Most businesses shut down over Christmas but many of the small and family ones will still be operating over the holiday season. For some, it will be business as usual. Others will be putting in time to catch up on administrative work. Surveys over the years have found that while more than 90 per cent of Australian small business owners will be taking time off, most will still spend the down time dealing with old emails, general administration, finances, writing business plans, updating website content or looking at budgets for the next year.
Many family business owners who shut down over Christmas make the most of the break by performing regular maintenance and repairs to equipment during the quiet period without dipping into their work time. They also use the down time to do the budgeting and planning for the year ahead and marketing the business through fliers, phone calls and direct mail.
But what about operating as usual? It’s a dilemma business owners face in the lead up to the festive season. For some, shutting down could see a drop in revenue and productivity. For others, apart from bars and restaurants, it’s the sensible thing to do when clients have shut down over the break.
Deciding whether or not to stay open over Christmas is a decision every family business owner has to make based on what their clients are doing and what they are offering.
So what are the steps to working over Christmas? The most obvious one is to find out what customers are doing. If they’re shutting down too, there’s no point staying open. But if they’re not, it’s an opportunity to make inroads during a quiet time of year and get one up on competitors. A well-targeted, well-planned Christmas campaign could help boost sales to new and existing customers.
With Christmas, it’s important to become Scrooge with debtors. Chasing up debts is imperative and it has to be done before Christmas because it’s almost impossible to recover money in January when people are away. The March quarter tends to be the toughest cash flow quarter of the year for most businesses so the rule for chasing debts is to do it now, before Christmas.
And because the March quarter is so tight, family businesses should have some sort of buffer going into 2014.
Second is staffing. Because payroll is the biggest cost, staff rosters need to be reviewed carefully to ensure that only absolutely essential staff will be working over the break. The rest should be directed to take leave so that the business can balance the books by not allowing large banks of leave to accrue.
The next big issue is stock management. What’s crucial here is to stay as liquid as possible during that time of year when business has slowed down. Unless business is booming over the Christmas period, companies should drive stock down to the lowest possible level in the weeks ahead of the festive season and only order the minimum to meet what’s required over Christmas. At the same time, however, it is important to ensure that suppliers will have the stock ready to go for the New Year.
During the festive season, there is a lot of discounting. With sale signs up everywhere, the danger with the me-too strategy is that doing it to keep up could see the business trading below its break-even point and even generating losses. It would require a massive increase in sales volumes just to maintain the same position, and that’s not going to happen. Most businesses won’t last if they do that over any protracted period of time. In any case, doing that would rob the business of the buffer it needs for the March quarter. The rule of thumb here is to know the profit margins and how much the business can afford to discount.
Whether the family business stays open or shuts down, Christmas is the time of year that needs to be managed with care.