3 seasonal factors that could affect the value of your business sale
3 seasonal factors that could affect the value of your business sale
By Alex Dodgshon

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3 seasonal factors that affect business value

TAGS:  Business Exit Strategies, Exit Planning, Maximising a Business Sale Price, Recurring Revenue, Value Builder Methodology

Christmas is a time when many seasonal businesses make their profits. Take Christmas tree farms – it’s a boom or bust time of year for them. The clever ones maximise income by offering customers related products, such as tree stands, ornaments and other festive accoutrements. It’s their way of making the most profit from their busiest time of year. With this in mind, let’s consider how to mitigate against seasonal factors impacting sales and the value of your business.

Of course, there are all kinds of seasonal businesses out there from garden landscapers to wedding planners and holiday lettings. For this blog, we’ll focus on the winter months and Christmas.

Factors to consider when planning seasonal activity

1. Reputational impact of PR

Making a wrong decision at this time of year could have a detrimental impact on the public’s perception of your business, which in turn affects its value. A social post in bad taste or a poorly worded advertising message is a potential spark for negative publicity and lost sales.

Think carefully and weigh up the possible consequences of your messages before embarking on any quirky campaigns. Try not to make snap decisions. If Christmas is also your most lucrative sales period, a bad choice could be very costly.

2. Community involvement

When it comes to Christmas marketing, not all businesses have the same budget as John Lewis or M&S. What your business has in common with both these brands is the potential to make a difference in your local community. Even more so when finances are stretched.

When teams have a genuine desire to make a positive impact through corporate social responsibility – and make this happen – the reputational impact is huge and positive. Community involvement is a great team motivator and an enhanced profile may bring in new customers and add to your bottom line. Consider the causes you might get involved in over the festive period and how they align with your business values.

And if you’re one of those businesses which donate a day or two for each staff member to spend volunteering in the community, make sure they capture the moments and share the stories on social media and blogs.

3. External Factors

As we write this post towards the end of 2022, UK businesses have been hit by a tidal wave of postal strikes, manufacturing delays and supply shortages, as well as economic recession. All these are external factors, often beyond your control, which may negatively impact sales income, your ability to fulfil customer orders, and business value.

Fortunately, not all businesses will be adversely impacted. Larger organisations, for example, will not be as affected by the Royal Mail strikes as they can cover the cost of a courier service. Small businesses unable to cover the additional costs may not be able to fulfil orders on time and be hit by demands for refunds and bad customer reviews – through no fault of their own.

The secret to mitigating against external events having a negative effect on the value of your business  is in planning ahead. In fact, it’s been great to see so many small businesses reacting quickly to the postal strikes and seeking alternative ways to fulfil Christmas orders and keep their promises to customers. These proactive businesses are the ones that stand to survive a seasonally affected downturn.

Planning to exit your business?

The best way to prevent seasonal factors from devaluing your business is to have continuity plans in place. Think ahead about the possible effect strikes, bad weather, and supply chain issues might have on your ability to deliver and put plans in place to manage this.

Take advantage of the peaks and troughs of the seasons to pull your plans together and, if you’re a small business, use your flexibility to find solutions.

Buyers will be impressed that you’ve considered the impact of seasonal factors on your continuing ability to function and serve customers.

Diversify to add business value

You might find going through this planning process prompts creative ideas for alternative income streams. When it comes to business value, capitalising on your most lucrative sales period makes complete sense.

A favourite festive example of diversification is a local turkey farm which keeps busy all year round by offering family visits to feed the lambs in spring and pumpkin picking in autumn. They sell veg boxes to go with the Christmas turkey and have even diversified into running outdoor yoga classes in their fields during summer! And if you’ve been to any one of these things throughout the year, which company is front of mind when you begin to plan your Christmas feast?

Add more seasons

This one sounds a bit crazy, but if you’re in the e-commerce business of selling festive hampers (as an example), why not add additional seasons to your year? Easter hampers for spring, back to school hampers for teachers in autumn, strawberries and cream hampers for Wimbledon fortnight, beer and crisps for the 6 Nations rugby tournament. You can probably use the same suppliers with a slightly different product selection. Each addition creates a number of mini seasons throughout your financial year, spreading income and minimising the impact if any one of them fails to deliver.

Find creative ways to communicate

Finally, we often forget about seasonal businesses when they’re not needed. Like the turkey farm, keep in touch with clients to let them know you’re still there and retain their trust. Loyal returning customers add real value to a business and will excite potential buyers. If you’re preparing to exit your business and interested in learning how to increase its value, we’re here to help.

And of the seasonal factors that affect business value?

What we’re talking about here is two-fold. The first looks at how you can stabilise your seasonal business income and increase profits. The second is mostly around reputation and brand. Building a strong brand which is recognised in your market most definitely adds value at the point of sale. Your market may be your town, your specific sector or it could be global, but making your reputation is hard work, so protect it through maturity.

Uscita is a business broker with extensive experience in preparing businesses for sale and finding the ideal buyer. Get in touch to discuss your plans and ask about our free business valuation service.

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