In this episode, Danielle Hayden, CEO and founder of Kickstart Accounting, Inc., tackles the challenges of managing seasonal ups and downs in your business. From fluctuating cash flow to balancing tax planning and growth goals, Danielle shares actionable strategies to help you weather any season stress-free with KSA’s framework.
Whether you’re an entrepreneur dealing with summer slumps, winter lulls, or unexpected expenses, this episode is packed with insights to help you stay ahead. Learn how to identify seasonal trends, plan effectively, and keep your mindset strong, no matter what challenges the season you’re in brings!
Key Takeaways:
- Understanding Seasonality: Use your financial data to identify patterns of seasonal sales and profits by running a profit and loss report by month (covering at least 24 months) to spot trends.
- Types of Seasonality: There are different kinds of seasonality: the peaks and dips in sales revenue that are tied to the calendar or seasons, and the fluctuations caused by grouped expenses like subscriptions or annual costs.
- Preparation is Key:
- Build a cash reserve of 1-3 months of cash outlay.
- Save 25% of net income for taxes.
- Secure a line of credit during peak periods for added flexibility. Don’t wait until you’re in desperate need and are scrambling!
- Maximize Downtime: Slower seasons are the perfect time for strategic planning, professional development, system audits, and personal well-being.
- Strategies for Peak Seasons: Despite high cash flow, this is the time to avoid overspending and start saving for the off-season.
- Managing Your Debt Mindset: Overcoming the fear of debt allows you to stay adaptable and open to new approaches throughout the year, which opens your business up to growth and improvement opportunities.
Topics Discussed:
Client Case Study: Navigating Seasonality and Tax Challenges (00:01:09 – 00:03:57)
Step 1 - Identifying Seasonality Trends (00:04:23 – 00:05:05)
Step 2 - Identifying the Type of Seasonality (00:05:05 – 00:07:35)
Step 3 - Preparing for Seasonality (00:07:35 – 00:15:15)
Step 4 - Managing Your Debt Mindset (00:15:17 – 00:17:26)
Resources:
Cash Flow Worksheet | kickstartaccountinginc.com/cash
Book a Call with Kickstart Accounting, Inc.:
https://kickstartaccountinginc.com/book
Connect with Kickstart Accounting, Inc.:
Instagram | https://www.instagram.com/Kickstartaccounting
YouTube | https://www.youtube.com/@businessbythebooks
Facebook | https://www.facebook.com/kickstartaccountinginc
Episode Transcript
00;00;00;00 - 00;00;23;16
Danielle Hayden
Hello and welcome back to Business by the Books, the podcast that teaches you how to use your financials to better manage your business. Are you a business owner struggling to make the most of your cash flow during seasonal up and downs? Are you uncertain of how to weather the seasons without putting too much strain on yourself or your business?
00;00;23;17 - 00;00;43;19
Danielle Hayden
If so, this video is for you. I am going to share the KSA framework that is going to help you manage and optimize your financials, no matter what time of year it is. So get ready! We're going to unlock the secrets to successfully steering your business through seasonality. I promise you, you are not the only one going through this.
00;00;43;20 - 00;01;09;04
Danielle Hayden
My name is Danielle Hayden, founder and CEO of Kickstart Accounting, Inc. We have worked with thousands of business owners using bookkeeping as a vehicle to help business owners better manage their business and use numbers to grow and thrive as business owners. Now, managing seasonality is something that regardless of your industry, we all as business owners go through this.
00;01;09;05 - 00;01;39;23
Danielle Hayden
We had a client a few years ago who had just started working with us, and she knew that she had two seasons in her business, January and February, and then summer was both two very slow seasons in her business. But fortunately for her, she was very profitable and growing and thriving as a business owner. It was January when we had just started working together, maybe early February, cold, dreary--I’m talking,
00;01;39;24 - 00;02;07;27
Danielle Hayden
I am from Cleveland. I remember there being snow on the ground, kids home with a snow day during our first call together. It was just an utterly freezing year that year. We had been talking about taxes, and her previous tax accountant had shared with her that because she was so profitable, she needed to take a large bonus and make some serious business decisions in December to lower her tax liability.
00;02;07;27 - 00;02;38;01
Danielle Hayden
What the tax accountant did not take into account was that she was opening up a second location, and she had serious seasonality in her business, and so she had made those major decisions in December with a narrow focus on taxes. Forgetting about the other business goals that she had coming up in early spring. So as we rounded out through January, February of that slow season, she really struggled.
