Your business’ budget should reflect the challenges and opportunities of the holiday season. The process starts with goal-setting: What volume of business do you want to achieve in the holiday period, and what expenditures should you make now to reach your goals? It’s easier to update your budget by breaking down your goals into a set of focused objectives like the ones we’ve compiled here:
Inventory:
The biggest selling days are the Black Friday weekend (the days after Thanksgiving) and the week leading up to Christmas. These are the days that will drain your inventory the fastest, leaving you vulnerable to stockouts, which is something you can’t afford. Conversely, you can’t mindlessly order extra inventory that will sit unsold on your shelves well into the new year. Therefore, review last year’s sales numbers and see if you would have benefitted by ordering more inventory or less. Then, factor in new products you’ll be selling this year, as well as the amount of extra advertising you’ll be doing. Your marketing and sales plans will greatly affect demand for your offerings.
Marketing:
Opportunities abound in the holiday season to spend money on marketing and advertising. The challenge is to pick the right advertising channels, whether existing or new, and allocating budget dollars to each. The basis for deciding your marketing budget is return on marketing investment for various channels, such as:
- Loyalty programs
- Social media
- Print advertising
- Broadcast advertising
- Promotions and events
- Website updates
- Signage
- Email marketing
Review your marketing ROI for the last 12 months to gauge how much to allocate to each potential channel. You might also want to canvas your peers (not necessarily your direct competitors) for their experiences in this area. Your objective is to have a cohesive, well-funded marketing plan that avoids missed opportunities while minimizing waste.
Production:
If you are a manufacturer, your holiday production schedule should reflect your best estimates for demand. In some businesses, demand won’t change much during the holiday season, but for others, the holidays are the make-or-break period for production and sales. You should update your production goals based on factors like last-year’s results, economic conditions, the latest trends and fads, changes in the competitive landscape, and so forth. Then, update your budget to account for changes in purchasing of raw materials, assemblies, equipment, and supplies. Factor in increased labor costs, and perhaps higher utility usage. You may also need to budget extra for temporary storage and transportation facilities.
Decorations and Gifts:
Retailers spend significant dollars each year on decorations that enhance the holiday spirit. You may also need to revamp or expand your shelves and bins. Don’t forget to budget holiday gifts you may want to distribute to employees, vendors, and contractors. The good will you accrue through thoughtful gift-giving will pay dividends all year long and bolster your long-term success. Gifts need not be lavish, but a simple thank-you card might not provide the results you want. In any event, do not tie gifts to demand for employee overtime or vendor discounts.
Liquidity:
After you arrive at your new budget, you may find yourself short of working capital. Rather than slashing your brand new budget, consider a short-term business loan. Interest rates are low this year, making the cost of a loan small in comparison to the benefits of additional spending. The extra sales volume you derive from your updated budget should greatly exceed the cost of borrowing. Ask yourself how much business you’ll lose if you don’t supplement your budget with a short-term loan. Remember, someone is going to benefit from all that extra holiday spending. Fortify your cash position so that the beneficiary is you.
