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Managing seasonality: 6 strategies for growing your business year round

Picture of a job site working on the exterior of a building in NYC | Managing seasonality in construction | Knowify

Every specialty trade faces seasonality in their business at one time or another. Learning how to deal with it effectively can be the difference between a successful business and an unsuccessful one.

While the traditional construction season falls between spring and summer, every trade will have a different relationship with the seasons of the year. As winter approaches, for example, some contractors may struggle to find jobs, while others will rejoice and experience a boom in business. 

Otherwise unexplained increases or decreases in revenue can be attributed to seasonal effects. For this reason, contractors must work to understand just how impactful seasonality is on their business. Those who fail to do so run the risk of cash flow issues or missed opportunities to improve profits. 

Read on to understand how seasonality in construction affects your business, and 6 tips to help you keep everything on track.

Seasonality definition

Seasonality, as it relates to finance, is defined as a measurable difference in data that is predictable and recurring at the same time every calendar year. In other words, seasonality is the annual increase or decrease in revenue that follows a specific pattern depending on the seasons, like winter or summer. Think turkey sales in November or beer sales the day before the Super Bowl. 

Seasonality is different from cyclical effects. Cyclical effects are those that affect finances during an irregular period of time. For instance, labor shortages may result in reduced productivity or one-off events that impact material prices. These situations can span anywhere from a few weeks to multiple years. Therefore there are not considered seasonal effects as they are not predictable, nor do they occur at the same time every year.

Construction industry seasonality: More than just the weather

Seasonality, in a literal climate sense, does play a major factor in projects. Weather will have a significant impact on job sites and working conditions. For roofers, heavy rain may bring hail damage, leading to a boom in business. Conversely, for asphalt and brick-laying trades, heavy rain or snow will bring operations to a halt. Any trade that requires liquid materials, slurries, or pastes will inevitably see a reduced number of jobs and subsequently reduced revenue in the winter months. So while seasonality is about the weather, it’s much more than that. Contractors should look at seasonality through an economist’s eyes and less from a meteorologist’s. 

How a contractor looks at the forecast largely depends on their trade, location, and business model. For this reason, weather is just another factor, among many, that plays into seasonality as a financial concept. For the remainder of this article, when we refer to seasonality, we are referring to a financially busy or slow period (in which weather may or may not be a factor). No matter the trade, seasonality will likely affect a contractor’s finances in one way or another. 

You cannot control the weather, but you can anticipate when your business will experience a slowdown in revenue. When this time comes, you may surprise yourself and maintain a steady stream of business. If this is the case, great! If business does slow down, however, you’ll be able to take much of the stress away by creating a plan both financially and pragmatically to mitigate the effects. 

Contractors that understand the seasonality of their business can better manage cash flow to ensure cash is always on hand and create more effective schedules and bids to coincide with busy or slow times. Think of seasonality as sailing a boat. You know which way the wind is blowing, but it’s up to you to position your sails to take you where you want to go.

6 strategies for managing construction business seasonality

#1 Know your numbers

Managing seasonal impacts begins and ends with knowing your numbers. This means job costing consistently and taking an active role in evaluating the performance of past jobs. For busy periods, try to find ways to maximize efficiency. The idea here is to make hay while the sun is shining. Don’t just look to be profitable, look to be prosperous. By tightening up efficiency during busy periods, you can take huge strides toward elevated profit margins. This could be through better scheduling, better allocation of materials, or improved processes. 

During a slow period, look through historical data to identify opportunities to boost profitability. When jobs are few and far between, maximizing profitability becomes paramount. 

Strategies to improve profitability during slow times:

  • Try to negotiate for more favorable rates on the contract
  • Consider working with new suppliers
  • Re-evaluate pricing 
  • Take a more detailed approach to estimating and use that to develop strict budgets

Work to identify the predictable time periods in which you know business will be slow or busy. Again, this should go beyond a simple hunch. Back your assumptions up with real numbers and create a plan accordingly. 

