3 Keys to Selling a Seasonal Business
By Andy Kocemba
"Make hay while the sun shines." For seasonal business owners, this saying becomes a way of life. If you own and operate a seasonal business, you know there are challenges but, you have likely become comfortable with the annual rhythm, which includes preparing for your busy season. You should use the same preparation to get your business ready to sell.
Whether you are considering selling your seasonal business in the next few years, or a future sale is further down the road, there are three keys to a successful sale you can begin preparing for today.
“Make hay while the sun shines."
- Timing Will Impact Price and Terms: You know your business has a busy season and a quiet season -- one where you make money, and one where you don’t. Imagine a buyer taking over your business at the beginning of the busy season. They will have money coming in the door right away to cash flow the business and make any payments to you. They will also be able to afford to make a more substantial down payment because they know money will come in soon. The opposite of this scenario is that a buyer takes over during the slow season. Little to no cash will be coming in, so payments to you will be smaller or on hold, and the initial down payment may be smaller so they can retain cash to float the business until they reach the next busy season. Don’t forget, all these cash flow issues can ultimately increase or decrease the total price being offered for the business.
- Your Transition May Last Longer Than Usual: Every business that sells has some sort of transition period negotiated into the agreement. In some transactions, the buyer can be comfortable and the seller can be on their way in a matter of weeks. In other transactions, it can take months for a seller to fully hand off information and contacts to the new owner. In a seasonal business, the best hand off and training for the new owner will occur when the business is operating. This means that if you sell during the slow season, you can bet you will need to make yourself available for transition guidance during the busy season, no matter how many months after closing that may be.
- This Might Take a While: Because of the factors mentioned above, you will be looking for a very specific buyer. This buyer may need more cash than would ordinarily be necessary to use as working capital while weathering the first couple years running a seasonal business. As a result, the buyer might be a person with another part time job or another seasonal business that can supplement the transition. Additionally, you might get the best deal from a person who already has a comfort level with businesses that rise and fall on a seasonal basis. Bottom line, the more specific traits you will be looking for in a buyer, the longer it may take to find the best buyer for your business.