How to cover your fixed costs in a slow season

Why a slow season still costs you money

If your work is seasonal, some months have more jobs than others. Your fixed costs do not move. These are the costs you pay whether or not a job is on:

• Vehicle payments and insurance.
• Phone, software and storage.
• Tools and equipment you are paying off.
• Any regular fee for your business.

The break-even calculator shows how many jobs (or how much work) cover those costs in a month. Then you can plan for the months that fall short.

Worked example: three jobs cover the month (made-up figures)

Example fixed costs are $3,000 a month. Each job leaves $1,000 after its own materials and subcontractors. Break-even is $3,000 ÷ $1,000 = 3 jobs a month.

A busy month with 5 jobs leaves 5 × $1,000 − $3,000 = $2,000. A slow month with 2 jobs leaves 2 × $1,000 − $3,000 = −$1,000, so you are $1,000 short.

Suppose the year has 4 busy months and 4 slow months. The busy months leave 4 × $2,000 = $8,000. The slow months are short 4 × $1,000 = $4,000. Setting aside at least $4,000 from the busy months covers the slow ones.

Keep money you owe for tax, and your own pay, out of this surplus. Ask your accountant what to set aside.

Steps to plan for a slow season

Use your own figures and review them after each season. Real months vary, so treat the result as an estimate.

1. List your fixed costs for one month.
2. Work out what an average job leaves after its own costs.
3. Enter both in the break-even calculator to get your break-even number of jobs.
4. Estimate how many jobs you expect in a busy month and in a slow month.
5. Work out the gap in each slow month, and the surplus in each busy month.
6. Put the gap amount aside in the busy months, and check it against what happened.

If the gap is large, look at your price. The markup vs margin guide shows how a small change in margin changes what each job leaves.