One in ten small businesses admit they have been caught off guard over the festive season, with 15 per cent admitting that bad financial planning has put the vital fifth of their annual profit earned during the season at risk. Many are blaming Brexit for their uncertainty, with a concerned 25 per cent even failing to employ their usual additional staff to cope with their busiest time.
LDF conducted a study of 500 small business owners that indicates the dangers of not being prepared for the festive season. They estimated a potential risk for the UK economy of over £342 billion of seasonal income due to lack of festive foresight. With 19 per cent of small businesses income being generated in the festive season, this has obvious impact on January and the year ahead.
Despite many savvy small businesses cashing in on the most lucrative time of year, nearly one in five admit they don’t forward plan for Christmas at all (18 per cent). In fact, most business owners start working on the key sales period as late as September (15 per cent), just two months away from Black Friday and the start of the Christmas period.
Businesses not planning for Christmas
It’s been a strange year for the economy, and this is reflected in the results, with one in ten business owners admitting they have treated Christmas differently this year due to Brexit, even though the results of the referendum have yet to impact consumer confidence. As a result, one quarter (25 per cent) made the decision to take on less staff, and one in ten has taken less funding than previous years (13 per cent).
The research found that 15 per cent of small business owners have actually experienced a negative impact on their business at Christmas time, causing a January ‘drought’, with one in five using their personal savings to get through the first month of the year (21 per cent).
At the top of the list of costs is resource to get through the key season: high staffing costs (23 per cent) with taking on more employees and Christmas temps, or giving more hours to current staff. Fun comes at a price too, with the Christmas party estimated to collectively cost UK businesses up to £1 billion, a significant figure which may often be overlooked during the festivities.
Overestimating consumer and supplier demand and having too much stock also proves an issue for small businesses (23 per cent) meaning they could ‘undersell’ their product in January. And this January has added blues as one in ten small businesses cite the current economic uncertainty as their biggest concern going into 2017 along with the US presidential election’s effect on trade (10 per cent).
For three quarters of small businesses (75 per cent), however, the outcome is much more positive , as they cash in on the £12 billion that the British Retail Consortium expects Christmas will contribute to the economy this year.
For the 55 per cent of small businesses that do it well and don’t have a January dry spell, over half use their festive profits to reinvest and grow their business (53 per cent), and one in will use this to cover the looming January tax bill (15 per cent). A generous one in ten small business owners (10 per cent) use their Christmas profit for staff bonuses and just one in ten (12 per cent) bank it as a personal profit.
Commenting on the research, managing director of LDF, Peter Alderson says, ‘This is a critical time of year for small businesses, especially those who operate seasonally as this can make or break how they approach the New Year.
‘Our research found that business owners are starting their Christmas preparation and planning far too late in the year, and actually with more insight and financial investment they could maximise the festive season a lot more than they realise.’