The holiday season presents both opportunities and challenges for businesses. While the cost of living has eased slightly, consumers continue to feel financial pressure, particularly due to rising mortgage payments and higher service costs. Effective strategic planning is crucial for navigating the volatility that comes with the Christmas period. With the festive season fast approaching, businesses are racing to grab every opportunity before the holiday rush.
The holiday season can bring instability and disruption for many companies, and without proper management, this volatility can lead to difficulties. Employee households are especially affected by increased mortgage costs, driven by the transition from fixed-rate loans to higher variable-rate loans. While energy subsidies and lower fuel prices offer some relief, underlying inflation remains above the RBA’s target, with services inflation—covering essential expenses like insurance, rent, and haircuts—hovering around 5%.
The discounting trend
Today’s consumers are actively seeking deals, and they often find them. If your business chooses to offer discounts, it’s crucial to understand your profit margins. Discounts can boost sales when you’re aware of your numbers, have older or excess stock that should be moved, or want to generate more leads. Consider exploring alternative value propositions beyond direct product discounts. For example, bundling popular items with slower-moving ones can create demand for multiple products. Other effective strategies include offering value-added incentives and quantity discounts.
The Christmas hangover
The holiday season often brings higher costs, including reduced efficiency, additional staffing, downtime on non-trading days, and increased promotional expenses. Effective cost control is crucial to preventing a financial hangover in the New Year. If you’re hiring casual staff for the holidays, make sure to pay them correctly and fulfill your superannuation guarantee obligations. Using a pay calculator can help you verify your calculations.
New Year cash flow challenges
The start of the New Year often brings tighter cash flow and a slower trading period. The March quarter is typically the most challenging for cash flow, so it’s important to have a financial cushion in place. Avoid overcommitting as the year winds down to ensure you begin the New Year on solid financial footing.
Learn from scrooge
If you offer credit to customers, be proactive in following up on outstanding debts. Consumers facing cash flow issues will likely find the holiday season even more difficult. Suppliers who stay on top of debt collection are the ones most likely to get paid promptly.
Trading stock trials
If your business experiences a surge in activity during the Christmas season and sells products, you may feel tempted to increase your stock levels. This strategy can be effective if managed properly. However, excessive stock after Christmas can result in carrying out-of-season products or tying up too much cash in inventory.
It’s beneficial to collaborate with suppliers who can deliver on short notice. Additionally, managing your inventory goes beyond just controlling costs. If customers visit your store but cannot find what they need, it’s essential to offer an online purchasing option in-store to help secure the sale.