Seasonality Isn’t a Problem, It’s a Profit Opportunity | Ep. 952
In this episode of The Game, Alex Hormozi and a catering business owner named Matthew explore the challenges and opportunities of seasonal business cycles. Matthew shares insights about his company's revenue patterns, with 65% of annual earnings concentrated in just six months, and discusses his current marketing approach combining organic SEO and Google Ads.
The conversation examines different perspectives on managing seasonality in business. While Matthew considers launching a corporate catering service to balance out slow periods, Hormozi suggests viewing seasonality not as a problem to solve, but as a natural business feature to optimize. The discussion covers strategies for maximizing revenue during peak seasons and efficiently managing resources during slower times.
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1-Page Summary
Catering Business Seasonality and how to Handle It
Matthew, a catering company owner, reveals that his business earns about 65% of its annual revenue in just six months, from September through February. This seasonal pattern is common in the catering industry, presenting challenges in managing resources during both peak and off-peak periods. During busy seasons, businesses often must turn down work due to capacity constraints, while during slower periods, they struggle with excess staff.
Matthew's Marketing Strategies and Growth Areas
The business has found success through digital marketing channels, with Matthew reporting that approximately 50% of customers come from organic SEO and 40% from Google Ads. These channels have proven crucial for customer acquisition and business growth.
Exploring New Business Ideas to Address the Seasonality
To address seasonal fluctuations, Matthew has considered launching a corporate catering delivery service called "Cater by Matt." While corporate events typically yield better lifetime value, they generate lower per-event revenue compared to private events. However, Alex Hormozi advises against this new venture, suggesting it could distract from optimizing the core business.
Seasonality: Industry Problem or Natural Feature
Alex Hormozi frames seasonality as a manageable characteristic rather than a problem to solve. He distinguishes between volatile-predictable cycles, like those in Matthew's business, and unpredictable cycles. Rather than trying to eliminate seasonality, Hormozi recommends focusing on maximizing growth during busy seasons through proven marketing strategies while efficiently managing slower periods.
1-Page Summary
Additional Materials
Counterarguments
- While digital marketing is essential, relying on only two channels (organic SEO and Google Ads) may not be diverse enough to ensure stability; exploring additional marketing avenues could be beneficial.
- Launching "Cater by Matt" could potentially open up a new revenue stream and stabilize income throughout the year, contrary to Alex Hormozi's advice.
- Hormozi's advice to focus on the core business might not account for the potential of "Cater by Matt" to complement and support the existing business during off-peak times.
- Viewing seasonality as a manageable characteristic assumes that all businesses have the resources and capabilities to do so, which might not be the case for smaller or less flexible companies.
- The recommendation to maximize growth during busy seasons might lead to burnout or quality issues due to overextension, suggesting a need for a more balanced approach throughout the year.
- The distinction between volatile-predictable and unpredictable cycles may oversimplify the complexities of business operations and the impact of external factors such as economic downturns or changes in consumer behavior.
- The advice to not try to eliminate seasonality might discourage innovative solutions that could potentially transform the industry and create a more consistent demand.
Actionables
- You can diversify your income streams by exploring different markets or services that align with your existing skills. For instance, if you're skilled in graphic design, consider offering seasonal greeting card designs during peak holiday seasons to capitalize on the increased demand. This approach allows you to leverage your current abilities while addressing the ebb and flow of work throughout the year.
- Develop a referral program to maximize customer acquisition during your peak business periods. By incentivizing current customers to refer new clients, you can increase your customer base without heavily relying on digital marketing. For example, offer a discount or a free service to customers who successfully refer a friend, which can help sustain your business growth even during slower seasons.
- Optimize your budget by allocating resources more efficiently during fluctuating business cycles. During your busy season, invest more in inventory and staffing, while in slower periods, focus on maintenance and planning. This could mean hiring temporary staff or using a just-in-time inventory system to reduce waste and manage costs effectively throughout the year.
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Catering Business Seasonality and how to Handle It
Seasonality is a significant factor affecting the catering industry, often leading to uneven revenue streams and operational challenges throughout the year.
Catering Business Gains 65% Yearly Revenue In 6 Months
Matthew, the owner of a catering company, sheds light on the seasonal nature of his business. He notes that his company earns approximately 65% of their annual revenue in the six months from September through February. This period likely coincides with peak events such as weddings, corporate holiday parties, and other large gatherings that require catering services.
Common Industry Seasonal Fluctuation
This lopsided revenue pattern is not uncommon in the catering industry, where the demand for services often waxes and wanes with the seasons. Businesses like Matthew's tend to experience a spike in activity during certain times of the year, leading to a bulk of the income being generated in a relatively short window of time.
Challenge: Managing Off-peak Excess Capacity and Busy Season Demand Surges
One of the main challenges that c ...
Here’s what you’ll find in our full summary
Catering Business Seasonality and how to Handle It
Additional Materials
Clarifications
- Seasonality refers to predictable fluctuations in business activity tied to specific times of the year. In catering, demand rises during holidays and event seasons, causing revenue spikes. Conversely, off-peak periods see fewer events, leading to underused staff and resources. Managing these cycles requires balancing workforce and expenses to maintain profitability year-round.
