Each week, we seek out expert advice to help a small or medium-sized firm overcome a key issue.
The lazy, hazy days of summer aren't exactly prime time for tea parties. And for Ancaster, Ont.-based Steeped Tea, that's a problem.
The company sells loose leaf tea and accessories using a direct sales model, through consultants across Canada and the United States who hold Tupperware-style home tea parties. But many Steeped Tea consultants are stay-at-home moms whose priorities and schedules change during the summer months.
"In general, our consultants are between the ages of mid-20s to late-50s," explains chief executive officer Hatem Jahshan. "In the summertime, they are travelling, there's a lot going on in their lives. Kids are off school. So business is typically slower."
The summer quarter represents about 10 per cent of annual sales, Mr. Jahshan says, compared with the 60 to 70 per cent that come during the busy winter holiday quarter.
Steeped Tea was founded by Jahshan and his wife, Tonia, in 2006. In the early days, seasonal swings in demand were easier to manage. "The numbers were simple," he says.
But in September, 2012, the company appeared on the CBC television show Dragons' Den, and sales exploded. At the time of the television appearance, annual sales were at $1.3-million. "Our next fiscal year showed five times growth," he says.
This rapid change has made managing cash flow difficult. "The summertime is when you start buying all your inventory for the winter. So you're at your lowest sales point when all your purchases are being made, and you've got to be very careful how you juggle that."
Mr. Jahshan says Steeped Tea's financials "have never been better," but he recognizes the need to improve infrastructure and forecasting to cope with swings in demand.
He's also looking for new ways to smooth out the sales curve. To that end, the company publishes a special summer insert to accompany the annual catalogue. This summer, they're holding a special sale on summertime items. Additionally, Steeped Tea is offering exclusive swag bags to hostesses and travel perks to consultants.
These tactics have been effective, he says, but the company is still looking for new ways to make the slower summer months more profitable. "There is a lot of room for creativity."
THE CHALLENGE: How can Steeped Tea encourage its sales consultants to continue selling through the slow summer months?
THE EXPERTS WEIGH IN
Janice Gerol, vice-president and general manager for Canada and Mexico, The Pampered Chef, Toronto
Schedules are more hectic during the summer for many of our independent consultants as well, so promoting an online or catalogue version of a sales event to customers would be a great way to fit into people's busy schedules.
Mr. Jahshan should provide consultants with the opportunity to sell online and empower them with the e-tools needed to market their businesses and maintain relationships with customers year round. There are technologies available that would allow the company to do this without affecting the online customer's shopping experience.
Providing busy consultants with additional support that allows them to grow their business around their lifestyle would impact sales growth year round. Consultants would be likely to support the company's plan to incorporate online sales when they know the success of their personal businesses and their sales commissions have been taken into consideration.
Rob Mitchell, assistant professor in the Entrepreneurship Group, Ivey School of Business, University of Western Ontario, London, Ont.
Instead of viewing the consultants as sales people, imagine what products you might offer them as customers as well during the summer.
As an example, if a consultant is busy taking care of kids home from school, might you then offer something that engages the kids at home? This might be a parent/child-organized summer tea party (which may involve broadening the product line). There might also be a way to incentivize kids to get involved in helping the parents by gamifying the sales process during the summer. This might include, for instance, an engaging summer-business curriculum for kids that is structured around your product (move over, lemonade stand!).
Again, the key question is: How can you better meet your consultants' needs in the summer in a way that also involves a continuation of sales?
Sylvie Rochette, president and founder, and Amelia Warren, chief executive officer, of Epicure Selections, Victoria
Seasonality is often a part of our industry. While engaging consultants to have more parties is one way to help, you must also focus on cash flow. Work with your financial partner to build a margined line of credit as you build inventory over the summer, where the greater your inventory, the higher your credit.
Build good relationships with suppliers. Pay quickly! Ignore typical advice to pay as late as possible. Be a customer that other companies want to do business with. In crunch times, your suppliers will be more willing to offer lengthier or more flexible payment terms.
Use consultant input to help inform your forecasts to improve accuracy. Endeavour to time your purchases and deliveries to manage your cash flow better.
And then, do business differently. Try outdoor parties, bridal showers, pool parties. Adapt your offering and marketing to the season: think iced teas and cocktails. Smaller summer lineups are a mistake: Make it so exciting consultants can't wait to call clients. Offer exclusive host items. With a part-time, volunteer sales force aching to take a vacation, provide them and their leaders with training and incentives to work their businesses consistently through the summer. This will in turn make it easier for them in the fall.
THREE THINGS THE COMPANY COULD DO NOW
Promote online alternatives
If in-person tea parties are less feasible due to summer schedules, encourage consultants to direct customers to an online sales platform.
Make it a family affair
If the kids are off school, consider products or sales opportunities that work for moms and children.
Focus on cash flow
Improve forecasting techniques and seek an expanding line of credit to better anticipate crunch times.
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Interviews have been edited and condensed.