Question
“My company’s sales cycle fluctuates dramatically. One month we are so busy we can hardly see straight and the next we seem to be sitting around twiddling our thumbs. In the slow months it can sometimes be hard to make payroll and meet our costs. I’ve tried reorganizing things so that our sales are more even, but the nature of our business means certain seasons are quieter than others. What can I do?”
Reader responses
Kevin Lang, Owner, Machine O Matic:
“Cyclical sales are the nature of my business as well. We are busy in the winter and slow in the summer. My strategy is to go for high-volume business with very low margins all year round. We are typically an oil-field manufacturer, but have gone after sports and recreation manufacturing as well as medical. The margins are not nearly there, but the work is consistent and enables us get through the slower times.
The other strategy that has helped is consistent marketing. We have started an aggressive direct-mail campaign as well as a strong online presence. Last year alone we picked up about 40 new accounts, mostly in non-traditional markets.”
Nikki Hilton, Operations Manager, Fatkat Animation Studios Inc.:
“There is always the possibility of hiring people on a contract basis. This way, meeting payroll during slow times is not a problem. However, in today’s competitive environment it is tough to secure good staff, let alone changing their terms of payment or convincing them to work on a contract basis.
Still, the key to this problem does lie in your staffing. Strive to hire multi-talented individuals who can offer other assets to the company during downtime; for example, a graphic designer who can handle the accounting. And everyone should be given sales experience so that they can look for work or opportunities during slow time. Offer compensation (commissions or bonuses) to employees who bring in contracts. Give your employees the skills to talk to prospective clients, through books, online courses or seminars. Certain provinces have funding for additional training of employees. Also, hiring interns or co-op students may keep the costs down, provided you can still sell their work.
Finally, you need to determine why a super-busy month does not allow you the extra cash flow to sustain slow periods. Employees need the time off to recooperate after busy periods and the extra cash gained from the project should be able to support this. If a ‘busy’ month only buys enough for that month’s expenses, then you are running an inefficient operation. You must look at if you are accepting projects for less than you should be paid or if the service staff take too long to complete the work.”
Debbie Hickey, President, Ossekeag Publishing Co. Ltd.:
“We have two busy seasons and two quieter ones. During our two down times, our sales staff concentrate on prospecting new customers and doing annual sales interviews with all of our current customers. The sales interviews update our information and ensure we are aware of any changes which may be taking place with our customers, giving us valuable information on what services we can offer to better meet their needs. We followed this process during 2004 and found it increased our sales during the summer slowdown. We will soon see if it is also successful during the winter one!”
Sean Cunnington, Program Director, The Inside Music School:
“In my company we go like gangbusters from late September to mid-June; after that, it is 3 months of terror. One of the mechanisms that I have employed is a business margin account. We stock-pile cash and make tax-efficient investments during our busy season. We know there is more than enough profit in the fall to make up for the summer’s losses so it is not a problem to borrow against our investments in the lean months. In doing this, my investments are still compounding at full value, and the cost of borrowing is significantly less than a line of credit or bank loan.”
Dave McCormick, Managing Partner, Pivotal Integrated HR Solutions:
“I’d be reluctant to ‘reorganize’ your sales. First, this sounds like you would be saying no to business at certain times of the year-not a great idea. Second, sales are usually something you have less control over.
Instead, take a look at a part of your business over which you do have control, and flexibility: labour. There could be a number of ways for you to build in more flexible staffing solutions to meet your uneven demand. Hiring temporary employees is an obvious one.
Hiring contractors is another logical solution, although this gets a little trickier (contracts, taxes, etc.). You can do this on your own or work through a third party. Another twist on this model is the ‘interim executive’ — usually a senior professional you hire for a given project or initiative. Our website offers a few tips on what to look for and explains the difference between an interim executive and a management consultant.
Finally, and depending on your specific situation (industry, size, etc.), you might want to look into time and labour technology. This can automate a lot of the ups and downs of tracking a cyclical labour force.”
For Dave’s answer, he’ll receive a copy of Integrity is All You’ve Got: and seven other lessons of entrepreneurial life by Karl Eller.
Watch for another Peer-to-Peer Poll in the next PROFIT-Xtra.
