SEASONAL BUSINESSES



Seasonal businesses are businesses that operate in one of two common business situations. The first situation is a business that is only open for operations during certain seasons of the year. Examples include vacation cottages, a lawn care service, or a snow removal service. These businesses either close down completely for part of the year or drastically scale back operations, managing only basic services such as accounts payable, during the off-season. The second situation is a business for which certain seasons of the year are far more profitable than others. In most cases, there are certain promotions or business techniques that can be used to increase profits during those seasons. A "season" in this sense can refer to the actual calendar season or to a specific business time period based on an event or holiday. The leading example of this type of seasonal business is a retail business that earns a large percentage of its annual profits during the Christmas "shopping season."

American Demographics magazine did a study of seasonal businesses and found that there are predictable events that can influence sales in every month of the year and that these events affect different industries. For example, the study showed that January is a good month for self-help books and programs. February is generally the slowest month of the year, but it does feature Valentine's Day, which triggers a great deal of seasonal business. In March, attendance at church and other religious activities jumps 60 percent. April is the month to market household cleaners and other spring cleaning products, while May features the cash cow that is Mother's Day. June features a lot of family activities, such as weddings, graduations, and vacations. July is the best month for all summer products. August is the busiest business and pleasure travel month of the year. September features back-to-school sales, while October is a marketing bonanza thanks to Halloween and the World Series. Finally, November and December are the biggest months of the year for almost every retailer thanks to the Thanksgiving and Christmas holidays.

BUSINESSES BASED ON THE ACTUAL SEASONS

Throughout the business world, there are numerous types of businesses that operate on a strictly seasonal basis, while many others stay open year-round but make a significant portion of their annual profits in one, or possibly two, seasons. Examples include vacation resorts, which in some regions of the United States are only open for part of the year (spring and summer in the northern U.S., fall and winter in the southern half of the country); cross-country and downhill skiing facilities; youth summer camps; lawn care and landscaping firms; golf courses; and sports leagues, from amateur all the way to the top professional leagues. Smaller-scale examples include snow removal services, pool cleaning services (in the northern U.S.), ice cream stands, golf driving ranges, and lifeguard positions, just to name a few.

If it is feasible, a business that relies heavily on one season at least tries to make some money during the remaining months of the year. If it absolutely cannot turn a profit, then the business often closes for the season to avoid paying employees and to reduce the cost of supplies and overhead. For example, in the northern United States, ice cream shops other than those located inside shopping malls simply close for the winter once the temperature dips down to the freezing level. On the other hand, some vacation resorts that might get 90 percent or more of their business in the summer months are trying to expand the length of their peak season and increasing their efforts to lure customers in the off-season.

Seasonal businesses can change drastically or even disappear as the demographics of a region or country change. An example of this phenomenon is the drive-in movie business, which in the 1950s and 1960s was thriving across the United States and Canada as a popular social event. By the 1990s, the advent of the VCR and the spread of plush, comfortable indoor "movieplexes" had all but vanquished the drive-ins. Adding to their demise was the fact that most people realized that, as urban growth occurred, the vast amount of land on which a drive-in was located was far more valuable for real estate development than it was for a seasonal business.

Above and beyond drive-ins, the movie industry remains one of the largest industries in the world that is driven by seasonal buying habits. The two biggest seasons of the year for the movie industry are summer and winter (mainly Christmas). Movie theaters do not shut down like other seasonal businesses, but they do hire extra employees for those two seasons and they do create budgets that reflect the dominance of those two seasons. Each year, the movie studios' most important releases are planned for those two times of year. High-budget, wide-appeal movies that have blockbuster potential are usually released in the summer, often at either the Memorial Day or Fourth of July holiday weekend. Around Christmas, the studios release serious pictures that are expected to gain Academy Award attention, together with big-budget films that are aimed at the entire family. A four-year study of monthly movie admissions revealed that, worldwide, December is the most popular movie-going month, with June finishing second in the United States.