#2 Ramp up marketing and promotions

Consider implementing more promotional efforts or marketing materials as you anticipate a slow period. Use the slow time to invest in your branding, messaging, and customer acquisition. Try to supplement the lack of business through better customer outreach. Improving your online presence starts with understanding your target market. 

Use this time productively by improving your website and by using social media to attract new customers.  Don’t forget to get involved in your local community by attending and sponsoring local events. These combined efforts can go a long way in bridging the gap for low seasons.

#3 Only bid on profitable jobs

This advice may seem obvious, but when times are slow, it can be all too tempting to bid on a job you know doesn’t have favorable terms. Money is tight as it is, and you need cash coming in. After all, wouldn’t it be better to keep my crews busy and worry about profit later? 

While this is all too common in the construction industry, try to avoid this classic faux pas during slow times. 

The low season is not a time to take chances or work for unfavorable rates just because there is pressure to take on a job and bring in cash. Doing so will only result in more financial issues down the road. Instead, ensure the jobs you do land during a slow period are profitable. To do this, take the time to review past jobs, and only choose and bid on jobs that you know you can confidently execute under budget and on schedule.

#4 Double down on training

If there truly is no profitable work to be found despite your efforts, then use the downtime to invest in your team. Will investing in training cost time and money? Yes. Will it improve productivity, efficiency, and profitability down the road? Absolutely. 

For these reasons, training can be thought of as a cost center–or a business activity that does not directly contribute to profit but still incurs a cost. Training is the perfect example of a cost center that doesn’t directly contribute to revenue but pays dividends in the future that will eventually lead to improved profitability. Therefore, you have the opportunity to make a slow period productive through increased investment in your crew. 

Ramping up training ensures your team is up-to-date with standard operating procedures. This can dramatically reduce costs due to improved efficiency and quality of work performed. Through better training, contractors can ensure they get the most out of their hard-working crew members. 

Furthermore, training is an effective way to fight the labor shortage issue; as workers tend to stay loyal to businesses that invest in their career development and offer a clear path for advancement.

#5 Assess financial strategies

Use the lull in business activity to review your current financial standing. Assess pricing, total jobs performed over the last year (and how each of those jobs went), scheduling effectiveness, and overall profits and losses as a company. In short, how are you performing against expectations? 

Use this time to evaluate and adjust your business operations so that once the busy season arrives, you have everything in order and in tip-top shape to execute at a high level. Conversely, use this time to plan for the next slow season. Adjust pricing, estimating, and bid strategies accordingly. 

Consider setting up an emergency or contingency fund so that come the next slow period, there is enough money in the bank to cover any shortage in cash. Remember that not having an emergency fund is an emergency.

#6 Adjust pricing & secure financing (with caution)

Knowify has previously discussed how to identify a break-even point and set a sales goal that is used for financial goals. With your financial goals in mind, work to determine how slow periods will affect your goals. For example, does winter put your goals off by X dollars? Will sales volume fall significantly during winter? If so, determine ways that you can supplement this loss of income. 

For example, raise prices, secure loans or financing, or find ways to cut costs through reduced crews or taking on lighter jobs. Determine the financial toll that a time of year has on your business, and make a plan to cover the difference. Many options are available, but they must be done to fit the specifics of your business.

Slow-season financial aid options:

  • Line of credit 
  • Business loan 
  • Contingency funds 

Cash flow should remain a priority in both slow and busy periods. Consider financial aid options to help bridge the gap in cash needs during slow times. Whether through a contingency plan or loan, contractors must have a plan for cash shortfalls or anticipated impacts due to weather.

How Knowify helps

As we’ve learned, contractors must have a steady grip on their finances to navigate and survive the effects of seasonality. Using manual, paper-based processes here will only stand in the way of you and profitability. 

Instead, take advantage of construction management software, like Knowify, to gain more visibility into project costs and gather real-time insights into the performance of every job. With a robust reporting system and features that span project management, project costing, and invoicing, contractors can make informed decisions when it matters. 

Knowify delivers a better way to plan for the varying effects of seasonality in construction. Schedule a free 30-minute demo with a Knowify expert to see how Knowify can lead your business to a more sustainable and profitable future.