Is the silly season over-hyped for businesses?
According to research Christmas can be a real boost to the bottom-line. But for most SMEs, the festive season is one of the quietest and least profitable times of the year.
As customers cram into malls and car parks, the TV and internet are awash with Christmas ads and EFTPOS goes into overdrive, it’s easy to form the impression that business is built around the silly season.
And while for some business owners it certainly can be a real boost to the bottom line, for most SME operators, the festive season is one of the quietest and least profitable times of the year.
That’s according to new research conducted by accounting software provider MYOB, which asked more than 300 SME operators from across New Zealand about the impact Christmas has on their revenue, income and performance.
According to the tech company’s latest Business Monitor snapshot, nearly a third (29 percent) of SME owners said the Christmas period wasn’t important to their business’s income, revenue or performance, while a further 35 percent said it was only slightly important.
In contrast, just eight percent of those surveyed said the Christmas period was extremely important to them, while a quarter (25 percent) said it was very important.
Christmas critical to retail sector
From an industry perspective, Christmas is clearly critical to the hospitality and retail sector with one-third saying it is extremely or very important to their operations and a further 35 percent saying it is slightly important. On the other side, nearly half (47 percent) of firms in the professional services, accounting and finance sectors say Christmas is not important to them.
MYOB spokesman Conor Roberts says for most SME operators – especially service providers – late December and early January can be two of the quietest months of the year.
“Given Christmas occurs over summer in New Zealand, it’s common for small business owners to have less work on over the holidays,” Roberts says. “Especially if their clients or business partners closedown, or their staff take leave.”
However, this can have an impact on their overall productivity, sales and income he says.
“If there’s no ‘paid’ work coming in, the holiday period can put a lot of financial pressure on small business owners.”
According to the MYOB Business Monitor, more than a quarter (26 percent) of SME owners do not close over the Christmas and New Year period, with a further 17 percent only closing their doors on statutory holidays.
Nearly a fifth (19 percent) said they close for one to two weeks, while just 6 percent said they close for three to four weeks. On average, the respondents surveyed closed for just 1.2 weeks over the Christmas and New Year period.
While more than a quarter (26 percent) say they do not close, one-in-five (21 percent) of those surveyed say their business makes no money over the Christmas period. A further third (33 percent) say they make no more than 10 percent of their annual revenue during this time.
On average, an SME makes just 11.5 percent of its annual revenue over the Christmas period.
Just 12 percent say their business makes between 21 and 30 percent of annual revenue over Christmas, while 21 percent say they make between 11 and 20 percent.
“The Christmas period can be boom or bust for business owners, with some doing really well over the period, while others are quiet. The important thing is to ensure you’re well-prepared for the silly season and ready for the year ahead,” Roberts says.
“Personal development, marketing plans, putting finances in order, reviewing employee performance, investing in staff training and keeping up with general housekeeping are some of the things you can do if it’s a less busy time.”