One-Third of U.S. Small Businesses Report Q4 Is the Most Profitable Time of Year
This week, we released data showing that the last three months of the calendar year cause the greatest fluctuation in cash flow among small businesses. Polling 300 U.S. small businesses, our survey found that one-third said the fourth quarter is the most profitable time of the year for their business. The survey also revealed 42 percent of small businesses report costs increasing as high as 25 percent in the same time period.
The impact of fourth-quarter profitability varies by industry, with online retailers (74 percent) and brick-and-mortar retailers (71 percent) reporting Q4 as their most profitable time of the year, followed by:
- Restaurants, bars and caters, 47 percent
- Transportation, 38 percent
- Real Estate and Property Management, 33 percent
- IT and Software, 27 percent
The same industries see an increase in costs during year-end. Online retailers (65 percent), brick-and-mortar retailers (60 percent), real estate businesses (56 percent), restaurants (50 percent) and construction companies (44 percent) cited their costs on average increase 25 percent, with some citing increases as high as 75 percent.
Across all industries, small businesses stated the top three reasons for heightened costs are:
- Purchasing more inventory (41 percent)
- Spending more on employees in the form of holiday gifts and dinner parties (31 percent)
- Increasing spend on advertising (25 percent)
“The data shows that small business owners have a great opportunity in the last three months of the year to increase profits, but it requires careful cash flow planning,” said Scott Rosenberg. “As a former retail industry executive, I’ve seen first-hand how seasonality can turn a good year into a great year and how critical it is to be financially prepared to manage climbing costs to reach higher profits.”