00;02;38;01 - 00;03;02;28
Danielle Hayden
And most importantly, she struggled with her mindset because she had made these decisions and wasn't sure if her business was ever going to survive. Like, are the clients ever coming back? How will I weather the storm? And then still had a tax bill in April. So managing seasonality is both in our industries and what is our normal trend of seasonal ups and downs.
00;03;02;28 - 00;03;38;29
Danielle Hayden
But then we're also managing as business owners our tax season as well. So of course she got through January and February. She had actually had a major launch of a retail location. She was an online business launching a retail location in early May. Unfortunately, she had to take on some debt, but we worked together to help her overcome her debt mindset and she successfully opened up that location and is thriving now because she knows her numbers and we are sending her financial statements on a monthly basis.
00;03;39;02 - 00;04;04;00
Danielle Hayden
She knows that she has that seasonality in summer as well. So it's really important that we are managing both sides of her business, understanding the seasonality of both and planning during the high seasons for the low seasons, while also planning for tax season. Now, I know that sounds like a lot. Running a business can be a roller coaster.
00;04;04;00 - 00;04;28;20
Danielle Hayden
Anyone and anyone who has tried entrepreneurship knows the roller coaster of running a business. So I want to provide you with a framework. You guys know how I love using frameworks to help us use this information in our business. So we'll walk through the framework and then I'll go into detail with each step. So step one, I want us to identify the seasonality by using our numbers.
00;04;28;23 - 00;04;54;29
Danielle Hayden
If you do not have any history or bookkeeping yet, you can use industry norms, but preferably I would like you to run your profit and loss by month looking at the last 24 months. Now QuickBooks has a really easy report to use called Profit and Loss by Month, and you can adjust the dates. If you are a Kickstart Accounting, Inc. client, just email your bookkeeping the team and they will send you over this information.
00;04;55;06 - 00;05;16;04
Danielle Hayden
So I want you to run the profit and loss by the last 24 months. I want you to be able to see two years so that you can see if there's any trends, because step two, we're going to identify the type of seasonality. Do we have a seasonality of sales and or profit. What do I mean by that?
00;05;16;06 - 00;05;38;22
Danielle Hayden
So a lot of businesses have the seasonality of sales where we know that, you know, let's say the holidays at Christmas time in November, December, we have a really high sales month, and then January and February are slower months. Another seasonality that we see in terms of sales for our clients is summer months. Summer takes a dip.
00;05;38;22 - 00;06;00;10
Danielle Hayden
Now, if you're in the tourism industry, you might be the other direction where summer is booming for you, pending on where you're located and what type of business that you're running. So is this a sales seasonality in which your sales actually dip based on the calendar or the actual physical seasons, or do you have a profit seasonality?
00;06;00;17 - 00;06;28;10
Danielle Hayden
Now we have some clients who, just based on the way that they have built and scaled their business, they have a lot of annual subscriptions or team bonuses, annual reviews, things that happen grouped together. So for instance, we have a client who we know every spring that a lot of their annual subscriptions, insurance, payments. Now, I want to be clear, if we know that we're going to be using a software for years to come,
00;06;28;18 - 00;06;55;28
Danielle Hayden
I am all for us using annual subscriptions to receive that discount. That's why we offer that at Kickstart Accounting, Inc. We offer that discount for any clients who want to take advantage of paying for the full year up front. So I am all for us using that strategy. However, just know that if we have more than one group together or we have something that's a really big cost, it will create a profit
00;06;55;28 - 00;07;17;05
Danielle Hayden
seasonality. So step two is to identify the type of seasonality. Again, the best place to get this information is to go to your profit and loss by month straight out of QuickBooks. It is a really easy report to use and understand to determine if it's a sales seasonality. You will look at the profit and loss at the top line gross revenue.
00;07;17;07 - 00;07;35;27
Danielle Hayden
And if we're looking at our profit, you're going to go fast forward all the way to the bottom of the profit and loss report and look at the profit, right? You can scan your eyes left to right, see which month you have a profit, in which months you have a loss to determine the root of the issue, to help guide you through step two.
