Managing Seasonal Demand in Retail: 3 Ways to Maximize a Business Loan
While much of the business world breaks the annual calendar down into months and quarters, retailers focus on seasons. Surprisingly these seasons are not those that come courtesy of Mother Nature, in fact the seasons that concern retailers are based on spikes and lulls in customer demand.
Given how vital managing seasonal demand is to the bottom-line — often making or breaking the entire year — many retailers obtain a business loan to “make hay while the sun shines.” Here are 3 ways that the most successful retailers are leveraging the funding to maximize sales and profits:
1. Map Demand Patterns to Borrowing Strategy
While there are obvious seasonal cycles in some retail spaces — such as auto repair shops seeing a customer surge in November and December as cars reveal that they’re not road-worthy for the winter ahead — others are harder to detect, and can be localized to certain geographic areas, or in some cases, specific locations. For example, while many restaurants experience a lull in demand in February/March (due to the messy weather and post-holiday consumer debt), some experience a spike in customer activity during this time.
As such, it’s important for retailers to analyze a few years’ worth of data to understand how seasonal cycles manifest for their specific operations, and map those patterns to their borrowing strategy (if data isn’t available because a retailer has recently opened, then gleaning these insights from secondary sources or primary market research is the next-best option).
2. Create Additional Business Lines
One of the most effective ways to manage seasonal demand is by creating additional business lines that offset anticipated revenue dips. For example, restaurants can launch a catering or special event division (e.g. weddings, charity auctions, singles nights, etc.), auto repair shops can target their captive in-store customers with merchandising (e.g. car care items, “man cave” essentials, etc.), and so on.
However, it’s critical for retailers to ensure that their lender gives them the freedom to allocate their business loan as they deem fit. This is because some lenders — most notably banks — place restrictions on how funds can be spent, and they’re unlikely to approve of a business line expansion because of the risks involved.
Here at National Business Capital, we believe that our clients — and not us — are in the best position to make smart spending decisions. That’s why we don’t place any restrictions or limitations on when, how much, or for what purpose a business loan can be spent.
3. Use Marketing to Stay on the Radar Screen
Seasonal cycles are called that for a reason — i.e. there is invariably going to be a drop in demand. However, rather than going into hibernation, many smart retailers use a business loan launch online and offline (e.g. postcard mailout, display advertising) campaigns. By staying on their customers’ radar screens, retailers position themselves to be the first and best choice when the cycle shifts, the lull is replaced by a surge.
Maximizing a business loan in these three ways can help your business take advantage of opportunities that you normally couldn’t. By utilizing extra funding to update your technology, increase your production or ramp up marketing budgets, you can grow your business to new heights! Check out more of these business-building tips in our latest free eBook “7 Profitable Opportunities You Could Miss Without More Business Funding”: