Seasonal demand is the expected fluctuation in demand influenced by external factors that most businesses can expect to face. Seasonal demand can pose numerous complications, and it often requires experienced management to help anticipate and navigate difficult circumstances. Common issues faced by seasonal businesses include inadequate stock levels to meet seasonal demand, too many or too few staff for the period, and suppliers being unable to meet increases in demand during busier periods for the business.
Without careful planning, a significant increase in demand could result in financial loss for a seasonal business. Here’s how you can reduce the effects of seasonal demand on your company to help ensure you’re prepared across the year.
Developing a safety stock (a surplus of stock that you can use to satisfy high demand if needed) is of critical importance in surviving fluctuating seasonal demand. In periods where the market has the potential to sway to extremes, you may need to be able to meet record levels of demand you hadn’t anticipated. While many business owners would consider this a positive issue to be faced with, if the increased demand can’t be satisfied, you may have to begin to actively turning business away which damages your sales figures and can lead to loss of repeat business.
Developing a safety inventory of stock that you can use if demand suddenly increases may require a relatively significant outlay of funds. However, if your company finds itself unable to meet customer demand, it will suffer from a loss of sales and potentially reputational damage for your company.
Forecasting for seasonal demand can be difficult, but analysing previous trading data can make it easier to predict. Gathering data regarding the volume of your sales activity and the periods in which it took place can help you begin to establish trends over the course of the year. The longer the data collection process is, the more accurate the numerical values become, and the more confidently you can begin to make decisions based on established trends. This can enable you to plan more effectively for staffing requirements, stock purchases, and other resources.
Plan ahead and communicate
When planning for seasonal fluctuation, it is of critical importance that the adaptive decisions made are effectively communicated to all those concerned . The reason for doing so is that it enables an understanding of what is expected from all individuals involved in the business. For example, the effective communication to suppliers outlines their expectations and allows them to order the necessary materials for a cost effective production that will prevent waste. Being conscientious and taking the time to update suppliers helps to build stronger relationships which ultimately benefit your business in the long term.
Diversify your business
This approach depends on your aspirations and how much effect seasonal demand has on your profit margins, but quiet periods can provide you with the additional bandwidth to redirect some of your resources. While there is lower demand on your company, you may be able to use cash in your business to research and develop a new product or service that provides additional streams of revenue. This could expand your customer base, increasing your sales figures, and can help make your company more resilient to fluctuating demand across the year.
There are many things that can be done to counter the effect of seasonal demand, but the best thing you can cost effectively do is uses previous trading history to predict peaks and troughs in your demand and then proceed to effectively communicate it with all your stakeholder so they know what to expect in the coming months.
Fluctuations in demand can have many negative effects on seasonal businesses, but there are ways you can reduce the negative impact on your company. Carefully analysing your previous trading history across the year can help you predict peaks and troughs in demand, and you can then use this information to make effective seasonal plans for your business. Communicating effectively with suppliers and other stakeholders is important so that they know what to expect in the coming months. Ensuring you have adequate stock and the correct number of staff during each season is also vital, as you could find your company wasting large amounts of money if these calculations are incorrect.
LendingCrowd can provide funding to help seasonal businesses meet their cash flow requirements. Call our Credit Team on 0131 564 1610 or email firstname.lastname@example.org to find out more.