If you were like me, when I first created those initial set of financial projections for my startup, you probably just had a slow build of revenues with month over month sales increasing. And, at some future point- 6 months, 1 year, you projected to break-even. Voila, and you thought it was that simple! As time would tell, I couldn’t have been more wrong or off with my sales projections. What I failed to account for with my online diet and meal delivery service is that it was very much cyclical. Sales in January through April were robust and growing each month, so I erroneously concluded that this trend would continue for the rest of the year. Once we hit Memorial Day, sales started falling and by August, they bottomed out. Whoa! I was in a bit of a mess because I didn’t plan for a summer slow down. My expenses were more than my revenues. With the surplus I had during the first part of the year, I started investing in new technology and improved processes. (Wise investments but I didn’t leave any extra cash to cover a shortfall or a slowdown). I literally couldn’t make payroll. I had to borrow from a really, really good friend to cover my shortfall. Business didn’t pick up again until mid-September and sales grew robustly until Thanksgiving, which was when sales again declined precipitously. It was August all over again.
I was pulling my hair out in frustration since I was going to find myself once again out of cash. As it turns out, this same cycle would repeat itself for each year over the next five years! That is the general life cycle for diets, lifestyle and other fitness trends. It makes perfect sense when you think about how people view healthy living. Most people ‘wait’ for the right time: New Year’s resolutions, spring shape-up for the summer or a wedding, etc. During the second year, as sales overall for the year doubled, we still experienced this same type of sales cycle as the previous year, however, we were better prepared to meet the lean and mean summer. It was during these slower times that we focused on business strategy, encouraged employees to take vacations, etc. Once we understood the nature of seasonality, we could better manage our business so that we could stay in business. How about you and your business? Do you understand the cyclical nature of your industry? Be honest because if you don’t do your research and study up on your customers’ buying trends, it will come back to bite you if you’re not prepared.