How to run a seasonal business

AS THE FD of a winter risk management company, I’m often asked about the challenges of running a seasonal business. Many assume we have a hectic few weeks from December to February and then put our feet up for the rest of the year, but nothing could be further from the truth.

The service we provide (we’re specialists in gritting and snow clearance) is carried out in the winter, but the business operates all year. Without the luxury of steady cashflow, we would soon fail if we weren’t firmly on top of our financial management.

Financial management in a seasonal business is not for the faint hearted, the key to success is planning.

Planning is essential in all parts of the company. During the ‘off’ season you focus on preparation and planning so that during the ‘on’ season you can focus on delivering your service. You almost need to treat it like a major event – the success on the day relies entirely on the advance planning that has been undertaken.

We embrace the fact we have time to plan and prepare. We never want to be chasing our tails so instead we plan ahead. Our season & financial year start in October so we aim to have our financial planning for the new year (renegotiation of all finance lines) completed by August so there is two months room for unavoidable delays.

We spend the spring carefully reviewing the previous season and working with the management and sales teams to confirm targets for the next season in order to identify what assets will need to be purchased. In addition, we work with suppliers to renegotiate contracts and terms.

We also conduct a mid-year internal audit to ensure we’re prepared for our year end, as it coincides with the beginning of the winter season and a time when the business is at its busiest. By ensuring any issues have been identified and dealt with well before the auditors come in during November, we aim to minimise any increase in our workload.

Many of our clients are on fixed price contracts so it’s important for us to analyse the last five winters and determine whether the risk of extreme winter weather has changed. We do this at the end of each winter season so we can review our pricing models accordingly.

GRITIT picks-up where the Highways Agency teams finish, so our customers include business and retail parks, hospitals, supply chain distribution centres, manufacturing sites and water treatment plants, among others. In order for us to be prepared, it is also vital for us to get clients into planning mode. We therefore have a distinct selling period from May to November so contracts are in place before the winter starts.

As a finance team, this means we need to have reviewed cost lines and agreed pricing models by the beginning of May so the sales team can begin.

The other challenge is managing budgets. Seasonal businesses need to be dynamic and able to react to what is happening today, whilst seeing the longer term impact.

Equally, when you work in a sector that relies on the weather, you need to be prepared for every eventuality. It is essential to understand your minimum cashflow levels, what will be effectively ‘eaten’ up and how you can manage that. Planning for the worst case scenario is the only way to succeed.

I’d advise a new seasonal business to consider looking into credit facilities – although we have never needed to call upon our reserves, having them in place creates a safety blanket.

Whilst times are tough for obtaining credit, detailed and transparent business plans and reports are needed to give banks confidence in lending to you.

We offer payment terms to suit the seasonality of our business, where fixed-price contracted clients pay for the service in two instalments – one at the beginning of the season, and one midway through the season.

Following the bad weather in January 2013, we issued nearly 2,500 invoices. Managing this requires proactive credit control, including factoring in promised payment dates. Nipping any issues in the bud at an early stage is vital as a late payer can become a non-payer, and there is a risk that you continue to provide a service which is never paid for.

From a human resourcing perspective, it is also vital to have a flexible team of individuals who are able to use their skills for the different job requirements throughout the year. This may require the roles to be tailored to suit their skill sets.

For example, in our business, the operations managers who oversee the monitoring and coordination of the field teams in the winter are highly skilled at working to strict deadlines and overcoming issues that occur throughout the day or night. They are therefore perfectly placed to execute summer tasks, as long as they are planned as separate projects with fixed deadlines.

Overall, running a seasonal business doesn’t have to be daunting. Make the most of your ‘downtime’ to properly plan in anticipation of the active periods, when you can devote all your energy to delivering the best service possible.

Matt Benham is financial director of winter risk management specialists GRITIT