How to Sell a Seasonal Business
No matter how much money your seasonal business brings in, its seasonality means selling it requires a different strategy from selling a non-seasonal business.
The potential buyers, the way you time the sale, the recordkeeping you’ll need, and more are different when selling a seasonal business.
What Makes a Seasonal Business Different?
While most businesses typically have ebbs and flows, a seasonal business usually has one peak season where it earns most of its revenue and an off-season when there are few sales or the business operates at a loss.
The peak season can be a few weeks or months, normally based on weather, holidays, or events around a certain period.
Examples of seasonal businesses include:
- Ski resorts
- Christmas trees or holiday decorations
- Water parks
- Halloween costume sales or rentals
What makes seasonality so critical to selling a business is that buyers have a limited time to recoup the sale price.
Timing Is Everything When Selling a Seasonal Business
Seasonal business owners usually want to sell just after their busy season to capture as much cash flow and profit as possible. But, buyers want to buy right before the busy season begins to quickly generate enough working capital to pay for their new business expenses. They only have a short period of time, so if they buy a seasonal business during the slow period, they might not have enough working capital to pay employees, buy inventory, or pay other expenses. They’ll most likely have to come out of pocket or get a loan to cover those costs.
Buyers who acquire a business during its slow period will usually offer a lower purchase price to offset the expenses they’ll have to pay until the business gets rolling.
Pros and Cons of Selling a Seasonal Business Off-Season
Buyers and sellers needn’t be at odds over the timing of a sale. A lower off-season offer and a higher one at the start of peak season might be equivalent when all is said and done.
Let’s say you own a business selling holiday season goods like Easter egg painting kits, bunny costumes, etc. You receive two offers for your business. One buyer wants to close in early March to capitalize on the season and offers $150,000 to buy the business. The other buyer is willing to close in the winter and offers $100,000.
Selling to the first buyer will likely mean you’ll have to buy inventory and hire and pay workers before the sale closes. You might also have to spend money on maintenance like refreshing your signage and updating your website. These costs might offset the higher sale price the buyer is offering.
Selling during the slow season also gives you more time to prepare your business for sale. Because you don’t have run the business as you do during the peak season, you can use the slow period to:
- Prepare the books
- Gather documentation
- Make improvements to increase your business valuation
A potential disadvantage to selling your business during the slow period is the training agreement you reach with the buyer.
Buyers usually want to be trained during the busy season to get as complete of an overview of the business as possible. If you close the sale during the slow period, it’s likely that the buyer will insist you be on hand to provide guidance and answer questions when most of the issues are likely to occur.
As a seller, you may want to wash your hands of the business when the sale closes, and you might not have that option if your sale closes in the off-season.
Selling a Seasonal Business
As with any other type of business, selling a seasonal business takes preparation, resourcefulness, and patience.
Preparing Your Seasonal Business for Sale
Whereas maintaining financial records by month or quarter is usually fine for selling other businesses, buyers of seasonal businesses will want to see a sales breakdown by week. You should also prepare monthly profit-and-loss statements, balance sheets, and monthly records of inventory levels.
Buyers will also want to see that you’ve controlled your off-season expenses. Review your books to ensure that you eliminate unnecessary costs and keep required expenses to a minimum so that your balance sheet looks good to potential buyers.
Inventory management is key to a successful seasonal business. Dispose of any leftover inventory after peak season, either by selling it to other businesses or offering it to your customer base at a deep discount.
Identifying Buyers
Buyers for seasonal businesses are likely to differ from those attracted to year-round businesses. Some buyers simply won’t be interested in a seasonal business, so your buyer pool is likely to be smaller as well.
On the other hand, a seasonal business can attract buyers who aren’t interested in committing to a full-time business. College students, for example, might be interested in owning a seasonal business that doesn’t interfere with their studies during the school year.
Another potential buyer pool for your seasonal business is small business owners who own other seasonal businesses. Networking with other seasonal business owners can help identify potential buyers for your business.
Marketing Your Seasonal Business for Sale
Once you’ve developed a profile of the most likely buyers for your seasonal business, market it using local ads and trade organizations. You can also use online marketplaces like BizBuySell to attract potential buyers.
Some seasonal businesses will take longer to sell than others just because the buyer pool is smaller. However, targeting the most likely buyers by contacting them directly and focusing your advertising can help speed up the process.
How to Improve the Business Valuation of a Seasonal Business
Entrepreneurs who want to get maximum value for their business can use their slow season to expand their offerings and lengthen their selling season. Here are some strategies to consider:
Diversify Your Product Offerings
By diversifying your product lines, a small business owner can often increase revenue without a commensurate increase in overhead costs.
For example, a business selling Christmas and Hanukkah items might add decorations for Easter, Valentine’s Day, and Independence Day to expand the selling season into spring and summer.
An ice cream shop can sell frozen treats during the summer months, then switch to soup and other hot items in the winter.
Run Off-Season Promotions
Consider offering special promotions or discounts during the slow season to generate revenues over a longer period of time.
A water park business, for example, might offer a special reduced rate on season passes for next season to entice their customer base to make purchases before the winter.
Boost Interest Year-Round With Your Website and Social Media
Many seasonal businesses dependent on weather, such as ski shops and surf shops, depend on local customers. Building your website and social media presence can help you expand your geographic market and capture new customers for your products in other weather zones and at other times of the year.
A surf shop on the Jersey shore can use e-commerce to sell products to customers in California year-round. Likewise, a California-based ski shop can extend its selling season by building a social media presence that attracts customers in New Hampshire and other northern and eastern regions with longer seasonal demand for its products.
Diversifying your product offerings, using special offers, and building an e-commerce business will likely require developing new marketing strategies. But chances are you won’t have to spend more on overhead costs to reap the additional sales.
The Bottom Line
While selling a seasonal business has challenges, it also offers distinct advantages for the right buyer. With a shorter selling season comes less risk. New entrepreneurs can try their hand at business ownership without a big capital and time investment. And small business owners can use seasonal businesses to try out their business model.
The important thing for sellers is to understand their target market of buyers and start preparing for the sale early.
Check out our section on how to sell a business to find plenty of articles and information, and sign up for a free BizBuySell account to receive alerts and stay updated on seasonal businesses selling in your area.