According to the study, movies have become more like the leisure industry as a whole. "Like all leisure industries, cinema is a highly seasonal business," said a summary of the study in Screen Digest magazine. "The release strategies of the major studios are now very closely tied into the seasonal holidays and long weekends that divide and define the theatrical calendar. Pitching a film at the wrong month, week, or even day can mean the difference between success and failure."

EVEN DURING BUSY SEASONS, THINGS CAN FLUCTUATE

For truly seasonal businesses, there are often situations beyond the business's control that cause sales to fluctuate wildly each year, with almost no way to predict what will happen in any given year. Perhaps the best example of this, in cold climates, is the amount of snow that falls each year. This can affect any number of businesses, from ski resorts to hardware stores that sell snowblowers, salt, and chemical de-icers. (The reverse of this situation for summer resorts is a summer that is colder and rainier than usual.) One winter can be extremely snowy, while the next can see almost no snowfall, with very little chance of consistently predicting which way a winter will turn out in advance.

Some businesses use this uncertainty to their advantage, offering unique sales pitches revolving around the snow, or lack of it. For example, it is not unusual for a creative hardware store to run a special on snowblowers late in the fall. As a gimmick to lure buyers, the store offers to refund the entire purchase price of a new snowblowers if a certain amount of snow does not fall that winter. If the snow does fall, then all sales are final, and the merchant was able to sell all his snowblowers at full price.

If the snow does not fall, then the merchant normally has taken out a special insurance policy that will cover most of his or her losses from the special sale, which has now turned out to be a worst-case scenario. Businesses that offer this kind of seasonal gimmick usually do their homework before they make what seems to be an outlandish offer. For example, the hardware store owner might know from studying statistical data that only twice in the last 100 years has the designated amount of snow not fallen, and therefore his odds of having to pay for the customers' snowblowers is extremely slim.

MAKE IT A YEAR-ROUND RESPONSIBILITY

For a businessperson who is used to working in traditional year-round occupations, the switch to a seasonal business might seem to require the use of different business practices. While there are a few things that will always be different, the changes can be minimized by treating the seasonal business as a year-round business. The business owner should take advantage of the downtime to make improvements to the business, attend industry seminars or conferences, recruit new employees, or other off-season activities.

In Nation's Business magazine, the experiences of an annual summer camp called Camp Echo Lake in upstate New York show how a seasonal business should be run year-round. At Echo Lake, the camp for 450 campers lasts only eight weeks during the summer. During that time, the camp employs 200 people. That leaves 44 weeks for owners Tony and George Stein to fill before the camp opens again. To make the most of their business, the brothers have devised a business plan that allows them to work on the camp all year. Following are some methods they recommend:

After the camp ends in August, the Steins prepare a newsletter for parents that is mailed in September; the letter provides a summary of the year's activities and highlights what campers can expect the following year.

During the winter months, the Steins study new literature on their industry, learning about new classes they can offer and new ways to market and promote the camp. Physical improvements to the camp are also made in the off-season.

They set up installment payment plans that allow parents to pay the camp tuition year-round. This makes it easier for parents to pay and ensures that the camp will have steady cash flow all year.

Additional cash is brought in by hosting off-season events, such as training camps for college athletic teams and wilderness getaways for adults and families.

The business owners also use the downtime to make sure that they hire the best possible staffers. Instead of filling staff positions in the few weeks leading up to the start of camp, the Steins hire a recruiter who begins interviewing candidates all the way back in May.

"Busy as it is, an advantage of the off-season is that it's a time when you have control over what you do," camp owner Tony Stein explained. "Once the new season begins, day-to-day operations occupy so much time that there is little left for any of the above activities."

