Highlighters at the ready…

The bumper Christmas edition of the Radio Times is out next week (a week later due to the World Cup and possible disruptions).

Every year, Jacki furnishes our coffee table with one. Not because we have much time to watch TV, and we could use the app, but it’s a Christmas tradition of ours and there’s something comforting about highlighting the “must-watch” family films over the holidays.

The decline of the print industry isn’t anything new, and I’m not focussing on this today; this week’s Scale Lesson is on Seasonality.

The Radio Times makes most of its sales from its Christmas issue; it’s highest-ever sales figure was achieved for the Christmas 1988 edition, which sold over 11 million copies.

Add to this the additional revenue from the 40+ pages of advertising.

Business is tough enough every month. Add to this a Seasonal Fluctuation, and if you get it wrong, it could be curtains.

Approximately half of my Private Clients 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 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.

The answer became obvious: what vehicles are literally wheeled out in our quieter times, the Summer?

Motorbikes! Caravans! Motorhomes!

Yes, we set up accident repair services for motorbikes, caravans, campervans – NOT to make a profit but to actually get it to breakeven, to keep the staff we needed for the busy period, and to turn the bumper months into exactly that.

So, if you have a few quieter days, weeks, months in the year what could YOU do to breakeven during those periods and release the bumper times into profit?

BW,

Martin