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Many SMBs recognise the pattern: Q4 ends in a sprint, followed by the annual dip in January and February. Footfall slows, online traffic softens, customers delay discretionary spending, and yet operating costs remain firmly in place. Add tax deadlines into the mix, and Q1 often feels less like a fresh start and more like a balancing act.
Across thousands of businesses, a clear trend emerges
From retail to hospitality, evidence shows that businesses which plan and invest during the quiet first quarter are the ones that grow fastest when demand returns. ² ⁸
Spring demand often builds earlier than expected. Retail activity accelerates around seasonal events, hospitality bookings rise as weather improves, and customers shift from restraint to selective spending.³,⁷ Businesses that prepare in February and March are already positioned to capture this uplift; those that wait frequently find themselves reacting too late.
This guide explores both sides of the equation: the real pressures SMBs face in Quarter 1 – and the overlooked opportunities to drive growth when trading is quieter.
December’s strong finish can mask how abruptly trading slows once the calendar turns. By January, footfall drops, online activity softens and discretionary spending is paused. Seasonal inventory has largely been sold - yet now needs replenishing.
What doesn’t change is the cost base. Staff still need paying. Rent, utilities and supplier invoices continue as normal. Marketing plans for the year ahead still require funding. Retailers must restock without the cash flow that supported Q4 buying. Hospitality businesses carry labour and ingredient costs even as covers fall. Service businesses see fewer bookings, but the same fixed overheads remain.
The result is a familiar early-year tension: the investment required to prepare for the next trading cycle arrives before the revenue arrives to fund it.
Layered on top of reduced demand is a steady rise in operating costs across almost every sector. Wage inflation, higher business rates, volatile energy prices and rising insurance premiums have become structural rather than temporary pressures. Supplier costs – particularly for imported goods, food and drink – continue to rise.¹⁰
In hospitality, this squeeze is especially visible. Data from the CGA Foodservice Price Index shows sustained inflation in food and beverage input costs.¹ Restaurants, cafés and takeaways are paying more simply to deliver the same menu, while customers remain highly price conscious.
For many businesses, profitability is now driven less by headline sales growth and more by efficiency, experience and capacity.
VAT, corporation tax and year-end payments often fall due during one of the slowest revenue periods of the year. Even profitable businesses can face liquidity pressure when a large tax payment coincides with lower-than-usual cash inflows.¹¹
The challenge isn’t just paying the tax itself – it’s what that payment prevents you from doing. Using working capital to cover VAT or year-end obligations can delay stock purchases, refurbishments or marketing investments just as demand is about to return.
A quieter period - and a rare window of opportunity
Early-year trading often feels subdued, but demand is already rebuilding beneath the surface. From March onwards, customer activity increases as seasonal moments approach and confidence improves.²,³
This creates a short but valuable window: demand is rising, yet competitive pressure has not fully peaked. Businesses that act now can prepare properly before supplier prices rise, marketing channels become crowded, or competitors rush to catch up.
How to make the most of this window
Customers no longer buy on price alone. Across retail, hospitality, wellness, fitness, beauty and services, purchasing decisions are increasingly shaped by how a business looks, feels and performs.⁴,⁶
Whether it’s a refreshed space, smoother booking journey, upgraded equipment or clearer digital presence, experience now plays a direct role in revenue growth. The quieter early-year months are often the best time to make these improvements – when there’s space to plan, test and refine before peak demand returns.
Businesses that invest early don’t just look better when customers return; they convert better, retain customers for longer and are better positioned to grow.
Customer expectations now span physical and digital touchpoints. Store-based retail sales in Europe are projected to grow by 14%, while online sales are expected to rise by 23% between 2024 and 2028.⁷
Early-year offers a rare opportunity to strengthen this foundation: improving websites, upgrading checkout or booking journeys, investing in digital marketing, integrating inventory systems or refining fulfilment. These improvements are harder to prioritise during peak trading - yet make a measurable difference when demand returns.
Across sectors, customers consistently reward businesses that differentiate early – through smoother experiences, clearer messaging and greater convenience.
The quieter months, at the start of the year, are often the best time to invest - yet they’re also when cash flow feels most stretched. Fixed costs continue, revenue is softer, and traditional funding options can feel ill-suited, with rigid monthly payments and slow application processes that delay decisions just when timing really matters.
That’s why more businesses are turning to flexible, revenue-based funding. With spring approaching and sales beginning to recover, fast access to funding can make the difference between reacting late and preparing early. Instead of fixed monthly repayments, payments move in line with revenue - easing pressure during quieter weeks and increasing naturally as sales pick up.
Used well, flexible funding becomes a planning tool rather than a last resort - enabling businesses to act while conditions are calm, put improvements in place early, and enter the busy season with real momentum.
Q1 doesn’t need to be a low point. For proactive businesses, it can be the window where real growth begins. When spring demand returns - across retail, hospitality, services and beyond - the question is whether a business is ready, and funded, to capture it. We understand seasonal pressures. And we’re here to help you prepare with confidence.
Let’s explore how we can support your busiest period. Your next season starts now.
Bibliorgraphy
¹ CGA Strategy. Foodservice Price Index & Hospitality Insights.
² British Retail Consortium (BRC). Retail Sales Monitor – March & April Editions.
³ Office for National Statistics (ONS). UK Retail Sales Index & Consumer Spending Data.
⁴ OpenTable UK. Dining Trends Report 2025–2026.
⁵ DesignMyNight. Hospitality Trends 2026.
⁶ Capgemini Research Institute. The Experience Economy in Retail and Services.
⁷ Colliers. Global Retail Outlook 2025 – Omnichannel Growth Projections.
⁸ PwC. UK Retail and Consumer Outlook.
⁹ UK Finance. Business Finance Review Q4 2024.
¹⁰ Deloitte Insights. The Resilient Organisation: Investing Ahead of Recovery.
¹¹ HMRC & ONS. VAT, Corporation Tax & SME Cash Flow Analysis.
¹² McKinsey Global Institute; Harvard Business Review – Gulati et al. Roaring Out of Recession.
13 The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. The information contained in this article is provided for general information purposes only and is not intended to constitute advice. Although Liberis has endeavoured to ensure the content of this [article / email] is accurate, you should seek appropriate professional advice before taking any action in reliance on any of the information contained within it.
