Gravity Payments

Does Your Small Business Need Extra Working Capital During the Holiday Season?

With the holiday season fast approaching, many small businesses are getting ready for their busiest and most profitable time of year. These critical five weeks – from Black Friday to Christmas – will often make-or-break a company’s sales and profit targets for the entire year. That’s why it’s important to plan ahead to secure the […]

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With the holiday season fast approaching, many small businesses are getting ready for their busiest and most profitable time of year.

These critical five weeks – from Black Friday to Christmas – will often make-or-break a company’s sales and profit targets for the entire year.

That’s why it’s important to plan ahead to secure the inventory, staff, equipment, and logistics for your business to succeed during the holidays.

However, many small business owners simply don’t have enough cash to finance the expenses and assets required to meet the surge in customers and orders.

This often leads to missed sales opportunities, lower profits for the year, and even less cash to invest in growth opportunities.

In this article, we’ll help you determine if your small business needs extra working capital to make the most of the holiday shopping season.

What Is Seasonal Working Capital?

First, let’s review a couple of key terms:

Working capital is the difference between a company’s current assets and current liabilities. Cash, accounts receivable, and inventory are examples of current assets. Current liabilities include accounts payable and short-term debts.

Seasonal working capital is the increased amount of working capital required to operate during peak season as businesses build up inventory, hire additional staff, and spend more on marketing campaigns.

Next, we’ll discuss the top reasons why your business may need seasonal working capital and how Gravity Payments can help.

1. Stock Up on Inventory

There’s nothing worse than running out of inventory and being forced to turn away customers during the holidays.

Not only does this result in missed sales opportunities, but it can damage your precious reputation as those same customers might not return next year.

That’s why you should stock up on your bestselling inventory ahead of time.

In some cases, you may even want to order several months of inventory at once to negotiate better pricing and longer payment terms with your suppliers.

This will ensure your business can meet customer orders before, during, and after the busy holiday season.

2. Hire Additional Staff

Does your business depend on extra staff during the holidays?

Whether it’s another full-time shift or a part-time assistant, many small businesses require seasonal or temporary staff to manage the influx of customers.

However, keep in mind the demand for short-term staff will also peak during the holidays, so you may end up paying higher wages, bonuses, or agency costs (if you hire from a staffing agency).

Even if you think your current employees might be able to  manage a holiday surge, there’s always the possibility that key personnel resign, call in sick, take vacation, or are otherwise unavailable.

That’s why you should take the time now to assess your business’s staffing needs and evaluate how many extra staff members will be needed to meet peak demand.

Then decide whether it’s best to pay existing employees overtime, hire and train new staff, or use a staffing agency to bring in experienced seasonal workers.

While it may seem expensive now, securing additional staff will save you from scrambling at the last minute to find qualified help.

3. Invest in New Equipment

Before the holidays begin, it’s a good idea to inspect your equipment and determine if any pieces of equipment need replacing or additional maintenance.

Whether it’s a forklift or delivery truck, your equipment will be working hard during peak season, increasing the rate of wear-and-tear and chance of failure.

For critical equipment, this could mean the shutdown of your entire business while you wait for a replacement or repair technician to arrive.

To avoid this situation, consider replacing older equipment and performing preventative maintenance.

However, purchasing new equipment can be difficult when cash is already tight – look for equipment leasing and financing options from vendors or put part of the purchase on a short-term line of credit or merchant cash advance.

4. Secure Warehouse Space and Logistics Partners

Whether you’re in eCommerce or simply need more storage room for inventory, pay special attention to your warehouse space and fulfillment partners during the holiday rush.

With eCommerce set to grow by 9% in 2022 and cross $1 trillion for the first time, the competition for warehousing and last-mile delivery is intense.

Your warehouse partner is often your fulfillment partner as well, so it’s important to find a dependable company that fits your small business needs.

Consider securing additional shelf space and fulfillment services before you expect to hit peak sales to guarantee your customers will receive their orders on time.

This is especially important for holiday shoppers who expect to receive their orders before a certain day.

If you have a local business, look for ways to add ramp-up capacity to your logistics chain such as independent delivery drivers and short-term warehouses.

5. Increase Spending on Marketing & Advertising

So, you have enough inventory, staff, equipment, and warehouse space, but you still need to get customers through your doors (easier said than done!).

Your competitors are all vying for a share of the holiday spending pie – fast-paced holiday marketing campaigns can help you get a big piece.

Whether you use an agency or in-house staff, make sure to allocate enough budget to online initiatives like search engine optimization, paid ads on Google, and social media blitzes, as well as offline channels like TV, radio, and mail-in flyers.

6. Prepare for Returns and After-Sales Support

Your business may still need that extra working capital even after the holidays and inlaw visits are over.

The National Retail Federation estimates over 16% of products were returned after the 2021 holidays, a reflection of growing online sales and binge purchases.

This “return wave” means you’ll need extra hands to assist with customer service and reverse logistics in January and even into February.

It’s also a good idea to forecast the return rate based on previous years to estimate the inventory, logistics, and cash flow consequences for your business.

Obtain Flexible Seasonal Working Capital with Gravity Capital

Gravity Capital can provide the extra funds your small business needs to prepare for a profitable holiday season.

Our convenient merchant cash advances allow small business owners to access funds quickly (within one business day of accepting a funding offer) and come with flexible repayment options.

Apply today to find out how much your business qualifies for.

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