Top Ten Challenges – Feast and Famine – The stop-start cycles that can break your business and drive you to despair!
For this challenge I’ve turned to Kevin Sheldrake. I’ve known Kevin for a number of years. He is a Certified Management Consultant specialising in solopreneur and small business marketing, differentiation and scaling and founder owner of The Boardroom Advisory. We are both inveterate networkers…
Kevin Sheldrake is managing director of The Boardroom. Their website describes the Boardroom thus: Based on the UK South Coast, we are a unique and independent source of quality, real-world guidance and support to solopreneurs and the owners of ambitious and growing independent businesses. Kevin coaches me on a one-to-one basis.
I’m going to let Kevin have his say:
You’ve heard of the expression feast or famine – the stop-start cycles that some businesses experience.
Sometimes it’s down to poor resourcing and scheduling. Sometimes it’s just a natural feature of the landscape: Gym memberships sales are strong in January, toy shops peak in the lead up to Christmas, many restaurants near where I live don’t even bother opening on Mondays.
Either way the boom-bust cycle is not good for your business planning, or your personal stress levels. The unpredictability, the lack of confidence in what’s ahead can:
- Hold you back from making commitments – be it the new larger office you need or committing to that new strategic supplier partnership. You’re stuck in limbo.
- Undermine your investor relationships – Erratic cashflow cycles will skew your financial performance reporting in a way that investors and funders (and certainly most traditional banks) may struggle to understand.
- Mess with your staffing plans – How can you attract quality staff when you can’t guarantee you’ll have the work to finance them in 3 months’ time?
- Play havoc with your marketing – Marketing is all about consistency and maintaining profile and relationships with your audience. If you dip in and out every 6 months depending on how busy you are what kind of scatty message does this create to potential buyers?
- Entice you to take on sub-standard business and difficult clients you would normally run a mile from in less lean times.
- Lead you into knee-jerk marketing tactics. You’ll take a call from a media manager selling their final page of ad space, or be drawn in by a special ad-words promotion. All something that you’ve never tried before, have done zero research on, and in reality will take 6 months of investment to yield results.
- Create unhelpful stress and self-doubt, making you mistrust your own judgement and business ability. If like most entrepreneurs you’ve invested everything, emotionally and financially, in this venture then the idea that it might not be working is terrifying. And if you’re not careful this self-doubt can start to become visible to others, further perpetuating the destructive cycle.
And let’s not forget the impact on your cashflow itself. Cash is the lifeblood of the business. Run out of cash and you won’t be around for long no matter how good your business idea is.
Why does it occur?
Some of the drivers of feast-famine you can mitigate, some of these you just need to accept and deal with. The boom bust small business cycle is generally down to one of two things:
1. Erratic marketing
- You keep switching your marketing efforts on and off. Maybe because your time is focused on servicing your existing clients and you can’t afford to divert it to speculative marketing activities. Maybe you have enough clients right now and so aren’t that hungry for new business.
- Either way, by the time you inevitably lose a client for whatever reason, you find you have nothing in the pipeline and a 6-month marketing and take-on lag before you’ll be able to replace the income.
- Your industry is inherently cyclical. This could be down to client behaviour (e.g. people don’t tend to dine out on Mondays) or external drivers (e.g. accountants working to tax year end deadlines, or leisure facilities being busy in school holidays). And of course many businesses tend to slow down during summer and holiday seasons as their clients turn their attention internally to cover holidays and their own seasonal pressures.
- The result is that you’re the tail being wagged by the dog.
What can you do about it?
Use these approaches to better understand, and address, your own feast-famine dynamic:
1. First, check it’s not something worse
Sorry to spook you on this, but are you sure this is a cycle, and not, say, some more systemic issue you’re seeing manifest? Is your product still relevant, are you still a desirable supplier, are your routes to market still current and hooked into your target market? Have you (or other comparable businesses) seen this behaviour before, and so know from experience that things will pick up on the other side?
If not then all the short-term sale initiatives in the Oxford Dictionary of Marketing (yes that is a thing) combined, will only give you a temporary reprieve. Instead, stop kidding yourself that things will pick up and fix the problem!
Resistance is not futile. What can you do to minimise the impact of the cycle? Look at:
- Reducing outgoings – Check your suppliers and utilities. What can you renegotiate or switch, that maybe you didn’t have time to review in your busier periods?
- Deferring new expenses – Perhaps you could live with your existing website, or printer, or vehicle for a couple of months longer so you have a bit more breathing space till the next upturn?
- Pushing new sales – Without being gimmicky or damaging your brand, are there any short term sales initiatives you could kick-off that would give an immediate boost to income? Perhaps a quick telephone blast to on-the-fence prospects, or a targeted Facebook campaign?
- Upselling existing – Don’t forget you already have a loyal following and customers who already like what you do. Are there opportunities to work on your existing relationships to sell more products or promote them to an additional level of service?
- Reducing losses – The last thing you want right now is more client losses, so keep a careful watch on your customer service levels and secure those existing customer relationships!
All this can give you a temporary reprieve, but, short-term tactics are just that. You can’t hold back the tide forever. You need to learn to swim…
3. Ride the waves
- Look ahead and get ready!: Don’t let yourself be caught off guard. You know what’s coming, so plan out your next cycle. Just because you have volatile external factors, doesn’t mean your internal activities need to lurch and stall in the same way. You can enforce some stability within the business by having a plan and setting a budget and sticking to them. Set a baseline for the number of leads you want in the pipeline at any time, and keep an eye on the performance. This will provide welcome consistency, reassurance, and discipline, for clients and staff, and yourself.
