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10/18/2012 – Small Business Outlook for the Upcoming Holiday Season

Summer is over and the kids are back in school, giving you a little breathing room to prepare for the upcoming holiday sales rush. October is traditionally a transitional month for many businesses, especially retailers and the businesses who supply them.

With signs of increasing consumer confidence, this year’s holiday sales are projected to increase 4.1 percent to $586.1 billion, according to the National Retailers Federation (NRF), the nation’s retail trade association. NRF’s 2012 holiday forecast is higher than the 10-year average holiday sales increase of 3.5 percent.

“This is the most optimistic forecast NRF has released since the recession,” said NRF President and CEO Matthew Shay. “In spite of the uncertainties that exist in our economy and among consumers, we believe we’ll see solid holiday sales growth this year. Variables including an upcoming presidential election, confusion surrounding the ‘fiscal cliff’ and concern relating to future economic growth could all combine to affect consumers’ spending plans, but overall we are optimistic that retailers’ promotions will hit the right chord with holiday shoppers.”

Careful news readers will note recently released government data shows a crosscurrent of indicators that could impact holiday sales, including unimpressive job and income growth and an unemployment rate stuck at eight percent. However, positive indicators are emerging that show a cautious but capable consumer, such as increases in confidence and home prices.

“While moderate compared to what we experienced the last two holiday seasons, the forecast is a very pragmatic look at what to expect this year given the current rate of economic growth,” said NRF Chief Economist Jack Kleinhenz, Ph.D. “There’s still some general anxiety amongst consumers when it comes to how the state of the economy is impacting their spending plans, but retailers can expect to see the excitement around their promotions and plenty of bargain hunters both online and in stores in the coming months.”

In addition, just released its 2012 online holiday sales forecast, expecting sales to grow 12 percent over last holiday season to as much as $96 billion.

Cash flow is crucial to being prepared

For many small businesses, the holiday season is a crucial make-or-break period – holiday profits must carry them through the first few months of the new year when business slows down. Good planning now will set up a successful November/December that leads you into the new year in a strong position.

A large part of the planning is making sure you have the cash flow you need for seasonal growth and to compensate for slow-paying customers. You need to have enough inventory on hand to ensure you don’t run out of best-selling items, and that takes cash up front. It’s a delicate balance – you don’t want to have too much inventory either, or you’ll end up with excess that you’ll have to mark down, which reduces profits.

Another crucial planning aspect is seasonal staffing – do you have enough hands on deck to manage the sales spike? According to NRF, retailers will hire between 585,000 and 625,000 seasonal workers this holiday season, which is comparable to the 607,500 seasonal employees they hired last year. Again, that requires a steady source of working capital.

“The retail industry creates hundreds of thousands of jobs every holiday season by adding new staff in stores, distribution centers, and customer service departments across the country. In addition to the newly created jobs, many retailers also offer existing staff the opportunity to work longer hours if they want,” said Shay. “New jobs help people support their families, and for some, seasonal employment can turn into a career opportunity once the holidays have passed.”


For over 18 years, Paragon Financial Group has provided working capital solutions for growing companies throughout the U.S. They serve small to large-size companies across a wide variety of industries through invoice factoring, and purchase order financing up to $3 million per month in volume. Paragon is a leading source of receivables financing, government contract financing, payroll funding, and purchase order financing. For more information visit

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