The Difference Between Ants and Squirrels

You may have read in your local newspaper yesterday of Amazon.com's stock rise of 15% on the back of strong holiday season spending.  Etoys' 49% rise and Buy.com's 25% increase followed suit.  Overall, the Nasdaq (the tech-stock index) jumped 5.4%.

Good news for the likes of Amazon.com, right?  But is it really?  What happens AFTER Christmas?  Here we go *again*.  Investors are jumping back on the bandwagon on the strength of a holiday buying frenzy.  Up goes the stock and everybody jumps on board.  After Christmas, back down it will go, investors will wring their hands and bail out, the stock will nosedive and everybody will start moaning about the great internet shake-out of 2000.  Again.

The holiday boom is nothing new, of course, and it certainly isn't restricted to online businesses.  And there's nothing wrong with a holiday-spending induced surge in business.  Provided business is respectable during the remainder of the year as well.  After all, if business is ONLY good at holiday time, how is that business going to survive for the rest of the year?

How about you?  How is your business faring now that Christmas looms?  If you're a retailer, this may be a good time of year for you.  If you're not, then, like me, you're probably finding things pretty slow right now as people go into underdrive as the year winds to a close.

No matter what your business, there will usually be certain times of year that are better than others.  The challenge is to be sufficiently successful during the good times to be able to weather the slow times.  Better still is to be able to anticipate your slow times and compensate for them, in effect, smoothing out the seasonal highs and lows.  In this article, we look at ways to do that.

=> Learn From Ants, Not Squirrels

Those of you familiar with Jim Rohn will also be familiar with his ants philosophy.  Ants never rest.  They are constantly working.  They don't rest over summer.  Why?  Because they know winter is coming.  So they work all summer long to build their nests so they have shelter in the winter.  They do something in winter too because they know summer is coming.  I can't remember now what it is but it's really big.

You may be thinking of squirrels as another example.  Storing nuts for the winter and all that.  But that's only half the story.  You, unlike a squirrel, don't get to rest during the winter just because you've gathered nuts during the summer.  Even if you've gathered enough nuts to last through winter, where are next year's nuts going to come from if you no longer have a business by the time fall comes around again?  So, don't think like a squirrel, think like an ant.  In the summer, think winter.  In the winter, think summer.

=> Think Bottom Line

Don't just focus on your sales.  Focus on your bottom line.  If your costs are $10,000 and your sales are $20,000, your profit is $10,000.  Similarly, if your costs are $5,000 and your sales are $15,000, your profit is still $10,000.  So, during times when you know sales are going to be low, look for ways to reduce costs.  Now, some costs are fixed and there's just nothing you can do about it.  Rent, webhosting fees, ISP fees and the like are examples of fixed costs.  Costs like payroll, however, can be variable.  So think in terms of reducing your variable costs.

In the case of payroll costs, flexible staffing arrangements may be the answer.  Rather than hiring another employee because you're run off your feet at certain times of the year only to find you have trouble occupying that employee during other times of the year, hire temporary staff to help you out during busy times.  You don't have to buy a cow to get milk.  Just buy the milk.

=> Know When Winter Comes

You can't plan for winter if you don't know when it's coming.  So analyze your sales history and identify, as best you can, where your peaks and troughs (summers and winters) are.  Only then can you anticipate your slow periods and be ready for them.

=> Promotions

Seasonal promotions can be a good way to temporarily increase sales during a slow period.  Let's say your regular price for widgets is $10 and during your "non-slump" time you sell, on average, five a day for a total of 35 a week or $350.  Your costs are $200, leaving a profit of $150.

Let's also say that during your slow times, you sell an average of only three a day for a total of 21 a week, or $210.  Your costs are still $200 (we'll assume sales all come from existing inventory), leaving a profit of only $10.  So you're in the hole $140 compared to non-slump time.

If, during your slow period, however, you were to run a promotion (or "sale" if you prefer that term), you can make up some of your lost profit.  Let's say you decide to sell your widgets for 10% off for the month of July, traditionally your quietest month of the year.  So, you drop your price to $9 per widget.  As a result, you find that you're now selling five a day again for a total of 35 a week, or $315.  Your costs are still $200, which leaves a profit of $115.  Much better than $10.

Now, this is obviously an over-simplistic example.  In the real world, all of your costs would not be fixed and, as a result, lower sales would translate to lower costs.  You'd vary your stock purchases for a start or, if you manufacture your own product, you'd just produce less, thereby resulting in lower expenditure.  But hopefully this example illustrates well enough the principle of promotions as a tool for increasing profits during slow periods.

=> Back-End Sales

Slow times are also a good opportunity to go back to customers who have bought from you in the past and directly solicit business from them.  This is particularly effective if you run an online business.  Just pull out that mailing list of previous purchasers and introduce them to another item in your product line that may appeal to them.  Once someone has purchased from you once, they are MUCH more likely to do so again in the future.  The increased sales you generate in the form of back-end sales can help you ride out a slump.

=> Introductory Specials

Slow times can also be a good time to introduce a new product or service.  Think of it as a way of testing the waters before the big push for sales during your peak sales period.  Again, previous customers are a good source of prospects for purchasing new products.  Simply publicize an introductory special for valued customers.  Giving people the opportunity to be among the first to acquire something not yet generally available can be a powerful sales generator.  It appeals to people's desire to feel special or exceptional in some way.  So think about taking advantage of this human tendency to help increase sales during your winter times.

=> Increased marketing

Simply increasing your marketing efforts may help smooth out a trough but be judicious.  There's no point generating additional sales if the marketing cost of generating those additional sales exceeds the profit generated!  Look instead for low-cost or no-cost marketing initiatives you can take to increase awareness of your products and services.

=> Strategic Alliances

Another idea, especially if you run your business online, is to forge strategic alliances with businesses whose busy times are your slow times and vice versa.  This is a win-win situation for both of you as you each have the benefit of each other's relatively higher traffic during your respective busy times which can help offset your respective slow times.

=> Constructive Use of Down Time

Finally, don't discount the value of slow periods as an opportunity for business and product development.  Investments of time in these developmental activities can make a substantial impact on the long-term viablity of your business.  These are activities that can be hard to find time for when you're busy so learn to embrace slow periods as an opportunity to invest in the future growth of your business.

It's easy to get discouraged when you're working as hard as ever but the sales just aren't coming in.  It helps to know that virtually every business (with the possible exception of funeral homes I guess) has slow periods.  By thinking like an ant and focusing on winter in summer, you can go a long way towards turning a long cold winter into spring.

"The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather in a lack of will."
*-- Vince Lombardi