- The months from September through February include major social and corporate events like weddings, holiday parties, and end-of-year celebrations, which increase demand for catering. Additionally, cooler weather often encourages indoor gatherings that require catering services. Many companies host corporate events during this period to celebrate milestones and holidays. This concentrated event activity drives higher catering revenue in these months.
- Peak season catering demand is often driven by events like weddings, corporate holiday parties, and large social gatherings. Other significant events include graduations, festivals, and community celebrations. Seasonal holidays such as Thanksgiving, Christmas, and New Year's also boost catering needs. These occasions typically require extensive food service, increasing demand for catering businesses.
- "Excess capacity" means having more staff, equipment, or resources than needed during slow periods. In catering, this happens when there are fewer events, so employees may have less work or be idle. Managing excess capacity involves adjusting schedules, reducing hours, or finding alternative tasks to avoid unnecessary costs. Efficiently balancing capacity helps maintain profitability year-round.
- Catering businesses must balance staffing levels to avoid overpaying during sl ...
Counterarguments
- While the text suggests that the peak season for catering is from September through February, this may vary by region and culture, as peak seasons can differ based on local climate, holiday schedules, and event preferences.
- The assumption that all catering businesses experience the same level of seasonality may not hold true for those that have diversified their services to include non-seasonal events or have contracts that provide a steady flow of business year-round.
- The text implies that managing off-peak excess capacity is a challenge, but some businesses may use this time for strategic planning, staff training, equipment maintenance, or developing new services, turning potential downtime into productive periods.
- The focus on minimizing losses during off-peak periods might overlook the potential for catering companies to explore alternative revenue streams, such as offering cooking classes, pop-up dining experiences, or partnering with other businesses to maintain cash flow throughout the year.
- The idea that catering companies must d ...
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Matthew's Marketing Strategies and Growth Areas
Matthew's business excels in customer acquisition through the effective use of online marketing strategies, with a focus on organic SEO and Google Ads.
Majority of Matthew's Customers Come From Organic SEO and Google Ads
Matthew illustrates that his marketing efforts have been particularly successful, with about 50% of his customers attributed to organic SEO and another 40% coming from Google Ads. These statistics underscore how critical these channels are for his business's customer acquisition strategy.
Winter Drop in Leads and LTV Limits Marketing Spend
$8 Million Revenue in 2 Years via PPC and Meta Ads
However, the details regarding the winter drop in leads and lifetime value (LTV) affecting the marketing ...
Here’s what you’ll find in our full summary
Matthew's Marketing Strategies and Growth Areas
Additional Materials
Counterarguments
- Organic SEO and Google Ads may not be sustainable long-term strategies as market conditions and algorithms change.
- Relying on two channels for 90% of customer acquisition could be risky if there are shifts in the digital marketing landscape.
- The text does not address the quality of leads or the conversion rates from these marketing strategies.
- There is no mention of customer retention strategies, which are also crucial for business growth.
- The text does not discuss the potential impact of ad blockers and increasing privacy concerns on the effectiveness of Google Ads.
- The text does not consider the role of other marketing channels, such as social media, email marketing, or content marketing, which could also contribute to a well-rounded marketing strategy.
- The text does not address the scalability of the current marketing strategies or whether they can be effectively applied as the business grows.
- The text does not mention the potential for market saturation or incr ...
Actionables
- You can diversify your online presence by exploring alternative digital marketing channels beyond SEO and Google Ads. Start by identifying social media platforms where your target audience is active and create content tailored to those platforms. For instance, if your audience is visually oriented, consider using Instagram or Pinterest to showcase your products or services with high-quality images or infographics.
- Experiment with content marketing by starting a blog or video series related to your industry. This can help you establish authority and provide value to your audience, which can indirectly boost your SEO efforts. For example, if you sell eco-friendly products, you could create a blog series on sustainability tips or a YouTube channel with tutorials on using your products in an environmentally conscious way.
- Engage with your customers through email marketing campa ...
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Exploring New Business Ideas to Address the Seasonality
Matthew is faced with the challenge of seasonal fluctuations in his event catering business and is considering new strategies to maintain a steady revenue stream throughout the year.
Matthew Considers Launching a Corporate Catering Delivery Service to Offset Seasonal Fluctuations In His Event Catering Business
Matthew's company, which caters to both corporate and private events, pushes corporate event catering during the winter to combat the off-season of his business. However, he finds that while these corporate events have a better lifetime value, they typically have a lower spend per event. This leads to a lower gross profit when compared to the revenue from private events. In light of this, Matthew has considered starting a standalone corporate delivery service, tentatively named Cater by Matt. His goal is to provide year-round service to offset the seasonality of the main event catering business.
Alex Advises Against Starting a New Business, as It Could Distract From Optimizing the Core Catering Business
However, Matthew’s idea receives ...