00;07;35;28 - 00;08;03;00
Danielle Hayden
All right, step three, once we have determined what the seasonality is and what it is caused by, it's time to prepare. During this preparation, we are going to do three things. First is the cash on hand. I want every single business owner to know and understand how much money that they are using to run their business. Now, I don't mean just your operating expenses.
00;08;03;00 - 00;08;23;23
Danielle Hayden
Looking at your profit loss statement, you really want you to understand what is the monthly cash outlay in your business? Now we have a worksheet for you. You can go to KickstartAccountingInc.com/cash to download the worksheet. Also walk you through the calculation here, but if you're driving, taking a walk, don't worry! There is this calculation for you.
00;08;23;24 - 00;08;55;22
Danielle Hayden
So the three months of cash outlay is your monthly average operating expenses, plus your monthly average cost of goods sold. Two more plus our average monthly debt payments, plus our monthly average owner's draws slash personal expenses. This is how much money it takes to run our business on a monthly basis. When we are preparing for our seasonality, we want to have 1 to 3 months worth of cash on hand.
00;08;55;24 - 00;09;25;14
Danielle Hayden
Again, this is not just our operating expenses. You cannot forget about your debt payments and owners your payments. You need to be able to survive personally during this time. Now, I say 1 to 3 months because it depends on how long your seasonality is and how large your business is, right? If you are running a larger business, it might become more difficult to actually save that much cash in your business, and you might still have some sales that are coming in during that seasonality.
00;09;25;14 - 00;09;53;14
Danielle Hayden
So it's not like business completely shuts off. If you're running something like an ice cream store that completely shuts down in October--that's fresh on my mind. We wanted ice cream this this Friday, and our favorite ice cream spots are already closed for the season, so they literally would have to have enough cash on hand to pay the mortgage, to pay any utilities, anything that they need in order to keep their grounds ready and prepared for the next season.
00;09;53;15 - 00;10;20;07
Danielle Hayden
But you might not have a business that completely shuts down, and therefore you still have cash coming in the door. It will reduce the amount of cash you need to actually have on hand, no matter what time of the year we need to be saving to have that tax reserve. So this is not including our estimated tax payments, but we suggest that every single one of our clients is saving about 25% of net income, not gross.
00;10;20;09 - 00;10;39;16
Danielle Hayden
While all the way at the bottom of the profit and loss statement, I want you to have 25% of your net income in a savings account, and I get it through our slow seasons, it's really difficult to be saving for taxes during our peak months. It's really important that we're saving for our tax reserve and our cash outlay.
00;10;39;16 - 00;11;05;12
Danielle Hayden
But no matter how small the contribution is, we want to make sure that we are contributing to our tax reserve and always paying our estimated tax payments. All right, step three in this is to have access to a line of credit. It's really important to get a line of credit when times are good. Don't wait for times to be bad to go and contact your bank, or to look into some of the unconventional credit methods.
00;11;05;14 - 00;11;31;11
Danielle Hayden
We want to be looking at a line of credit when times are good. So during our peak months, during our peak years, we are looking to get access to a line of credit so that we have access to that cash to be able to help us during the seasonality. So let's recap here, we want to have cash on hand between 1 and 3 months worth of cash outlay, our tax reserve, and then access to our line of credit.
00;11;31;11 - 00;12;06;20
Danielle Hayden
Next let's talk about how to prepare for our downtimes. I want every single one of you to maximize your downtime. This is the time where we can do strategic planning, budgeting, admin projects, team training, professional development for you, new equipment, inventory counts, evaluating our pricing, systems audit, time with family, and reduce the amount of expenses that are scheduled during these downtimes so that you can avoid stress.
00;12;06;20 - 00;12;29;15
Danielle Hayden
You know, even in our business at Kickstart Accounting Inc, we have downtime. So for us, summer is our downtime. So I know that during the summer, I want to be planning professional development for my team and I. That's when we do a lot of our team trainings, live events. We are doing our equipment audit where we're looking at who owns and houses what equipment.
00;12;29;15 - 00;12;59;04
Danielle Hayden
We're looking at our pricing. We are doing a full systems audit and looking at everything in our business with fresh eyes, right? But most importantly, I spend time with my family. This past year, we took two weeks off and I took my family to Italy this year. Knowing that this is going to be a slow time for our business, it allows me to enjoy that time without sitting here stressing, oh my God, where is everybody?
