In our three-part series on seasonal lulls in business, Entrepreneurs' Organization (EO) members share strategies and best practices to prevent seasonality from impacting your business bottom line.

JT Terrell is an Entrepreneurs' Organization member in Nashville and a speaker and accountability coach at Petra Coach, helping businesses uncover opportunities through creative strategies. As the former CEO of Music City Tents and Events, JT has first-hand knowledge about seasonal slumps many businesses face. We asked him to share strategies for getting through lean times. Here's what he had to say.

While all business is driven by customer demand, the hospitality industry operates at the whim of the consumer. It can be harshly impacted by travel disruptions, seasonality and lean economic times, when parties are the first line item to go. While it's difficult to foresee the ebb and flow of the overall economy, the seasonality of the event rental industry is easier to predict.

As an entrepreneur-turned-coach, I speak from experience. My former company, Music City Tents and Events, which I now coach, faced an ongoing struggle with the seasonal nature of party and event rentals. In our particular situation, 75 percent of annual revenue was realized in Q2 and Q4, due to the popularity of spring and early summer events in addition to winter holiday and end-of-year celebrations. In contrast, Q1 and Q3 were lean, leaving us struggling with cash flow problems just a month or so after our cash flow enjoyed high volume.

Regrettably, in our early days, we'd end up laying off trained staff after the holidays, and then have to hire and invest time and effort in retraining new employees to be ready for the spring event rush that started in April. One of the great ironies in those days was that we needed to perform maintenance on our inventory and equipment during Q1 "downtime," but we couldn't afford to pay the staff necessary to accomplish those tasks.

After a few years enduring this vicious spiral, we came up with an annual plan to ease our cash flow woes. The plan budgeted for a loss in Q1 so that we could keep our best team members on the payroll for at least 32 hours per week, enough hours for them to stay afloat during our predictable, seasonal lean times. We didn't arrive at this plan arbitrarily; we involved the entire team in the decision. We asked all 20 of our staff members to choose their preferred scenario: either 10 staff members could stay on for 40 hours per week while the other 10 would be laid off, or everyone would be reduced to 32 hours but we would remain a team of 20. To their credit, they voted to keep everyone by sacrificing their number of individual work hours, which fostered a stronger team environment.

With this decision made, we enacted additional strategies to minimize the impact of our seasonal slump and help our company and individual team members survive the lean times as follows:

  1. Obtain financial planning advice. To help team members cope with working fewer hours and the corresponding smaller paychecks during lean times, we provided basic financial planning sessions to help them manage overtime pay accumulated in Q4 to last through Q1. On a macro scale, as a company we learned that our best strategy was to earmark a huge portion of Q4 cash to get us through Q1, no different than our team members.
  2. Offer rebates or discounts during lean seasons. Another way we buoyed our bottom line was to offer modest rebates for professional clients who wanted to pay their spring and summer invoices early. This provided a much-needed cash infusion to meet payroll and other obligations during our lean Q1. It was a huge benefit to us, and our clients loved it because they got our regular services at a discount. Win-win.
  3. Renegotiate financial obligations. By leveraging a great track record with our bank, we were able to negotiate the terms of our line of credit and long-term debt so that we could defer the payments from January through March. It was a complex undertaking, but provided a huge benefit to us from a cash position.

Over the years, our Q1 lull got shorter and shorter as we grew, and now it doesn't exist. However, the budgeting principals that sustained us through lean times remain top-of-mind and will serve any company facing a cash-strapped seasonal lull.

Published on: Jun 30, 2017
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