How much does weather affect your business?

by Staff Writer

For most of the U.S., it's been an unusually warm (and precipitation free) winter. In fact, it's the fourth warmest in recorded history, according to National Oceanic and Atmospheric Administration. And with an early spring upon us, this has been great news for some businesses, like landscapers, but terrible for others, like ski resorts.
 

From a business perspective, weather can have a significant impact on the bottom line. And as with most patterns of this type, bad times are usually balanced out with good times. But in order to “weather the storm” during those bad times, business owners need to be prepared for it. And this doesn't just go for seasonal businesses, either. Businesses of all kinds can be affected, even if indirectly, by both good and bad weather. The key is to know how:

Customers

What are your consumer's behaviors during certain weather conditions and/or times of the year? It's a valuable question for all businesses to ask, not just the tourism industry. Retailers, restaurants and all types of businesses should consider the impacts of weather patterns on their customer's purchasing habits in order to optimize sales. Sears, Subway (subs), even Lands End, Campbell's (soup) and Panera have all been known to do extensive research and weather predictions in order to optimize their product offerings to meet the fluctuating demand of their consumers.
 

This isn't just about doing market research and optimization, however. It's also important to understand and identify how much impact weather has on your businesses performance so you can accurately predict future performance. Just because an ice cream shop has a great spring this year, doesn't mean it will do as well next year. Knowing the difference between real growth and weather conditional performance can empower the owner of the ice cream shop to prepare for adverse weather fluctuations in the future.

Products

Demand aside, a number of products are subject to price fluctuations based on weather conditions. Agriculture is an obvious one as weather has a direct effect on yield, but it certainly doesn't end there. Some products and certain raw materials become more expensive to produce when weather conditions are less than ideal. This has a ripple effect throughout all businesses that utilize and/or sell associated products. Understanding and predicting these fluctuations can be helpful for your financial projections.
 

Oil is another big reason weather impacts just about all businesses. Since oil demand is increased during colder winters, oil (and thus gasoline) prices increase making transportation more expensive. And because just about all products require transportation of one kind or another, prices suffer as a result, even if just a little.

Employees

The most recent employment forecast wasn't quite representative of an improving jobs economy. But part of that has to do with the recent warm winter, believe it or not. During warmer winter months, layoffs tend to happen less. As a result, in later months, new job growth is slowed. A phenomenon known as 'good weather payback'. In fact, despite evidence of this in the last jobs report, experts believe the worst of this impact is yet to come.
 

But what does weather have to do with individual businesses and their employees? First, an early busy season likely means requiring additional help sooner than expected. Delays can mean opportunity loss. Second, increased worker demand usually comes with increased costs and can sometimes lead to temporary worker shortages.
 

Another way weather can impact businesses is with scheduling and consistency. Weather delays can cause some businesses to lose days at a time either directly impacting sales or otherwise cause projects to be delayed requiring expensive catch-up work. It's important to maintain a level of contingency and/or flexibility to limit these effects.

Property

Don't underestimate the destructive power of weather. Floods and water damage, wind and ice damage and all the other ancillary hazards associated with weather are a major concern of business (as well as residential) property. Assessing risk and protecting property that can be effected by weather is as important as anything else mentioned in this article. Just like a house, what took your whole life to build up can be erased in the matter of a few minutes.  So be prepared- better yet: be covered for such an event.

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