The song might claim it’s the most wonderful time of the year, but if you’re not prepared for the slow season, it can be the most stressful time of the year for your business.
“The offseason can be a challenging time,” says Austin Zakow, CEO of Outerland, based in Mashpee, Massachusetts. “There is not much cash coming in, but you still have a number of fixed costs that you will have to pay. Overspending during the busy season when there is a lot of cash coming in without being mindful and preparing for the needs of the off-season can put companies in a tough spot come the winter months.”
Depending on your region, just how slow things get for your landscape company will vary. Your location will also impact your ability to find additional income sources to offset the slow season.
Proactive Budgeting
When you know your business is going to experience slow seasons, it’s extremely important to budget and map out how much is needed to fund the company during the off-season.
Zakow advises looking at your historic cash flow during the off-season and understand what your current fixed costs are such as rent, insurance, and overhead wages. This will allow you to budget conservatively so you are not caught off guard.
“Regularly update the budget/forecast when new information becomes available,” Zakow says.
Strategies for Slow Season
There are a number of different methods landscape companies can practice to help ensure they have enough cash to carry them through the off-season.
One Zakow suggests is the to ask vendors for extended terms or a different payment schedule that aligns with the cash flows of the business.
“For example, maybe you have to pay insurance premiums over 12 months but making these payments in the off-season is challenging,” Zakow says. “Therefore, ask your insurance broker if they are willing to change the payment plan from 12 months to just 8 or 10 months to better align with your business’s cash flow.”
You can also offer customer prepayment discounts to keep money flowing in advance of work. Similarly, you can change the payment structure of your contracts. Zakow says for construction projects signed in the winter months that will start in the spring you can require a deposit for materials.
“If there is outstanding AR, put an emphasis on collections while still in the busy season,” Zakow says. “The longer you wait, the more difficult it becomes to collect.”
Zakow also notes having a line of credit as a backup can ease stress of a slow winter. It will allow you to pay your staff and vendors when not a lot of cash is coming in.
“When cash really starts to flow in then you can pay down the line,” Zakow says. “You keep your employees and vendors happy.”
Paying Employees
One of the major concerns during the winter is paying your staff. The best option is to sell winter work, so you have revenue coming into cover payroll.
Zakow says that winter work is great as it provides more year-round work for your employees, and you can engage with them more often, so you don’t have to spend as much time finding new hires in the spring.
However, if you are unable to find winter work suitable for your organization, another option you can explore is dependent on the structure of your contracts.
“If you can build in the cost of keeping employees working all year round in your contracts (whether that is green work or snow work) then you will be able to keep paying employees throughout the winter without putting yourself in a bad spot come the spring,” Zakow says.
Zakow says whether you keep your employees on all winter long or not, it’s vital you stay in constant contact with them over the slow season.
“Whether that is offering trainings in the winter or as simple as reaching out to them to see how they are doing goes a long way in ensuring you are setup for a successful spring season,” Zakow says.
Common Mistakes
Some of the mistakes that can put you in a tight spot during the off-season include not understanding the true cash needs of the business in the winter and making large purchases leading up to the slow season. Zakow stresses you don’t want to spend frivolously in the busy season.
“You always want to be ahead of the game, but instead of paying for it all in cash upfront can you finance it over a few years to spread out the cash outlay of the vehicle and align the timing of vehicle payments with when that vehicle will be used to generate cash,” Zakow says.
While you can cut back on some recruiting and marketing expenses in the winter, Zakow says it’s important not to hamstring the business.
“The off-season can be extremely challenging, but the more you can focus on setting up the business for long-term success in the winter months the better off the business will be,” Zakow says.
