1. Supplier closures
The heat is on in December to stock up for the Christmas sales rush, with the added pressure that some enterprises will be closed for longer than others, meaning suppliers may be unavailable well before an SME finishes trading.
2. Staff holidays
The three public holidays over the Christmas period mean many small businesses will need to close their doors to allow staff time off. Moreover, many employees may choose to take additional leave in order to spend time with their loved ones, so business owners need to plan for a reduced workforce.
Beyond approved leave, it’s highly likely that small business owners will also have to deal with unplanned absences in December as cold and flu season sets in, which must be factored in when calculating staffing needs.
4. Heightened demand
For many SME leaders, especially those in the retail sector, the run up to Christmas marks the busiest part of the year for their business. Coming at a time when many employees are taking time off, this means some companies may need to consider taking on temporary staff or offering over-time to meet the heightened demand.
5. Overtime pay
Of course, if employers do enlist staff to work extra hours or cover shifts during public holidays, they will also have to think about the increased costs involved in providing overtime pay rates.
If overtime pay wasn’t enough of a cost to contend with, entrepreneurs also have Christmas bonuses tugging on their purse strings. While these gestures of goodwill may pay off in the long-run, by leading to more motivated staff who will stay with the company for longer and work harder, in the short run they can be a burden for small firms.
7. Christmas celebrations
The same can be said for celebrations, including staff parties and client Christmas lunches for business-to-business companies. It’s easy for the costs to quickly escalate for these occasions, so SME leaders must budget carefully.
8. Cash flow
Seasonal spending patterns, disrupted service, overtime pay and extra outgoings all contribute to a growing cash-flow headache for small businesses. In particular, SMEs face a delicate balancing act in terms of anticipating sales: purchase too little stock and they may not gain enough profit to cover the January slow season, but purchase too much and they risk being left with unwanted festive products.
9. Tough competition
This situation is made more difficult still by the challenge of competing with larger rivals for customers, particularly given how much bigger brands spend on marketing at Christmas. The hype surrounding the John Lewis Christmas advert alone underlines how hard it can be for SMEs to get their voices heard.
10. Delivery pressures
For small firms operating online, delivery timescales are a crucial factor to remember. Entrepreneurs must clearly state the latest date customers can make a purchase in order for their gifts to be delivered in time for the big day, or they may face a daunting volume of returned items.
11. January returns
Of course, some level of returns is always to be expected, so SMEs may wish to set aside a proportion of takings for refunds, and must also be prepared for the additional customer service requests they are likely to face in January.
Finally, independent businesses need to be aware that Christmas is a high-risk period for theft, with premises left unattended, stores full of valuable gifts and cash registers ringing. Investing in the right type of business insurance can offer peace of mind against this last challenge.
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