Managing seasonality: Alternative services and beyond

An alternative service, such as holiday decorating, is one of the most common ways to deal with seasonality. Photo: Christmas Decor

Wreaths and tinsel seemed a far better option to Gary Fouts than laying off employees from his landscape maintenance business for the eighth year in a row.

For this reason he opted to operate a Christmas Décor franchise in 1999 during the off-season for his New Lennox, Ill.-based company, then-named Principle Lawn Care & Maintenance. He made $30,000 from the alternative service in that first year and reeled in $307,000 last year under a new name, Principle Lighting.

“It’s really helped me through the slow times,” Fouts said, adding the service also allowed him to cross-market between Christmas Décor clients and his landscape maintenance clients, growing his customer base significantly.

That, in addition to generating revenue with existing assets, is one of the main reasons landscape business owners make up 85 percent of the Christmas Décor’s franchisees, said President Brandon Stephens.

Moreover, according to a study by Jeffrey Shields, associate professor of accounting at the University of Southern Maine, an alternative business, such as holiday decorating or snow removal, is the most popular means to cope with slow business seasons.

Yet, there are plenty of other underutilized means to keeping businesses afloat in the off-season, Shields said.

His study, conducted in May 2012, surveyed 73 small business owners in a range of industries to analyze how they deal with seasonality, “the systematic and predictable swing in sales” in a business year.

His findings showed weather is the leading factor for seasonality, with demands highest in warmer months and lowest in colder months.

Jeffrey Shields

Shields shed light on the three least reported methods used to deal with seasonality in the study, and he alluded to why small business owners, mainly those in the Green Industry, should refrain from turning their heads from the underutilized approaches.

1. Advertising in times of low demand

Small businesses don’t advertise enough, Shields said, and credited this to businesses not spending enough on their advertising. He advised businesses to spend 6 percent of their budget on advertising, pushing it most strongly in the off-season.

“Remind people in the slow season that the next season is coming around and to get on your books and think of what they might need done,” Shields said.

Once you have a hefty customer base and are in times of high demand, then consider increasing prices, he added.

“A lot of business owners are reluctant to increase their prices,” Shields said. “If you’ve got the ability to take on a job, charge more for that job because they’re using your capacity in a high season, not a low season.”

2. Closing up shop in the off-season

Shields said the most startling finding, to him, was how little businesses shut down in the slow phase—this was the least reported method to deal with seasonality.

Yet, Shields said, shutting down a business allows owners to “enjoy seasonality,” offering the opportunity to maybe take an annual vacation in the slow season rather than struggle with combatting it. Moreover, owners can save on variable costs, such as office electricity, equipment expenses and employee compensation.

The downside to shutting down, Fouts reminded from experience, is the question of “will you get your workers back when you need them?”

The key to this method, Shields said, is to ensure one can afford it by, perhaps, setting aside enough money to sustain a living during the several months of a slow season.

3. Using the slow season for strategizing

“The lights are on and your answering the phone, but you’re not actually performing any services,” Shields said, referencing the method of using downtime for strategizing, planning revenue growth for the next year and maintaining equipment.

“I think there’s a lot of value to planning and having a strategy to implement those plans,” he said.

The downfall to that, though, is “you’re not bringing in revenue and you’re not on vacation. You’re thinking about the business,” Shields said.

Despite that, Shields most favors this method to others in coping with seasonality, and even above alternative services.

“In the off-season, working on the business—in terms of planning, maintenance and hitting the ground running when spring comes—will make you more efficient and effective in terms of the results you get out of the business,” he said. “Planning tends to have a positive impact on any business. It does payoff.”