00;12;59;11 - 00;13;23;10
Danielle Hayden
So I really encourage you to think about how can you maximize your downtime. So if January and February are a downtime for you, get ready now and you have time to plan how you're going to maximize your downtime. All right, next, I want to give you a few strategies during peak months. During peak months we want to avoid any unnecessary expenses.
00;13;23;11 - 00;13;45;06
Danielle Hayden
I know this is kind of counterintuitive to what many of you expect me to say. I really want you to avoid unnecessary expenses and don't overspend during this time when business owners are looking at the cash in their bank account, but not necessarily looking at the full picture, looking at your financial statements, looking at the history of your financials, booking time with your money team.
00;13;45;06 - 00;14;10;29
Danielle Hayden
It's really easy to overspend during good times because that cash is sitting in your checking account calling out to you. I want you to reduce your cost, and this might be something that you actually do during the downtimes by shopping around suppliers and services that offer discounts and special rates. That way, during peak months, you're able to actually save your cash outlay and tax reserve.
00;14;11;00 - 00;14;34;04
Danielle Hayden
It's important that we're always looking to save money on storage space so you don't have to pay rent when it's not necessary. So again, back to that example of somebody who is actually shutting down during winter months, looking at how we can maximize our storage space so that we are in-tune with our seasonality. I really want to encourage all of us to think outside of the box.
00;14;34;04 - 00;14;56;09
Danielle Hayden
If you have always hired full-time team members and this doesn't feel aligned with who you are as a business owner, I'm not saying that I want you to reinvent your business, or that I don't want you to live in alignment with your core values, but what I am asking you to think of is how you can think creatively and outside your industry norms.
00;14;56;12 - 00;15;21;14
Danielle Hayden
So one option might be to hire temporary employees that way it gives you the flexibility to reduce your manpower when it's necessary, and only pay for what you need. Don't forget we need to treat them fairly. We need to treat them like other year long, full-time employees and be the best seasonal employer out there. All right, step four is manage your mindset.
00;15;21;14 - 00;15;40;14
Danielle Hayden
You know, I worked at a company before I started Kickstart Accounting and this company had been--they had been around for like 100 years. And when I came in as the CFO, I can't tell you how many people would tell me when I asked them why they were doing something, they would say, because that is the way we've always done it.
00;15;40;18 - 00;16;07;23
Danielle Hayden
And the number one thing I worked on with them is that if we don't have a reason as to why we're doing it that way, it is time to reinvent ourselves. We have an opportunity every year, every month, as business owners, to think about who we are, what we do, and why we do it. So if you find yourself saying because that is the way we've always done it, it is time to think outside of the box.
00;16;07;23 - 00;16;37;16
Danielle Hayden
As business owners, we don't just have to manage our own mindset, but we need to manage our employees expectations. So talking to our employees about this seasonality in our business and about what they can expect from us as employers is going to help manage both our expectations and our team members' expectations from us. So we, as business owners, are responsible for managing our own mindset, our own expectations, as well as our employees.
00;16;37;16 - 00;17;09;22
Danielle Hayden
Lastly, I want you to think about your debt mindset. I can't tell you how many business owners have sold me over the years. I don't want to carry debt in my business. Now, I'm not saying that all debt is created equally, and that I want you to run out and obtain debt, but I think as we are managing seasonal businesses and the ups and downs of running a business, working through your debt mindset is going to be really helpful in managing your mindset and how you work through the seasonality in your business.
00;17;09;28 - 00;17;33;04
Danielle Hayden
Having access to cash to be able to keep your business thriving is going to be a game changer for you in your business. The key takeaway here is that you carry the tone as the business owner, you are the one who are leading your customers and your team during these times. So talk to your money team and review this framework with them.
00;17;33;04 - 00;17;56;19
Danielle Hayden
Identify the seasonality. Determine the type of seasonality. Determine how you will prepare and what you're going to do to control your mindset during your seasonality. If you don't have a money team, then I invite you to book a call. You can go to Kickstart Accounting, Inc.com and book a call right there. The Kickstart Accounting team would love to help you.
00;17;56;20 - 00;19;00;05
Danielle Hayden
We are here for you as business owners to get bookkeeping off your plate and use it as a vehicle to help you understand your numbers, so that you can grow and thrive in your business. Don't forget to hit like and subscribe and we will see you next week!