SUCCEEDING AT A TRULY SEASONAL BUSINESSES

In a business that is truly driven by the seasons, there are steps that can be taken to ensure greater success. The two most important factors are managing cash flow and hiring the right employees. Knight-Ridder/Tribune Business News documented the case of Todd Binford, who owned a landscaping soil and stone company. Through the years Binford learned from his mistakes and determined how to manage money during his slow season. Tricks he used include not paying himself a salary during the winter months; paying employees well and letting them work 60 to 80 hours in the summer, then dismissing them each winter instead of paying them lower amounts to work 40 hours year-round; and rearranging bills so that most can be paid in the summer. "You just get used to trying to save money instead of spending every paycheck," said Binford.

Finding and keeping good employees is another key to succeeding in a seasonal business. Paying well and creating a positive work environment are obvious ways to gain good employees, but there are other tactics a small business owner can use. Keeping employees informed of how the seasonal shift affects the company is a good idea, as the employees feel as if they matter more and are an important part of the business. It also helps employees identify the best time to take a vacation. When hiring new employees, owners may neglect two sources of good seasonal employees—students and retirees. Students are perfect for summer jobs because their time off from school matches the business's busy season perfectly, and most students need to earn money in the summer to pay for school in the fall. Retirees tend to make good employees because they may have years of experience in their field, but they no longer desire to work full-time. Therefore, a job that lasts a few months each year is perfect.

One other tactic that seasonal business owners can use to succeed is to expand their business to include a new product line that is seasonal in the opposite way of their original line. For example, a lawn and garden company that sells lawn mowers and offers mowing and landscaping services can add snowblowers to their product mix and offer snow removal services to compliment their landscaping services. The new product should be similar to the existing product so that an owner does not have to learn a brand new business or invest a great deal of money.

EVENT- OR HOLIDAY-BASED SEASONAL BUSINESS

The second type of seasonal business is primarily set in the retail sector, although industry can also feel the seasonal boom as it strives to produce consumer goods for holiday-based retail sales. This type of seasonal business is driven by holidays or events that greatly influence consumer spending. Christmas is by far the largest holiday that creates seasonal shopping. In fact, Christmas has become so huge that a study of retail sales reported in the Economist showed that sales rise by 15 percent above normal months in December and drop 30 percent below normal in January each year. Other examples of event- or holiday-based seasonal periods include Halloween, Mother's Day, graduation, and back-to-school. These events are held at the same time each year, which makes it easy for a businessperson to establish an annual schedule.

One example that illustrates how event- or holiday-based seasonal business works is the candy industry. According to Chain Drug Review, "at mass retail stores … the bulk of sales [are] occurring around four holidays: Valentine's Day, Easter, Halloween, and Christmas." In the same article, the National Confectioners Association reports that it found that candy sales doubled during those four periods in 1997, illustrating how important those brief periods are to a candy manufacturer. Retail stores also take advantage of the seasonal increases in candy sales by targeting advertising toward holiday shoppers and presenting special displays of candy. Candy manufacturers have learned to take advantage of the holiday as much as retailers have. After offering nothing but the same colors of plain M&M candies for years, M&M/Mars Inc. now produces a number of holiday-themed candies, such as red and green for Christmas and pastel for Easter. Other candy manufacturers have followed suit and now offer candy with theme designs.

Outside the candy industry, those same four holidays are the biggest holidays or events in almost every other retail sector. Exceptions include the greeting card industry, which also sees huge sales on Mother's Day and Sweetest Day, and the office supply industry, which is responsible for meeting back-to-school needs.

Preparing for a seasonal event often begins months in advance of the event itself. For example, Discount Store News reports that "superstores … in the past few years have steadily become more aggressive in their pursuit of the Back-to-School seasonal business. Almost as soon as school lets out for the summer, the superstores begin setting up merchandise displays in advance of television commercials touting superstores as destinations for Back-to-School shopping." Another example of this phenomenon is Christmas sales, which seem to start earlier and earlier with each passing year as stores try to expand the selling season and turn a greater profit. In the past, Christmas sales traditionally started on Thanksgiving weekend. Now, in most stores, the day the Halloween decorations come down, the Christmas decorations go up.

