Every household has its own tradition, and never more so than at Christmas time. Christmas officially arrives in the Norbury household when Starbucks wheels out it’s Gingerbread Latte, and the legendary bumper issue of the Radio Times is on the newsstands.
This year, the Radio Times is celebrating its 95th edition. Since then, of course, times have moved on and whilst you can still buy an actual paper copy of the Radio Times, they reach audiences via its website, app and array of social media handles #ChristmasRadioTimes. They even have a TV advert running this year.
The decline of the print industry isn’t anything new, and I’m not focussing on this today. No, this week’s scale blog is on Seasonality. You see, the Radio Times makes most sales from its festive issue. In fact, it’s highest-ever sales figure was achieved for the Christmas edition of 1988 which sold over 11 million copies! (Today its more around the 600k mark).
Business is tough enough every month. Add to this a seasonal fluctuation, and if you get it wrong, it could be curtains.
Out of all my private clients, I reckon over half run a seasonal business. At a certain income level, it is possible to have momentum and get through the ‘quieter’ months, but below seven figures it becomes really difficult to carry overheads and staff for the less busy months and see that cash get lower and lower.
So, what can you do? Well, there’s three little words – Gross Margin Value. And this applies to any business, not just a seasonal one.
Every business has set costs they need to fund to deliver sales. These are generally referred to as fixed costs. They form the breakeven point of your business.
As an example, if my business has fixed costs of 30k per month, as long as I sell 30k of sales (after my cost of sales has been deducted) I will breakeven.
Think about it this way – if your business has six great months BUT also six bad months then the six-great pay for the six worse. Putting this into figures (after the cost of sales deduction):
- Six months of great business could be 40k per month.
- Six months of poor sales could be 20k, resulting in a business achieving 360k.
- Now if that business had fixed costs of 30k per month it would break even, the great covering the poor.
- But what if the poor months could actually breakeven – not make a profit but breakeven – hit that gross margin value? That would then result in all the bumper months turning into profit.
To give you an example, when I was CEO for a PLC that repaired accident damaged cars, this is the philosophy that I focused on – getting the most out of the bumper times but limiting the liability on the quieter months.
And when we focused on that, the answer was obvious: what vehicles comes out in the Summer (our quieter times)?
Yes, we set up accident repair services for motorbikes, caravans, campervans. Not to make a profit but to actually get it to break even. And to keep the staff we needed for the busy period and turn the bumper months into exactly that.
So, if you have a few quieter days, weeks, months in the year what can you do to breakeven during those periods and release the bumper times into profit?