Business development · 9 December 2016

Poor Christmas planning means a dry January for one in five business owners

tax returns on Christmas Day
Small business owners that fail to effectively manage stock levels may have to undersell products in the new year

One in five owners will have to dip into personal savings to make it through January this year, as new research revealed the dangers of not being prepared for the festive season.

The study, conducted by small business finance provider LDF, revealed a January “drought” for many small businesses, as a further 15 per cent of small company owners admitted that the Christmas period negatively harms their profits.

The single biggest cost of the Christmas period for small business owners, the study found, was ensuring resources could meet the increase in demand – bringing in temporary workers as well as giving more hours to existing employees.

Another factor found to make January a poor sales month was the failure to manage stock levels.

Almost a quarter of survey respondents claimed that by overestimating consumer and supplier demand, they will be left with a surplus of stock going into 2017 and faced having to “undersell” their product in January.

Commenting on the findings, LDF managing director Peter Alderson said that company owners needed to anticipate the impact of Christmas well in advance.

“This is a critical time of year for small businesses, especially those who operate seasonally as this can make or break how they approach the New Year.

“Our research found that business owners are starting their Christmas preparation and planning far too late in the year, and actually with more insight and financial investment they could maximise the Christmas period a lot more than they realise,” he said in a statement.

In a recent article for Business Advice, the vice president of Intuit Quickbooks, Dominic Allon, warned business owners of the “balancing act” of buying stock for Black Friday and Christmas sales.

“Use data from previous years to understand what is likely to sell, and buy enough stock to keep customers happy. But, do bear in mind that going overboard and not selling risks problems for your cash flow,” he said.

The study found that almost one in five small business owners made no preparations for the Christmas period. With UK shoppers spending £2.9bn over Black Friday this year, according to the BBC, and separate figures suggesting that almost a fifth of total small business revenue is generated over Christmas, the value of forward-planning shouldn’t be understated.

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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