Seasonal businesses are scary, especially product-based seasonal businesses with long finance cycles.

I cut my financial teeth in the bicycle industry back in the days when Univega was one of the leading U.S. brands. My mentor was the late Ben Olken, whose retail store, The Bicycle Exchange, was a Harvard Square landmark for more than 50 years.

Recognizing the limitations inherent in being a single-store retailer, Ben had established his own distribution company to import and market Univega bikes throughout the Northeast. The business grew steadily during the late '70s and '80s, to a point at which Ben's company was responsible for the distribution of more than 30,000 bikes a year to 200-plus retailers, plus three little Howes and their father.

At that time, the old-line U.S. manufacturers — Schwinn and Huffy and others — were losing market share to new brands sourced from Japan and Taiwan, whence Ben Olken, Inc. contracted its production. Then, as now, the primary benefit of outsourcing overseas, given competitive quality, was price — especially with the yen at 220-240 to the dollar. The drawback was lead time: the manufacturers wanted to know in November and December what we were expecting to sell in April, May, and June. They also wanted our purchase orders by the end of January, accompanied by a bank letter of credit, assuring that they would get paid as soon as they shipped the product.

Their receipt of the P.O. and L/C started the manufacturing (4–6 weeks) and ocean freight cycle (4 weeks) — product ordered in mid-December hopefully arrived in early March. If our salespeople had been successful with their retailer accounts, most of those bikes went out the door by the end of March for the start of the spring retail selling season in April.

In a good year, customers would snap up the new models and the retailers would be starting to pay us by early June. So Olken's company regularly had a "finance cycle" of six months from the commitment of the L/C until Ben finally got paid on his invoice. With over 60% of his annual sales occurring in March through June (a month ahead of the retailers' peak), Ben had a financing challenge.

Fortunately, a succession of local banks was equal to the challenge. As each container of bikes "hit the water" in East Asia and the letters of credit were presented for payment by our vendors, the bank advanced us 50% of the landed value (including duty, freight, and insurance) of the inventory in the shipment. Then, once it was processed through the warehouse in Stoughton and sold to a retailer customer the advance rate (the amount eligible to be loaned) went up to 80% of our invoiced price on each bike. This "asset-based lending" was critical to Ben Olken's business.

At key intervals in the spring, the Company often had bank obligations that exceeded half its annual revenue. An extended winter (think April snowstorms) or a succession of rainy weekends in April and May could clog the pipeline, leaving the retailers with unsold inventory and Olken with bikes coming (in) but not going (out). At the same time, the financing "availability" was usually contingent on being able to move from 50% inventory financing to 80% receivable financing to 100% payment by our customers (80% of which paid down the bank loan), all within a 60-90 day period.

With so many variables to keep track of — bike models, price points, letters of credit, inventory values, retailer purchases, sell-through, credit availability, loan advances — financial projections were critical. It was no coincidence that the growth of Ben Olken's distribution business coincided with the introduction of the electronic spreadsheet. VisiCalc, then Lotus, then Excel enabled us. Instead of using 13-column journal paper, pencils, and erasers to produce one master plan, which was not easily reproduced to share with the bankers, we had the newly-discovered ability to consider multiple options and for the first time to engage in "what-if" scenarios, including the bad weather nightmare, testing multiple assumptions en route to a bankable result.

Getting our bankers on the same (spreadsheet) page with us was critical to our financing, but equally important was having a financial roadmap for all of our constituents — vendors, salespeople, warehouse workers, customer service reps, and the retailers. They could see that the rainy day plan called for price cuts to move inventory. But everyone also knew that without stocking up early, the retailers ran the risk of running out of inventory in June. So, by the time that the system had to be committed to, in early February, everyone was on board except the customer. Fortunately, only the most astute of them knew that April showers brought May price cuts.