Here’s what you’ll find in our full summary
Exploring New Business Ideas to Address the Seasonality
Additional Materials
Counterarguments
- While Alex Hormozi's advice is prudent, it assumes that Matthew cannot effectively manage two ventures or that the new venture will necessarily detract from the core business. It's possible that with proper planning and delegation, both can thrive.
- The idea that corporate events yield lower gross profit than private events might not account for the potential cumulative value of repeat corporate business, which could eventually surpass the profitability of less frequent, higher-margin private events.
- The suggestion to optimize the existing business does not address the fundamental issue of seasonality. Even a highly optimized seasonal business can suffer from unpredictable cash flow issues.
- Launching a new service like Cater by Matt could potentially open up new markets and customer segments, which might not only offset seasonality but also lead to overall business growth.
- Hormozi's advice may not consider the possibility that the new corporate catering delivery service could share resources with the event catering business, potentially leading to economies of scale and synergies rather than distraction.
- ...
Actionables
- You can analyze your own business or personal projects for seasonal trends and develop complementary services or products that align with your existing offerings. For instance, if you run a landscaping business that slows down in winter, consider offering snow removal or holiday lighting installation during the colder months to maintain steady income.
- Explore partnerships with other businesses to create bundled offerings that appeal to your existing customer base and attract new clients. If you own a bookstore, partner with a local coffee shop to offer a "Book and Brew" package, combining a bestseller with a bag of specialty coffee beans, enhancing value for customers and smoothing out revenue dips.
- Implement a customer feedback system to identify areas of im ...
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Seasonality: Industry Problem or Natural Feature
Alex Hormozi posits that seasonality should be considered a natural characteristic of certain industries, one that can be managed effectively rather than eradicated.
Alex Considers Matthew's Seasonal Business Model Manageable
Hormozi asserts that the seasonal nature of some businesses, including Matthew's, is not only predictable but also manageable. He points out that predictability provides the opportunity for proper planning, implying that seasonality is not inherently risky.
Volatile-Predictable Cycles vs. Unpredictable Cycles in Business
Alex makes a distinction between volatile-predictable cycles and unpredictable cycles, indicating that while the former, such as Matthew's business, is not inherently risky due to its predictable nature, the latter can pose significant challenges for businesses.
Alex Recommends Matthew Focus On Maximizing Growth During the Busy Season and Manage the Slower Months Efficiently Rather Than Eliminating Seasonality
To navigate the cyclical nature of his business efficiently, Hormozi recommends that Matthew focus on amplifying growth du ...
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Seasonality: Industry Problem or Natural Feature
Additional Materials
Clarifications
- Alex Hormozi is a well-known entrepreneur and author specializing in business growth and scaling strategies. He has founded and grown multiple successful companies, making his insights valuable for business owners. His expertise lies in practical, data-driven approaches to managing and expanding businesses. Many entrepreneurs and business professionals respect his advice due to his proven track record.
- Volatile-predictable cycles refer to business fluctuations that are regular and expected, such as seasonal demand changes. Unpredictable cycles are irregular and unexpected, making planning and risk management difficult. Predictable cycles allow businesses to prepare and optimize resources in advance. Unpredictable cycles create uncertainty, increasing risk and operational challenges.
- PPC (Pay-Per-Click) is an online advertising model where advertisers pay a fee each time their ad is clicked. Meta ads refer to advertisements run on Meta's platforms, such as Facebook and Instagram. These ads allow precise targeting based on user demographics, interests, and behaviors. Both PPC and Meta ads help businesses reach potential customers efficiently during key periods.
- Seasonality reflects natural fluctuations in consumer demand tied to time periods, holidays, or weather. Attempting to eradicate it often requires costly changes that may not align with customer behavior. Instead, businesses benefit from adapting strategies to leverage peak times and optimize slower periods. This approach maximizes resources and profitability without fighting inherent market rhythms.
- Managing slower months efficiently means optimizing resources to reduce costs and maintain stability when demand is low. This can involve cutting unnecessary expenses, focusing on staff training, or improving internal processes. It also includes planning cash flow carefully to ensure the business remains financially healthy. The goal is to prepare for the busy season without overextending duri ...
Counterarguments
- Seasonality management strategies may not be equally effective across all industries, and some businesses might face insurmountable challenges due to external factors beyond their control.
- Predictability does not always equate to manageability, as some seasonal fluctuations may be too extreme for businesses to handle effectively, even with proper planning.
- Focusing solely on peak periods could lead to over-reliance on a limited timeframe for revenue generation, potentially making the business vulnerable to unforeseen disruptions during these critical periods.
- Diversification into non-seasonal areas or complementary services could provide a more stable year-round revenue stream, reducing the risk associated with seasonal businesses.
- Doubling down on marketing strategies like PPC and meta ads during peak seasons could lead to increased costs and may not always yield proportional returns due to market saturation or ad fatigue.
- The recommendation to not alter the foundational seasonal pattern may not consider the potential long-term benefits of innovation and adaptation i ...
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