Small businesses look to plan B in extreme weather
New York •
This summer, many small businesses that depend on high temperatures got more than they bargained for.
Across the nation, July was the hottest month ever in the continental U.S., according to the government's National Climatic Data Center. It was also the driest since 2001, according to Planalytics Inc., a company that analyzes weather and retailing trends. Records for high temperatures and lack of rain were broken in many areas. August is shaping up to be pretty warm and muggy in many parts of the country.
With plants shriveling up and outdoorsy types feeling it's too hot to be active in the extreme summer heat, many small business owners with seasonal enterprises aren't ringing up robust sales. Their experience highlights the need for businesses that depend on Mother Nature's cooperation to have a plan B whether that means cutting expenses or finding alternate revenue streams.
"We've gone three weeks without any rain. Who's going to buy something?" asked Michael Bird, owner of Wilmot Nursery and Landscaping in Lake Ariel, Pa., during a recent interview.
Wilmot Nursery's customers have lost plants to the heat but are not replacing them. The average high temperature in nearby Scranton during July historically has been about 82 degrees, according to AccuWeather, a private weather forecaster. But the temperature was 90 or above on 13 days last month, and 85 or above on 22 days. And aside from about three-quarters of an inch of rain on a few days, it has been bone dry.
Bird says he has learned over the years that when it's an extremely hot summer, customers don't want to throw good money after bad. Rather than replace burned plants, they'll wait for the chrysanthemums to come in for fall planting.
He expects his revenue this year to be down about $30,000 from $460,000 in 2011, which was a tough year because of the weak economy in the area. Bird believes both the climate and his customers' financial worries have hurt business this summer.
But Bird says his company is in good shape because he has been cutting expenses. He's spending $80,000 less this year than he did in 2011 on wages, inventory and other costs. He has nine employees this year, down from 15 from last year. He's buying fewer plants, paying for some merchandise in installments and has held off on some equipment repairs. He's closely monitoring the money coming in and going out. Instead of analyzing revenue and expenses monthly, he's going over them each week.
The heat is creating similar complications for Anna Levesque's company, Girls at Play. Levesque runs kayaking and paddleboard clinics and trips for women during the warmer months. Because of the heat, fewer people are signing up for some events. She had to cancel a trip in Pennsylvania because only five people instead of the expected 25 to 30 signed up. So far, there are no takers for an upcoming trip on the Salmon River in Idaho.
Levesque protects herself with savings, but also by looking for other opportunities. She teaches yoga, and her company runs kayaking trips to places like Mexico, Costa Rica and Bhutan. "I'm always thinking of off-season offerings I can create," she says.
The hot weather is a boon for Summit Sports' three stores in the Detroit area that sell water sports gear such as wakeboards, paddle boards and towable tubes. Andy Schepper, the vice president for sales, says business is up 20 percent from last year. But sales of inline skates are down nearly 20 percent. Over the years, he's learned that very few people want to skate and bake in the sun.
Having a big online retail operation has helped insulate Summit. Schepper says the stores bring in only 25 percent of sales. Customers for its winter sports websites, skis.com and snowboards.com, are scattered around the country, with New York and California among the biggest markets. Also, many of its winter sports customers buy in Detroit, but travel west to play in the snow.
But last winter, when much of the country went snowless, online sales also suffered. "It defeated our theory that it's always snowing or sunny somewhere," Schepper says. And the company had back-to-back bad seasons in 2006. "We were at about break-even for the year," he says.
When the weather hurts business, Summit marks down merchandise, and tries to do so ahead of the competition. While that can cut into profit, it does bring in sales.
"When it doesn't snow but when the prices are good enough, people are buying for next year," Schepper says.
One thing most small business owners who operate seasonal business have in common is that they learned their lessons through experience.
Chic Henderson expected to do well this summer in Dallas, where he operates Potato-Potahto, a food truck that sells baked potatoes. Henderson started the truck in February, selling as many as 120 lunches a day. When the triple-digit temperatures hit Dallas had 30 days 100 degrees or above as of Wednesday Henderson found himself selling only about 40 meals a day.
Henderson learned that summer really isn't high season for food trucks in Dallas, which, according to Accu-Weather, has an average of 18 triple-digit temperature days a year. The city has been behind other cities in joining the growing trend of trucks selling tacos, ice cream and other food on the street. So "there wasn't a large population of food trucks to really get some history from," he says.
So Henderson is ordering less food and looking for spots where his truck might have more success. In the meantime, "I'm just trying to bear with the weather situation until it gets better." And next summer, he's planning to take six weeks off.
Michael Volpatt also learned some lessons when he became the owner of a gourmet shop and restaurant in California's Russian River area. When Big Bottom Market opened in July 2011, it was "super crazy busy" because of tourists who had come to see the Redwoods and the vineyards. But Volpatt recalls one of his partners warning, "don't freak out when the winter comes. The business will die down considerably."
And it did. Some days, business was down as much as 70 percent from the summer. The partners had to invest money to pay expenses until the busy season started again in the spring. It did get busy. The restaurant is serving twice as many meals as it did a year ago.
Volpatt learned that the summer is the time to start banking the profits the company is making; that money will carry the business through the winter. The partners weren't able to do that last year because the business was so new.
But this year, "the month of July was our best month ever and August looks like it's going to be even better than July," he says.
Joyce Rosenberg writes about small business for The Associated Press.