NON-ANNUAL EVENTS

The most extreme examples of holiday or event-based seasonal businesses are those involving a once-in-a-lifetime "season," or one that is almost equally rare. An extreme example of this could be a type of solar eclipse that might be visible only from one-third of the Earth's surface and that will not occur again for 120 years. Tourism-related businesses in those regions where the eclipse was most visible could expect a large boost in bookings over a normal year, even if that boost might only last a single day (or several days at the most).

Just as sometimes happens in true seasonal businesses, events of this type can sometimes be ruined by actions that are out of the business owner's hands. Some insurance companies even offer a policy to businesses that protects them from unexpected losses if the unique event does not occur as planned. In the case of the eclipse, for example, if the day of the big event turns out to be overcast and rainy in the viewing area, then the expected increase in tourists that was hoped for on that day will never materialize. Money spent on advertising or increased inventory for that day could be recouped under the terms of the special insurance policy.

Perhaps the largest single "unique event" type of seasonal opportunity in history presented itself at the end of 1999, as businesses around the world prepared for the New Year's Eve that would signal the start of a new century (although the twenty-first century technically started on January 1, 2001, people generally celebrated the event as the calendar rolled to 2000). In addition to all of the worldwide panic over the Y2K computer bug, which created an almost "seasonal" event of staggering proportions for the computer industry, there was additional fallout from that one-time event in many business sectors. In the hospitality profession, for example, the initial reaction of hotels and restaurants was to charge exorbitant prices for special room and meal packages that evening. The thinking was that because the event was so unique, people would pay anything to experience it. In fact, just the opposite turned out to be true. Most people, worried about the computer problem and put off by the high prices, chose to stay home that night. Hotels, restaurants, and other businesses were left scrambling, desperate to drum up any amount of business at the last minute; many were forced to offer refunds to customers who purchased their packages early in the process.

FURTHER READING:

"Avoiding Seasonal Glitches." Inc. June 1996.

"Candy: Seasonal Tie-Ins Critical for Sales." Chain Drug Review. March 2, 1998.

Carlstrom, Charles T., and Timothy S. Fuerst. "Interest Rates for Seasonal and Business Cycles." Economic Commentary. July 1996.

Carpenter, Robert E., and Daniel Levy. "Seasonal Cycles, Business Cycles, and the Comovement of Inventory Investment and Output." Journal of Money, Credit & Banking. August 1998.

Gilbert, Sarah. "Managers Learn to Weather Ups and Downs of Seasonal Business." Knight-Ridder/Tribune Business News. November 15, 1999.

Krummert, Bob. "Peak Seasons Grow Longer at Resorts." ID: The Voice of Food Service Distribution. April 1998.

Maynard, Roberta. "At Season's End, the Real Work Begins." Nation's Business. October 1995.

Sapers, Jonathan. "In Season." Entrepreneur. September 1997.

"Stationery Offerings Find Little Room for Growth." Discount Store News. August 9, 1999.

"Summertime Arrives Early for U.S. Box Office." Screen Digest. August 1999.

"Tis the Season." The Economist (U.S.). December 14, 1996.

Waldrop, Judith. "The Seasons of Business." American Demographics. May 1992.

Wilson, Richenda. "Time Machines: The Conference and Exhibition Sector Is a Seasonal Business and as 2000 Nears, Many Event Organizers Are Feeling Anxious. Will the Turn of the Millennium Be a Help or a Hindrance?" Marketing Week. December 2, 1999.



User Contributions:

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Howard Fox
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Aug 27, 2006 @ 6:18 pm
Interesting article. Was looking for Tax Preparation as well, since that is a great seasonal business. Another slant on the article might have been which businesses are suited to take the summer off or a good portion of the year, and yet still make a reasonable profit.

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