When you own a personal business, it can often feel like you’re stuck in a cycle of “feast or famine.” In the busy months, there’s plenty of revenue to go around and you feel super confident in your finances. But in the slow months, you end up pinching pennies to keep your business afloat.
Seasonality can make your financial system more complicated, but with the proper planning, you can regulate your finances and feel confident in your personal income all year long.
1. Paying Yourself As a Business Owner
As a business owner, your personal income is very dependent on your business’s profit. And if your business is somewhat seasonal, your personal income can fluctuate significantly between the slow and busy months.
In this scenario, I’ve seen business owners pay themselves two ways:
1. You pay yourself a percentage of your profit every month.
In this scenario, you settle on a percentage of your profit (ex. 50%) and pay yourself according to that percentage. So during a month when your profit is $10k, you take home $5k. But during a month when your profit is only $2k, you’ll only get to take home $1k.
In a highly seasonal business, this system can create uncertainty in your personal finances. If you want to pay yourself this way, make sure you plan ahead for slow, low-income months.
2. You pay yourself the same amount every month.
In this scenario, you decide on a set amount of money you pay yourself each month, regardless of your business’s profit. Think of it like receiving a paycheck from an employer; no matter what, you take home the exact same amount of money every single month.
You might need to recalculate this amount if your business grows significantly. But overall, this is a more stable system for paying yourself.
4 Ways to Regulate Income In Your Seasonal Business
The best way to avoid “slow month panic” is to regulate your personal income in your seasonal business. Here’s how!
1. Create a second income stream.
If your main service or product is seasonal, why not create a second income stream to get you through the slow months? This can be a product or service you only invest time in during those months, or it can be a passive income stream that makes you money year-round.
Here are a few examples of second income streams I’ve seen in action:
For wedding photographers, offer family photos in the off-season.
While your spring, summer, and fall are booked with wedding weekends, the winter tends to get slow. Advertise family photos before the holidays to fill up your calendar. And after the holidays, advertise to those newly-engaged couples looking for engagement photos.
For lawn care of landscaping companies, offer winter-specific services.
Before the temperature drops, offer your regular clients a winterizing service to protect their lawns and homes. Once it gets snowy and icy, you can always clear driveways or offer consulting services to help your clients remodel their outdoor spaces in the spring.
For personal and professional development coaches, sell lower-ticket products over the holidays.
You might not think coaches or course creators experience much seasonality in their businesses, but it can be hard to sell packages over the holidays when your audience is spending their money elsewhere. During these seasons, advertise lower-ticket products like mini courses or downloadables. Not only are these easier for your audience to invest in, but they can act almost as a teaser for your services. That way, they’ll be ready to invest in your bigger packages once the holidays are over and they’re in that “new year new me” frame of mind.
Whatever your industry or target audience, I guarantee there are ways you can get creative with your offerings and create a second income stream. Get to know your audience, find out what they want and need, and design your products accordingly.
2. Save during the busy months.
As a seasonal business owner, it can be very tempting to treat yourself during the busy months. Your business is making plenty of money, you’ve got a chunk of change sitting in your bank account, and the stress of the slow season seems distant.
But before you go spending that extra cash, consider how it might affect your future. That money could benefit your business during the slow months, meaning you won’t have to pinch pennies to afford your necessary expenses or payroll. It could also serve as your “paycheck” during the slow months when you’re not making enough to pay yourself your usual salary.
And not only that, but if you get used to treating yourself now, those slow months are going to hit you even harder. Suddenly, you’ll have to cut back on spending and adjust to living within your new means. Save yourself the stress, and save your extra profit just in case.
3. Pay yourself according to your annual average.
Sticking to your personal budget is hard enough. It’s even more difficult when your income varies wildly month-to-month. My solution: Pay yourself according to your annual average, not how much you made the month before. This way, you’ll have a regular “paycheck” you can easily budget with.
Here’s how to calculate your “paycheck” according to your annual average:
STEP 1: Calculate how much your business makes in a year. This should be your revenue minus your expenses (not including your “paycheck”).
STEP 2: According to that number, calculate how much you can afford to pay yourself in a year. Most business owners pick a percentage of their profit to pay themselves as the CEO.
STEP 3: Divide that number by 12 months for your monthly “paycheck.”
Once you settle on your monthly pay, stick to that number even as your business profit ebbs and flows. You’ll feel more secure in the slow months, and your business can build up savings during the busy months.
4. Budget according to your slowest months.
Do you find yourself cutting back on expenses during the slow months, only to pick them back up when the money starts flowing back in? If so, try budgeting according to your lowest-profit month to avoid these fluctuations.
Make a list of all your expenses, and decide which you’d keep paying for if your slowest month was every month. How many of these expenses are absolutely necessary? How many of them could you do without? Once you figure out what you need, cut the rest and save your money! In the busy months, that extra profit can serve as savings for the slower months.
Want more tips like these? Be sure to subscribe to the newsletter! (and don't forget to follow along on IG @prettypennyaccounting)
