The Difference Between Ants and Squirrels
© 2013 Elena Fawkner
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)
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 2013. 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
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
=> 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.
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.
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Elena Fawkner is editor of Home-Based Business Online.
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Friday, 17-Jan-2020 23:46:35 CST