How to Create a Holiday Budget for Small Businesses
To get started with your holiday budget, first meet with your staff and determine your goals and the most effective ways to reach customers. Then you can review to see what’s feasible and where you may have leeway. Here’s a breakdown of 11 areas of your business that need a budgeting review for the holidays.
If you haven’t already, you’ll probably soon be bombarded with plenty of holiday advertising opportunities. Some may be beneficial to consider while others may be not worth the expense. It’s important to carefully consider the return on investment on all new and existing advertising opportunities.
The same exercise in looking at return on investment is a must when considering all marketing efforts. These pre-season months can be used wisely to develop a marketing plan that will maximize sales during the holidays.
Here are some places you may want to invest before the holiday madness begins:
- Website updates
- Email marketing
- Social media
- Promotion items
- Public relations
The elements of your marketing plan and budget should be cohesive and well mapped out to minimize any waste or missed opportunities.
The holiday season is made for get-togethers. Whether it’s the employee dinner or the customer open house, you’ll want to budget for those special events that you host to celebrate those who support your business. Drill down into costs for venue, catering, decorations, invitations and more.
When you look at the cost of events, you may question their return on your investment. However, it’s important to consider the value that events provide in promoting customer and employee satisfaction. This is often worth far more than what you can determine by adding up the numbers.
The earlier you jump on budgeting and planning for events, the better. Not only will you secure the venue and vendors you want, you won’t be scrambling once the busy season begins or paying a premium for late in the game orders and reservations.
Like events, you probably give tokens of appreciation to employees, contractors and perhaps even vendors. They need to be considered when creating your holiday budget. They’re a cost of doing business like events that may not show direct returns on your investment. However, they are most likely vital to your business’s long-term success.
While you don’t have to give lavish gifts to everyone, even something small with a card thanking them and wishing them a happy holiday can show a deep level of appreciation. Make sure they know that this is strictly a gift and that you’re not expecting overtime or discounts for free because of it. It’s merely a token of your appreciation.
The additional customers and sales that the holidays bring may warrant the need for more equipment. For brick and mortar retailers, this may mean additional point of sale systems or displays. Online retailers might need improved equipment to pack and ship orders. Do you deliver within your community? Could a car or truck help you get orders in the hands of your customers quicker? Think about every piece of equipment you use in your business and get a jump on any repairs or upgrades.
If you’ve been pondering the idea of investing in business equipment, this might be the right time to make the plunge. You’ll have it ready to go when it is peak sales time and be able to take any applicable tax deductions when you file your next tax return.
For any business, inventory planning is crucial to achieving success on Black Friday and the days leading up to Christmas. You can’t afford to run out of inventory with two weeks left in the season. However, you also don’t want to find yourself with shelves of unsold products on January 1 either. Inventory management directly affects your revenue, so you want to ensure you’re managing it correctly.
Look closely at your sales numbers from last year. Would you have been better off ordering more or less? Take into account other considerations too such as new products you’re offering, additional advertising efforts that ay generate more traffic to your store, and sales you plan to promote. All of these can have a profound effect on the demand for what you’re selling.
If you ran into a shortage of help last holiday season, budget for staff this year. Whether this means hiring a full-time employee who can help you grow next year or just contract help for the season, evaluate wages or salaries as well as any benefits you’re willing to offer. These should be added to your budget. After all, you don’t want to find yourself in middle of the season without the help you need.
If demand for your business isn’t as high this winter, consider cutting down some shifts for part-time or hourly workers. You could also brainstorm ideas to help cover the seasonal lull and schedule your staff based on those ideas.
- Office or retail space upgrades
Have you been putting off a refresh of your office or store? You still have time to polish your surroundings to have them ready to go for the holidays. Even small investments in paint, shelving, displays, furniture or flooring can make a big impact which could actually lead to more sales. It may not make financial sense to wait until next year when you can leverage the benefits of your investment during the most profitable time of the year.
- Discounts and promotions
Nearly every retailer offers at least one holiday promotion. Your customers expect incentives this time of year, and if you’re going to increase sales, you’ll probably need to budget this for the season.
This doesn’t necessarily mean you have to slash prices in half to make customers happy. There are actually many ways to add value to their purchases. Consider a free promotional item you give them with a sale or a discount coupon that they can use during those traditionally slow months of January and February. Be creative, but don’t forget to incorporate these costs into your budget.
More sales naturally will lead to more returns. And returns wind up costing your business money. Research how much returns cost your business last holiday season, and make sure you budget for at least this amount.
- Don’t forget…
All of those little extras that aren’t as obvious as inventory and advertising can definitely catch you off-guard. Try and make a list of those somewhat hidden costs that tend to go up when your business gets busier. Here are some to remember:
- Postage and shipping
- Greeting cards and wrapping paper
- Holiday decorations
- IT support
- Cleaning supplies
- Office supplies
- Packing materials
- Tax considerations
Very few business expenses are not at least somewhat tax deductible. Everything from holiday parties to the hourly rate you pay the IT guy who backs up your system is deductible. You’ll want to first keep very good track of all holiday expenses and consult with your tax or financial professional about the specifics of what you can and cannot deduct. Oftentimes, you can significantly lower your tax liability with the wide variety of expenses you incur.
Once you’ve completed your holiday season budget, you may discover you’ll need additional capital to cover your expenses. A quick, flexible source of financing can be a great choice to help your business as it continues to grow.