As we come to the end of the year, most people are thinking of slowing down, going home to families or going on holidays, except entrepreneurs. They are divided into two categories: those that profit from the festive season; and those that don’t.
If you are one of the former, you have obviously planned for this busy period and are ready and excited for the financial success you are expecting.
If you are part of the latter group, what are you going to be doing over this period?
I remember being part of the group that doesn’t benefit from the festive season and desperately wanting to change this, within my own industry. I still had to pay rent, salaries and all our other fixed expenses during this period and our revenue dropped by over 50% over December.
Our business designed, supplied and installed commercial kitchens and sold commercial kitchen equipment. So I analysed our business, the sales trends, our customers businesses and devised a plan. I guaranteed our customers that we would be able to supply kitchens and or new equipment right through the festive season. This allowed the franchises we dealt the opportunity to open more stores before Christmas as often importers, suppliers and manufacturers would run out of stock.
To provide this guarantee to my customers, I had to purchase a considerable amount of additional equipment and store it, awaiting their orders. And the orders came and we had an order book that would allow us to double our average December sales.
After the excitement wore off, we waited to supply the equipment and slowly but surely the warehouse started emptying. Bit by bit the chip fryers, gas grillers, coldrooms, underbar fridges and the containers of glassware we had imported and racks and racks of crockery, cutlery and kitchen utensils started leaving the premises and being converted into cash.
As we approached 15 December, the requisitions for the equipment sales started slowing down and I anxiously spoke to my customers. The answer was that they couldn’t take the rest of the equipment until next year as the builder’s or the shopfitters couldn’t complete the work in time, or that the landlord’s could not complete their obligations in time either.
The end result was that nothing changed for my business other than having a more serious cashflow crisis in December.
Trends and cycles
What I took away from this was that there are trends and cycles in business and industries that will not be changed and they are there for a reason. The months leading up to December where always great months in our industry and December was the pay-back.
What we did the following year was to run down our stock to preserve our cashflow and increase the prices for the few customers who had left their ordering to the last minute. Higher gross profit with a normal turnover for December.
I am still part of the “non-earning” entrepreneurs for December and now I am grateful for the time to catch up on my reading, get my admin in order, meet acquaintances that I haven’t made time for and of course to reflect and strategise.
I don’t know about you but I can’t wait for 2015.