Are You Prepared For the Off-Season?

If you are a Marine or Motorsport dealer who does not have a winter product to sell, the coming months can be very stressful.  Obviously sales will drop off to a trickle, while your overhead and operating expense will continue to drain your cash flow.  The question is, are you prepared to meet these business challenges until sales begin to ramp up in the Spring?  Read more.

Is this winter different from any other?   You have been through this scenario many times before and have always been able to manage the off-season sales slump.  However, we can’t underestimate the pressures this recession have brought to bear on our business.  What if you could reduce your stress and have absolute confidence there will be no surprises before your sales ramp up in the Spring?  Would that represent a difference from past years?

There is a shopping list of things we need to consider before the off-season and it starts with a thorough knowledge of how your company has performed.  Regardless of whether the Fall represents your year-end or you are in mid fiscal year, a Financial Performance Analysis is the first step towards reducing those stressful off-season months.  Knowledge of the following business facts is the main ingredient for your stress reducing recipe:

• How much profit or loss has the company produced from in-season sales?
• How does the company stand in the eyes of its creditors?
• Does the company’s liquidity ratios allow for an increase in operating line of credit?
• Does the company have adequate inventory finance lines of credit for pre-season unit purchases?
• Does the company have adequate cash flow to meeting its payables during the off-season months?
• Can expenses be cut in key areas to minimize the drain on cash flow?
• Is the company producing profit levels within industry expectations?
• Is the company’s inventory at manageable levels?

Ultimately, this information will help you build a short-term budget or business plan.  The focus must be on your cash flow and whether you have built up enough surplus to see you through the off-season months.

If it appears as though you will have a shortfall over the winter months, now is the time to negotiate with your bank for an increase in operating line of credit.  Banks will be much more receptive to customers who are well prepared with a financial perspective of their company and a proper cash flow project/business plan in hand.  They will look at your liquidity and performance ratios and this will form the basis of their approval.

A shortage of cash flow does not necessarily mean that your company is not performing well.  You can be very profitable, but still have cash flow challenges during the year.  The key is to be prepared well in advance, because if you wait until you have a shortage to address the problem it will be too late.

By simply taking action you will reduce that hidden stress that can be very debilitating.  Organizing your business in advance of the off-season will give you a huge sense of relief, allowing you to focus on your business plan for the next year.

If you need help formulating your plan of action, contact me for a free consultation.

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