Seasonality is the fluctuation in business from one part of the year to another. Generally, businesses with less seasonality will be more marketable and valuable than businesses that don’t have seasonality. However, for many businesses, seasonality is simply a given due to the nature of the customers served. For example, a tutoring company serving school-aged
children will have more business during the school year from September through May than during the summer break from June through August.
While many businesses have natural seasonality, it’s important to keep in mind that buyers are likely comparing your business to other types of businesses that may not have seasonality (unless the buyer is a strategic industry buyer only looking at businesses exactly like yours). To the extent a business can pursue initiatives to level-out revenue and reduce seasonality, it will reduce the business’ perceived seasonality risk and therefore add to value and marketability. For example, the tutoring business noted above could consider adding summer camps that focus on different academic subjects to boost off-season revenue, reducing seasonality.