Owners of seasonal businesses that only generate cash flow for part of the year face huge logistical and financial challenges.
“Canada certainly has more seasonality than many countries,” said Robert Kozinets, chair of the marketing department at York University’s Schulich School of Business, noting diversification is one way to survive. “In Southern Italy you can do all right selling ice cream all year round. In Ontario, that won't work, and you might want to think about adding some hot chocolate to your menu once the leaves fall from the trees.”
Simon Parker, associate professor at the University of Western Ontario’s Ivey School of Business, said the need to hire workers with required skills and good work habits is another hurdle, particularly because those employees are often on the payroll for only part of the year. “This can be difficult for the entrepreneur,” he added, “but on the plus side these workers are quite sensitive to rises in the rate of pay, and they tend to be less expensive to hire in the first place.”
Thousands of businesses across Canada are faced with these issues, and not always the ones you’d expect. Giles Osborne, manager of Parker Prins Lebano, noted that even chartered accountants face seasonal ups and downs. Busy at tax time, they market their services to companies who have different year ends to fill in the gaps.
Financial planning is crucial in order to deal successfully with the fluctuations. “Companies have to try their best to manage their inventories,” he suggested. “For example, in a retail environment, a company will have to acquire merchandise and it may have to borrow to do so. Then there will probably be a big volume of sales in October and November, but that revenue may have to carry them through four very slow months.
“In our business, we pay a lot of attention to forecasting. My advice would be to come up with projections that are as detailed and accurate as possible.”
Even big retail giants can feel the effects. “Canadian Tire can stock up like crazy on snow shovels,” Mr. Osborne said. “If it doesn’t snow, though, they won’t sell no matter what.”
Paladin International Food Sales, Richmond, B.C.
Sea cucumbers and plump sea urchins bulked up to withstand cold weather are the bread-and-butter of Paladin International. “The sea urchin is at its best when it is fattened up for winter like a bear,” said Albert Wong, head of the company. “We operate from the middle of September to the end of April. The rest of the year I am unemployed. I relax and play golf in the summer.
“We shut down because there is no reason to work. The quality of the sea urchins is not as good, and we have competition from Chile at that time of year.”
Paladin, a 16-year-old company, started as an offshoot of Mr. Wong’s love of sport fishing. Now, with a harvest of 6,000 pounds of urchins on a good day, the company sells 90 per cent of its output to the sushi-hungry Japanese market, one of only three or four fish processing companies doing so from September to May.
“We sell to food importers, not restaurants,” Mr. Wong said. “A referral started us out and somehow our customers find us by word of mouth. We send out a fleet of four or five boats with a crew of three or four for about three weeks at a time in the season. Scuba diving fishermen pick the sea urchins off the ocean floor and put them into nets while a deckhand brings up the nets. The catch goes to our plant for processing.”
He said that for his company, diversification is not practical. Other seafood products require different processing equipment and freezing capacities and they can overlap the sea urchin season. “Salmon, for example, have their season in October, which would interfere with our catch,” Mr. Wong said. “With a business like ours, you are either too busy or not busy enough.”
Artistic Gardens, Toronto
Coping with high seasonal demand is second nature to Meredyth Hilton who, along with husband Brad Hilton, owns Artistic Gardens, a design/build company that during key summer months sees employees putting in 12- and 14-hour days, seven days a week. The season starts in April and the company continues to plant right into December, depending on the weather. Additionally it provides seasonal planters, decorating homes when Christmas bells begin to jingle.
Artistic Gardens has also diversified with some creative business endeavours. “We offer courses,” Ms. Hilton explained, “teaching people to design their own gardens, in evening classes at a restaurant where they can enjoy some food and beverages too. I also contribute a column to a magazine. Some gardening companies take on snow clearing, but we thrive on the creative aspects of our work.
“In our peak season we will have several crews of four or five people working, but in the winter months it’s only the two of us. We’ve been in business for 20 years and do about 50 gardens a year ranging from $25,000 to hundreds of thousands. Initially, I used to spend the winters in Europe, but now that we have a family, that’s not possible. But when you put in long, gruelling hours over a long time, it’s a welcome break to stop totally for a while. When you start again, it’s almost like having a new company.”
How to get and retain good workers? “We treat them like a team,” Ms. Hilton said. “We respect their ideas, and we pay them well. And everyone loves Brad. We are also very lucky that after 20 years we get really amazing clients, so our jobs are interesting and hopefully fun.”
Budgeting and managing cash flow is extremely important, Ms. Hilton added. “Starting out in business, I had advice from a mentoring group of retired executives who suggested having enough money available to survive for two years.”
Christmas Mountains Manufacturing, Perth-Andover, N.B.
Joan Tone, who works at the Christmas Mountains factory, said she suffers from painful arthritis, but when her health concerns get in the way the company will always find something for her to do. “I’ve been doing the job for five years and I love working there,” she said. “There aren’t many jobs around. In the winter, my arthritis really acts up but I keep busy – the days go by really quickly.”
Christmas Mountains is a family business named for the mountains near its headquarters. With a 20-person work force during peak periods, it manufactures Christmas tree stands and related products, 20 different items in all, which it sells to major chains including Canadian Tire and Rona. Started in 1993, the company took over from a small manufacturer, using borrowed money to purchase equipment.
“My brother David and I were fresh out of college,” said Michael Bolster, one of the owners. “I worked for a place that made Christmas tree stands and Canadian Tire was interested in carrying the line after they sold 100 in Saint John in one weekend. We have employees who have been with us for years and even though they are laid off for four or five months of every year, there are a lot of smiling faces around. My brother and I and a skeleton staff run the business, spending our time in constant selling mode when our factory shuts down.
“We did try to diversify and manufacture related non-Christmas items, including a post for hanging plants and bird feeder, but they didn’t work out.”
Sticking to selling Christmas products as a business is logical, he added, because all the marketing is in place and all the procedures. “We go to the same trade shows every year, we have established contacts and representatives. It just makes sense this way. Now some of us are busy with selling the 2011 lines, but we are only in production from May until November.
“Christmas is the shortest selling season there is and it only happens one time every year.”
Special to The Globe and Mail