Summer Slowdown – Fixed & Variable Expenses

General, the Summer is our slowest period.  We see the lowest number of sales during the months of May to August (excluding a few cons that we do); but overall it’s slow.  This means we don’t have a lot of orders to ship out and even less revenue, so we have to reduce expenses. Now, I’ve discussed expenses with regard to hard and soft costs (fixed & variable expenses); and how it’s easy to adjust variable expenses, but let’s talk about what we can / do adjust.

By itself, Cost of Goods sold and distributor / shipping expenses will adjust themselves. We don’t have as much shipping expenses when we don’t have to ship as much and of course,the COGs drop too.  Overall, the directly related cost in managing individual orders have dropped.

The other major variable cost is our staffing cost. All the staff these days are on hourly wages, so theoretically it’s easy to cut their hours to match the amount of work / orders going on.  However, there’s a social cost to this that extends beyond pure the accounting side of the business.  There’s a tacit understanding when you hire someone that you’ll be providing them a specific amount of work, work which they then count on to pay their bills.  Sure, there’s some flexibility in detailing the fact that yes, they are part-time workers; but if you want them to work for you long-term; you can’t just cut hours at short notice to the bone.

There’s also the problem of rustiness – while we have a small business, it’s relatively complex in the sheer volume of things that need to be done.  None of the jobs are that difficult, but remembering all the different tasks especially if you don’t do it regularly can lead to rustiness / forgetfulness.  You then have to pay for people to not be good at their job while they relearn the tasks.

That’s part of the reason why, even if revenue is down, while we do reduce hours; we don’t cut it to the bone and end up with a lot of ‘extra’ hours for our staff.  This makes summer a great time for projects like stock counting, product weighing and reorganising our shelving and figuring out new processes.  It is make-work in some ways, but it is necessary make work.

Not to say I wouldn’t mind saving a bit of money and not stressing about finances during this period…