Seasonal shifts – should I tailor my costs to suit busier periods or maintain a steady course?
When you are running an SME, deciding precisely how to structure your costs can often be the difference between success and failure during a particular quarter.
Many people prefer to tailor their outgoings based on seasonal changes which may be as simple as spending more in summer and cutting back in the winter. This attitude will obviously make sense for specific products/services but not all of them.
In contrast, some companies will prefer to maintain a steady set of costs which do not deviate from one month to the next, allowing them to regularly assess exactly where the business is and where it is heading in the short-term.
But which option is the best?
The summer is a classic example of a seasonal shift which entices retailers and other SMEs to potentially increase their in-take of stock in a bid to capitalise on the potential for sales.
For example, a retailer might take a calculated risk in increasing the amount of summer dresses or sandals they have on offer, confident in their ability to sell them and subsequently increase their profit.
However, there is little doubt there is a strong element of risk in this strategy, with everything from the unreliable British weather to a sudden economic downturn acting as variables that could scupper your plans.
It is really down to you and whether you are willing to take a risk on the summer reviving the potentially ailing fortunes of your company in the current economic climate.
Taking the opposite route involves shunning the volatility of seasonal shifts and trends, instead placing a focus on structured outgoings that leave the company on a more stable financial footing. However, sticking rigidly to this position also means that you may miss out on the chance to take advantage of a potential boom in key areas.
A certain amount of calculated risk is a vital aspect of any successful business, and the truth is that identifying when the time may be right take such a chance whilst maintaining a stable approach to outgoings is probably the best way for an SME to proceed.
If your SME is struggling to survive in the current climate, calling on the services of insolvency practitioners such as Moorfields could be a good way to reach the most practical financial solution for those involved.
By Phil Smith
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