- Think flexible: Make sure you are geared up to make the most of your feast season. What’s worse than knowing the famine season is on its way, is having the famine on the horizon whilst turning down work in the here and now because you can’t handle it. Break that capacity ceiling. Find resources or systems or outsourcing channels or work scheduling techniques that will give you flexible capacity and enable you to smooth the workload out. Does everyone really need their new website built today, or will they be prepared to accept a production slot in a few weeks’ time?
- Reduce your marketing and take-on lag: If, from recruitment to courting to on-boarding a new client it takes you 6 months to get them to a point that they’re income generating for you, then you’re in for some potentially long famine periods. Are there process or product revisions you could introduce that would speed things up? When we introduced e-signature capability to our signup documents here at The Boardroom Advisory, this one initiative alone reduced our average client take-on time by 14 days! What can you do to reduce your acquisition and take-on times, and so bring your famines to a speedier end?
- Systemise and standardise: Get on top of your admin processes and systems. A famine will be exasperated by your not sending out invoices on time, or being slack about client payment terms.
- Ringfence and outsource: If it’s just you, and you are stuck in the spiral where you’re too busy to market for your next clients because you’re too busy servicing your current ones, then look at ways to ringfence your marketing activities. Can you set the discipline of x hours per week for marketing no matter what, or look at external resources or outsourced marketing services, that just run without being any material drain on your time?
- Resist Gimmicks: When you are at your quietest, and your nerve is being tested to the limit, it’s tempting to switch into reactive mode and opt for gimmicks or knee-jerk sales. Sometimes these work. Much of the time though they create a lot of short-term noise (and even short-term sales) but ultimately damage your brand and your longer-term revenue – e.g. once your clients realise that you always have an end-of-season sale, they will learn to hold back and wait for the bargains. You may think you’re generating new business but in fact you’re merely transferring it from one time period to another, and at a discounted rate.
- Celebrate, cautiously: We know it’s tough and relentless and often thankless running your own business, so do celebrate your wins. But, don’t go overboard. Remember that the income you’re raising now needs to keep you going through the inevitable quiet period too.
- And keep working too: A new client or a big sale doesn’t mean that you can take your foot off the gas. You know what’s around the corner.
- Finally, use your down time productively: Time is an asset, and you should never squander your assets, so make the most of the opportunity to revisit your marketing processes, explore that new product or partnership you’ve been procrastinating on, focus on your CPD… this way you’ll be more relevant and attractive and switched on for when the next boom comes.
4. Break the cycle
What can you do to break out of the cycle? How can you take control of the system rather than being controlled by it?
Now you know that what the cycle looks like, and the impact your mitigation tactics have on it. And perhaps you know the gap, between the performance you’d like and what you can expect from the current situation.
So, what you can do you reduce the impact? To shorten the gap:
- Can you introduce recurring revenue streams that will stay constant throughout your cycles?
- Can you build a marketing system that runs and generates leads for you independently, no matter how busy you are?
- Can you diversify, so that you have a portfolio of counter-cyclical activities? No one is going to buy iced lollies on the seafront in January, no matter how much you discount them. But what about hot chocolate, or roasted chestnuts (you get the idea!).
5. Change what you can. Accept what you can’t change
You can’t change the laws of physics. What if you just have to accept that for your business situation, this is the normal way of things. Sometimes it’s sunny. Sometimes it rains.
Is it the unreliability, the unpredictability that gets you? Do you need to look more carefully? Go through a couple of cycles and you’ll know exactly what’s coming. You don’t find farmers being surprised when they can’t grow crops during the winter. They know spring is coming, and they’re planning ahead.
Know your cycle:
- You need to understand when winter is coming and what it looks like if you’re to put aside enough nuts to see you through to spring.
Know your customers:
- What attracts them? What keeps them? What do they find useful, or compelling? And what frustrates or repels them?
Know your business:
- Understand exactly how your sales pipeline, your lead-to-sale lag time. How long does it take a new marketing effort to generate leads? And how long to convert them into sales?
- Experiment with different products and marketing and customer retention strategies. Find out which are the most stable, the most sticky, and the easiest to sell in a promotion.
Running your own business always requires a special set of skills and a special set of nerves. Not least when your month on month performance is erratic and feels beyond your ability to control it.
Throughout all of the advice above are the three consistent themes that will help your business, and your nerves, better cope with the inevitable ups and downs of entrepreneurship:
Understand (your business, your customers, and your environment)
I have one client who literally makes her full yearly revenue with one annual event. The rest of the year is spent on planning and marketing and build up. That’s only possible with a deep understanding of the dynamics of her buying cycle, and experience-led confidence in her own abilities and business model.
What’s your experience of cyclicality? Do you know what to expect, and what to do? Or is this your first un-nerving journey through a full cycle?
The farming analogy is perfect. I know feast and famine on an epic basis with my Avenue Business Services accountancy, tax and auditing business. Having just survived yet another January income tax return deluge makes me understand why I’d needed to invest in the building of the Outsourced Finance Director income stream.
My whole reanalysis of myself as The Outsourced Finance Director and not just another accountant (chartered or otherwise) is the result of asking myself where do I want to go and how do I get there.
Try to engage your staff, customers and suppliers in a meaningful discussion so that any peaks and troughs are managed, not merely survived…
If you would like to talk to Kevin – and I would certainly recommend that you do – please contact him at firstname.lastname@example.org
‘Feast or Famine’ is one of the challenges identified in our Top Ten for Businesses as they Grow You can subscribe (using the form, below) for new blog posts from small business owners facing these challenges.