The Feast and Famine Effect: How it Hurts Small Businesses and How it Can Be Avoided

Small businesses are the backbone of economies worldwide. However, small businesses often face challenges, such as the feast and famine cycle, that can significantly impact their financial stability and success. Feast and famine refers to the inconsistent flow of business, where a business may experience periods of high demand (feast) followed by periods of low demand (famine). In this blog, we will discuss how feast and famine can affect small businesses and some strategies to mitigate these effects.

Effects of Feast and Famine on Small Businesses:

1. Cash Flow Problems: A feast and famine cycle can make it challenging for small businesses to manage their cash flow effectively. During the feast period, there is an influx of money, which may lead to overspending and over-investment in the business. However, when the famine period hits, the business may struggle to pay its bills and meet its financial obligations.

2. Employee Retention: During the feast period, small businesses may need to hire more employees to meet the demand. However, when the famine period hits, the business may not have enough work to keep all employees busy, leading to layoffs or reduced working hours. This can make it challenging to retain good employees, as they may look for more stable job opportunities elsewhere.

3. Marketing Challenges: During the feast period, small businesses may not have the resources to market their services as their time is taken up by the day to day running of the business and satisfying the current high demand. However, it is often due to this period's lack of marketing that leads to demand dropping off and the next period of famine becomes inevitable. The danger is that this becomes a never ending cycle, leading to the challenges outlined above.

4. Business growth: Due to the challenges already outline, a business that regularly cycles through feast and famine periods will struggle to compete within their field and sustainably grow. In order to achieve sustainable business growth it's vital for a business experiencing these challenges to break the cycle and establish strategies to avoid falling back in to it.

Strategies to Mitigate the Effects of Feast and Famine

1. Invest in consistent and effective marketing. For small businesses that don't have an in-house marketing team, marketing tends to fall on the shoulders of the company owner. Therefore it's not surprising that marketing can be pushed to the bottom of the to do list during periods of famine. Sound familiar? By outsourcing your marketing to a marketing agency (oh, hi!), you'll avoid falling in to this trap and be able to stop the never ending cycle of feast and famine thanks to your marketing finally getting the attention it deserves. Breaking this cycle is essential if you want to sustainably grow your business.

2. Plan Ahead: Small businesses can try to plan for the feast and famine cycle by anticipating demand trends and adjusting their business accordingly. During the feast period, businesses can save money and build up their cash reserves to prepare for the famine period. They can also invest in equipment or technology that can help them operate more efficiently during the famine period.

3. Diversify Revenue Streams: Small businesses can try to diversify their revenue streams to avoid relying on a single product or service that may be subject to feast and famine cycles. For example, a restaurant can offer catering services during the famine period, or a retail store can sell products online to reach a wider customer base.

4. Build Relationships: Building strong relationships with customers and suppliers can help small businesses weather the feast and famine cycle. During the feast period, businesses can focus on delivering exceptional customer service to build customer loyalty. During the famine period, businesses can rely on their loyal customer base to sustain them.

The feast and famine cycle can significantly impact small businesses, leading to cash flow problems, employee retention issues, and marketing challenges. However, small businesses can mitigate these effects by planning ahead, diversifying their revenue streams, and building strong relationships with customers and suppliers. By taking these steps, small businesses can become more resilient and better equipped to handle the ups and downs of the business cycle.