Many industries have a particular time of the year when business is highest. Pools, water parks, and theme parks all do better in the summer. Retailers depend on holiday revenue.
If you’re in one of these businesses, your payment schedule is complex. Here are three ways to get extra money before your busy season.
1. Save for a Rainy Day
Your business plan needs to address your core problem. Your revenue is seasonal. You earn more during one quarter than the others. How you use the revenue from your busy season is critical to your success. If you burn through this income, you’ll suffer cash flow issues for the body of the year.
What you should do is set up a new revenue model. Your first step is to maximize sales during the busy season. The time prior to this quarter is when you should spend the most money. With some clever planning, you’ll increase sales.
Afterward, you need to save some of the busy season revenue for your down periods. Don’t think of this capital as available to spend. Instead, put it in a bank account and earn savings until you need it. Then, use this cash to pay for the build-up to the next busy season. You’ll have cash flow problems the first year that you use this strategy. After that, you always have your busy season expenses paid ahead of time.
2. Get a Working Capital Loan
One of the smartest ways to address your cash flow problems is with a working capital loan. If you follow the advice above, this loan can take care of your needs in that shaky first year. Better yet, a working capital loan doesn’t require collateral. You won’t risk any of your company’s major assets with this loan. You also won’t have to use personal assets to secure the loan.
The working capital loan is a clever business idea for both parties. The borrower minimizes risk. Meanwhile, the business offering the line of credit knows that the borrower will act responsibly in making payments.
The outcome is that a working capital loan solves cash flow issues in the short term in exchange for a modest fee over time. The borrowing company is protecting its future by adding capital prior to the busy season.
3. Set Up a Delayed Payment Schedule
You’ll have to buy more goods than normal in the months leading up to your busy season. In order to pay for them, an option is to set up a payment plan for these items.
For a consumer, this concept is known as 12 months same as cash. Many appliance and electronics retailers offer it to customers. Another version of the automotive industry is the zero-down payment system. The buyer doesn’t pay anything in advance but agrees to make scheduled payments over time. As a business owner, you’re setting up the same system with one alteration.
You will pay the regular amount now, but then you’ll pay the balance later. The idea is that you can more easily afford the payments once you have the revenue from your busy season.
Finding extra money for your busy season isn’t hard. Simply follow the tips above, and you’ll maximize your earnings while maintaining solid cash flow.
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