Some businesses benefit from steady, reliable demand that can make planning seem like a breeze. Others experience extreme ups and downs as demand can go from off the charts to on the floor. Managing a feast or famine business can require a special set of skills and a special set of nerves.
I recently spoke about managing feast or famine businesses with Kristin Marquet, founder of Creative Development Agency, a New York City PR and marketing firm; Wes Higbee, president of Full City Tech, a New York-based management consultant; and David Maurice Sharp, a former dancer, ex-Wall Street professional, author of The Thriving Artist and teacher of personal finance workshops for people in the arts.
Why do some businesses typically have feast or famine cycles? Does your business?
Kristin Marquet: It can be for a variety of reasons. It could be from a lack of marketing and advertising or due to economic turndowns, not having enough sales in the pipeline or not planning for the future properly. A business may not have differentiated itself enough, or the business owner may not be good at time management. When I first started out, business definitely ebbed and flowed. I’ve been able to mitigate that by coming up with a series of products and trying to space out new client campaigns over several months.
David Maurice Sharp: That’s an endemic feature of any art form. There are just times when you have a lot going on and other times when you don’t. It can be dependent on economic cycles. When people have more disposable income, they’re more likely to be spending it on other products.
Wes Higbee: Any business can have this. I don’t think it’s specific to an industry, although some tend to have it more than others. If you have unintended famines, it’s largely because, during a time when you’re busy, you get so consumed with delivering work that you forget to think about tomorrow. During the famine, you focus on marketing and relationships, bringing in prospects and courting new business, and all of a sudden you’re overwhelmed. Then if you don’t continue to invest in getting new business, you’re going to bring it on again. By and large, it’s a management failure, and that can happen in any company.
What special challenges do these extreme cycles pose?
Marquet: The most prominent are cash flow and staffing. You have to make sure you can feed your employees. It’s your responsibility to make sure they can pay their bills, so you have to always have something in the pipeline.
Higbee: You really need to be careful about what you do when somebody walks through the door in a downturn, because you’re much more likely to accept them. That’s when you wind up with customers that don’t contribute much.
How can business owners smooth peaks and valleys or otherwise manage it?
Sharp: In your downtime, use that time productively. Keep a list of things you want to get around to, whether it’s exploring a new asset to add to your investments or whatever. When you think of something, put it on your hit list.
Marquet: In my type of business, I absolutely need to be out there working on business development. And I need to make sure my current customers are happy so that they’ll send us referrals. So make sure you have projects in the pipeline, make sure clients pay their invoices on time, make sure you have good relationships with clients so you’ll get referrals and have a couple of larger clients on your roster. If you have time, try to create some add-on services or products to create another stream of revenue.
Higbee: Don’t specialize. If you’re in the business of, say, helping people set up Christmas displays, you’re obviously going to have a problem with this. So expand. Help people put up other types of displays. Branch out into other types of work. Always look at how you can generalize. When you narrowly focus on something, that narrow focus can disappear from the market and you could be in trouble.
Are there any new technologies or techniques for easing feast or famine cycles? Or any other tips?
Marquet: In terms of looking for ways to build your network and new opportunities, LinkedIn is a great way to find new leads. I have a friend who is a bridal PR consultant, and she finds 90 percent of her business through LinkedIn. And email marketing is still a great way to stay connected with existing customers and keep them engaged.
Higbee: Create something that didn’t exist before. If you’re a dry cleaner and you deliver laundry, what if you not only deliver the laundry, but then come into the customer’s house and put it away? You could double what you charge, and most of that would be profit. So get creative with your customers, and serve needs that didn’t exist before.
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