A Perfect Balance...

Entrepreneurs running seasonal businesses have to be always on the lookout for ways to keep revenues coming in during the lean period.

WITH Christmas celebrated, New Year ushered in, partying done and shopping wound up, the spacious shop floor of David and Co in south Mumbai wears a calmer look once again. This past month has been back-breakingly busy for its owner, Felix Dias, who sells Christmas ornaments and trinkets to scores of families that have bought from him for generations. But with one more profitable season behind it, Dias’ enterprise has now transformed itself into a wedding card business. It’ll remain that way until it’s time again for candles, carols and the call of Christ.

Entrepreneurs, who run seasonal businesses, are among the most adventurous of their lot, having to constantly figure out ways to keep revenues coming in when it is no longer the peak period for their ware. Dias has been doing it since 1953 and so have a number of others dealing in flowers, winter clothing, school uniforms, umbrellas, tour packages, psephology and an endless variety of other stuff. They have evolved innovative solutions to smooth out the volatility of their seasonal businesses and make money all through the year.

The first trick, of course, is to encourage people to buy products during the off-season by promoting new uses and giving heavy discounts. Almost all businesses witness some seasonality and examples abound of companies offering new value propositions to attract customers. Mr Diaz promotes his decorative ware among students in the late months of a college year, for use in special days celebrated by them at campuses. Thus, he is able to reposition his product in the off-season.

Just consider why is January the best time to buy umbrellas? Because you don’t need it right then and the shopkeeper desperately wants to clear his stock. The best brands are available at attractive prices and even given away as gifts for heavy purchases at bigger stores.

It is also a good idea to develop a portfolio of related businesses that will keep the business running through the year. When the season for one ends, that for another could start. Farmers have been following this strategy for ages. They rotate crops using the same land, which otherwise would lie vacant during the off-season for their main crop. Of course, they ensure that the rotation doesn’t hurt soil quality.

The same thing goes for entrepreneurs. Dias’ wedding card business is the counter-weight for his Christmas-related offerings, not requiring completely different skill sets or business model. “The wedding card business is what keeps our business going on in the off-season,” he says.

MANAGE CASH FLOWS

Cash flow is the oxygen for any business. Expenses are certain to happen everyday but not sales. So, it is crucial to keep a leash on the balance between them in a business that fluctuates with the season. Madhav Oza’s Bluestar Travels has a very strict credit control policy which helps him keep his costs down and thus make most of the peak season throughout the year. Set up in 1987, Bluestar is one of the largest ticketing consolidation businesses in Mumbai. “It is very important to budget out your expenditure at the outset of the high season. And keep a strict policy on payments (to be received) for your services. Else, your cash flow goes haywire for the entire year,” Oza warns.

Another policy followed by some is to employ only those many workers that can justify current demand. “If practical, employ workers on a seasonal rather than permanent basis,” says Vikaas Gutgutia of Ferns and Petals (F’N’P), whose business in flowers swings in tandem with weddings and festivals season. Temporary workers are themselves trying to manage their skills that have a seasonal demand. So, they might be engaged in other trades during off-season, but be readily available when demand picks up. However, this model is not without its drawbacks. “The downside, of course, is that you may not be able to attract the quality of employees that you want,” Mr Gutgutia says.

In fact, Mr Oza of Bluestar is totally against employing workers only for the season. “By the time you complete training your temporary staff, the peak season is past you. Also, it always helps to have 7-10% more people than you need, for demand in a travel industry is high during holiday season. It takes care of absenteeism,” Mr Oza says.

ROTATE YOUR MARKET

A key strategy of successful seasonal businesses is to rotate the markets. Business season, just like the climate, can vary every few hundred kilometres. Mr Gutgutia’s flower business doesn’t remain idle when peak demand ebbs at its home base in Delhi. “When it is off-season in Delhi, we look at places like Hyderabad and Mumbai, where the season is just starting, in this way, we look to hedge out the seasonal factor in the business,” he says. Weddings and festivals are the main reason people buy flowers in large quantities. But in a country as varied as India, no one custom is uniform across the country. Mr Gutgutia exploits the wedding cycles of various parts and minimises volatility in his income. So, while flowers is a seasonal business in any given location, the mobility and wide reach of F’N’P makes it a perennial business for the company.
Others have tapped the corporate and student sectors to tide over temporary dips in demand. “Thanks to the corporate sector orders, a business such as ours, which used to see a 40-50% dip during the off-season, now only shows a 15% dip,” says Mr Oza.

CUSTOMER CONTACT

The major risk in seasonal business is losing touch with buyers during the slack season. While it is important to maintain the company’s staff and operations all the time, “it is equally important to keep in contact with one’s customers as well,” says Mr Gutgutia. “Some people who run seasonal companies act as if their customers actually vapourise during the off-season. Just because they’re not in your store or in your town, it doesn’t mean they’ve ceased to exist,” he says. He advises young entrepreneurs to send e-mails or newsletters to customers, exchange pleasantries or inform them about new items. The effort needed for marketing during the peak season may be that much easier.

USE SLACK TIME WELL

The off-season is not just about selling. It is also about preparing for the peak season. Gutgutia says a company can build up inventory, planning ahead for forthcoming demand. Entrepreneurs can also step up research and development, product innovation and training. Gutgutia, in his early days, often spent the slow period studying foreign bred flowers that could be imported. “This is one way of better preparing yourself for the next season,” he adds.

Article Resource:
Ritwik Donde is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".