How do I assess a seasonal business?

Seasonality is not a defect and plenty of excellent businesses have it. It changes two things though — how you read the financial statements, and how much cash you need on day one — and both are easy to get wrong from an annual summary.

Monthly, for at least two years

A single year of monthly figures shows the shape; two years show whether the shape is reliable. Ask for revenue, gross margin and operating cash by month. What you are looking for is how many months carry the year, how deep the trough runs, and whether last year’s pattern matches the year before it.

The closing date is a cash decision

Buying a garden centre in September and buying it in March are different transactions at the same price. Post-peak, you inherit the quiet months and fund payroll, rent and inventory build from your own resources until the season turns. Pre-peak, the business starts paying you almost immediately. If the timing is not negotiable, the working capital requirement has to reflect it.

Working capital needs sizing to the trough, not the average

Average monthly expenses are the wrong basis. Size the cash reserve against the deepest consecutive run of negative months in the historical data, then add the inventory build that precedes the season. Lenders assessing a seasonal business apply the same logic, and a financing package built on annual averages will be short.

Test whether the season was the season

Weather-dependent businesses have good and bad years for reasons nobody controls. A single strong year may be a strong year rather than a trend. Where the data allows it, compare against the prior cycle and ask directly what a poor season looks like — the answer belongs in your model, not in your optimism.