How to Smooth Profit for a Seasonal Business

Previously I had written a business planning case study for my new (at the time) Australian Hammocks Business.

Since that time, it has been growing constantly, and now after almost 2 years it is starting to get to a point where I’m feeling good about it and treating it as my primary business rather than a side business. Right now in Australia, winter is coming to a close. Winter-16 vs Winter-15 has seen the business grow by over 150% in sales and more than that in profit. The business plan has definitely evolved since I first wrote it, but I feel like what I wrote was a great starting point.

Winter vs Summer Sales

In Australia, December sales are 10x as much as June or July sales. Google Trends can show you that data. That’s because Australia has a double peak season for hammocks – summer and Christmas at the same time. So winter is miserable in terms of sales, and fixed costs really bite hard eg. a website provider, or any fixed advertising. On top of that, conversion rate falls off a cliff. Conversion rate seems to be around half compared to summer. I imagine that people are thinking about what they’ll do when the weather warms up, so they search about hammocks, but they aren’t willing to pull out the credit card while it’s still cold. What that means for the advertising is that people are clicking but not converting, leading to a lower conversion rate, so advertising quickly becomes unprofitable in winter if you don’t reduce CPC accordingly.

Tip 1

Optimise your summer and winter ad budgets and campaigns separately. If I left the summer advertising campaigns running through winter, they would eat through some of the accumulated summer profits, or at the least run through inventory for marginal profit.

Tip 2

Stock some less-seasonal products. In our case, sales of our Hammock Chairs have proven more resilient to winter, since they are more commonly used indoors or on a veranda than hammocks are. To improve the winter low season, we have placed more focus on our hammock chairs: improving the range, sales channels, up-sells, and pricing.

Other product lines that have proven less-seasonal for us are kids and baby-related products such as our Sensory Swings and Baby Hammock.

Tip 3

Minimize fixed costs. We stopped using BigCommerce partly because they charged us the same in summer and winter, even though our seasonal business has relatively tiny revenue in winter. We redeveloped the site using our own code and now pay almost nothing every month.

Tip 4

Expand overseas. I have a plan to send the best selling products to an Amazon warehouse in USA. USA has the opposite seasons as Australia, so this would mean that I could have a high season in Australia, then when that ends, I will have a high season in USA.

I have learned numerous insights from running this business. The ones mentioned above are just a few that are related to the high seasonality of the business.