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A new client recently asked what they should be doing to get through the slow summer months until their specialty food e-commerce and mail order business picks up for the holiday selling season.
The tips below are designed to help you make it through the slowest time of the year and to gear up for the all-important holiday season.
Study your prior-year June-August P&L. Categorize every expense as either fixed or variable. Once you know how much your fixed expenses are running in the period and you know your variable margin, you can calculate your monthly break even. For example, if fixed expenses run $10K a month, and variable expenses (including cost of goods sold) run 65% of sales, you need $28,571 per month to break even. $10,000/(1-.65) = $28,571
By plugging in your estimated sales for the period, you can easily and quickly calculate your approximate profit or loss. For example, if you estimate that sales will be $15,000, the equation will look like: $15K x (1-.65) - $10,000= -$4750. In other words, if your sales are $15K, you will lose almost $5,000 for the period.
After running the numbers, you may find that you are one of the lucky few specialty food companies that is cash-flow positive in the summer months. However, if you are like most specialty food companies, you lose money and have negative cash flow in the slower summer months. Knowing how deep the cash hole is will help you devise steps to minimize the drain.
Conserve cash without jeopardizing your credit rating.
Delay any capital outlays until the fourth quarter or just after the new year when your cash position is much stronger. Many employees value time off as much as cash. Ask employees who are not critical to your business at this time of year if they would like extra time off in the summer. Let key vendors know this is the slow time of year. Ask for an extra 30-60 days on your payment terms. You may be surprised to find most of them will be glad to work with you, especially if you ask up front rather than just slow pay their invoices. If you have a wholesale component to your business, you likely have receivables. Monitor your aging report, and call customers who are starting to stretch the terms beyond 30 days. Do you have any inventory that you could barter for services you need now? We have several clients who are in barter networks, and they have traded food and gift baskets for all sorts of other goods and services.
Market to your best customers. If you have not done so, segment your customer list into groups of buyers by their season of last purchase and their life-to-date sales. Use post cards to communicate to your most recent and highest-dollar customers. Use promotional offers such as free or discounted shipping, a substantial discount on overstocked items, or just a customer appreciation sale to stimulate response and drive more sales. Use email in conjunction with your post card mailings. Email costs almost nothing and can add thousands of dollars in much needed sales. Call your top customers and/or your previous summer buyers who have not yet ordered this year. Let them know you have products available and ready to ship, and use a strong offer to close the sale. Call your best corporate gift customers, and offer them a free sample of any of your new products. This puts you in a good position to get their business again this year, creates a lot of goodwill, and helps you gauge interest in your new products from your biggest customers. Monitor your pay per click program. Are you bidding on any key words or phrases that are not profitable in the summer months? If so, suspend or “turn off” those words until business picks up in the early part of the holiday season. In almost all cases, it pays to keep your branded terms live throughout the year. If you are not bidding on your branded terms, do so immediately. It will generate an immediate and positive ROI. Now’s the time to use the web to reduce inventory and generate more sales. Put overstocks, discontinued and other discounted products on your home page. Use this slower time of the year to get ready for the approaching holiday season.
Fine-tune your mail plan and promotional calendar. Catch up on industry news by tackling that two-foot stack of trade publications that never get read. Commit to spending time each day working on a longer-term vision for your business. Use idle workers to manually de-dupe and merge records on your customer list. Work on your mailing list and begin preparing for your gift list mailing, which as we all know is THE most important and profitable promotion of the year for specialty food companies. Don’t wait until September to start working on your list!
Contact local businesses that have a need for gifts in the non-holiday season. Examples include accounting firms sending post tax season gifts and realtors sending house-warming gifts. These and other companies are always looking for unique client and customer gifts. If you can position yourself as a reliable resource to these companies, they can develop into an important part of your business inside and outside of the holiday season.
Don’t panic! The summer doldrums are a fact of life in the specialty food business, especially for companies operating in the online and mail order channels. Use this time to enjoy your family and friends. Before you know it, the holiday season will be here, and you will be working 18 to 20-hour days…longing for the lazy-hazy days of summer.
We hope these few tips will make it a little easier for you to make it through the slow summer selling season. If you have other tips that have worked for you and you would like to share them, we would love to hear from you.
Warmest Regards,
Tony Cox
President
The 5th Food Group and Catalog Solutions, LLC
ABOUT 5TH FOOD GROUP & CATALOG SOLUTIONS
5th Food Group helps specialty-food catalogers and internet marketers grow and make more money by developing, managing and implementing their mail order and online marketing programs. We are the only catalog/internet marketing firm that works exclusively in the specialty food industry. Helping smaller companies or large companies with small mail order or Internet divisions is what we do best.
Visit us online at www.5thFoodGroup.com to download a copy of our free booklet, The Seven Habits of Highly Ineffective Catalogers, and for information on our fully guaranteed introductory program called Jump Start.
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