Seasonal businesses are tasked with an unusual feat: make one season's revenues enough to sustain the business for an entire year. Some businesses have the advantage of being able to close in the off-season, while others remain open all year. Some businesses have cycles which coincide with actual seasons while others are heavily dependent on particular seasonal occasions such as tax deadlines, weddings or graduation. Let's examine some popular businesses that thrive during the summer and the challenges they face when the seasons change.
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Ice Cream and Summer Treats
During the summer, people are always looking for ways to beat the heat. As a result, ice cream shops see a nice bump in business. Rita's Italian Ice is an ice cream franchise which ranked #121 on Entrepreneur.com's 2013 Franchise 500 Rankings. Ice cream businesses are often risky because winter months tend to be slower; therefore, warm locations or seasonal hours are an integral part of the business model to find the recipe for success.
Generally, most locations in colder climates are only open the months of March through September, but there are also several locations and businesses like Rita's, which are open year-round. However, most of them are located in states where the weather is warm all year. According to the company website, Rita's is the top Italian Ice franchise in the United States.
Once school lets out, the rush is on for families to take vacations and for parents to find ways to occupy their kids. Most theme parks are open between late spring and early fall to accommodate the rush. Six Flags is the world's largest theme park company, with 21 parks across North America and one destination in Dubai.
Some locations are able to stay open year-round because of their moderate to warm weather locations, but others such as The Great Escape & Splashwater Kingdom in New York are only open in the summer months. (We break down some of the U.S.'s most popular amusement parks to find out which one provides the best value.)
In recent years, Six Flags hit hard times, but the company reemerged from Chapter 11 restructuring in May 2010. As an example of the seasonal nature of the business, in the last 3-month period of October 2009 through January of 2010, revenue amounted to $102 million while in July through September of the same year it was $457 million.
Aside from the major holidays, summer marks the peak season for travel, and hence tourism. Destination-based tour guides stay in one location and let the tourists come to them. Many offer tours on foot or by way of bus and even boat.
One such boat line, the Maid of the Mist, has been granting tourists an up-close and personal view of Niagara Falls since 1846. For less than $15 per person, passengers can depart from either side (American or Canadian) of Niagara Falls and ride into the water at the base of the falls. Depending upon the weather, the fleet operates from April to October.
As with the aforementioned businesses, tour guide companies must generate enough cash flows during their time of operation to justify their operations. (If flying to an exotic locale isn't in the cards this year, check out these cheaper vacation alternatives.)
Depending on what region the business is located in, the revenues for landscaping firms may dry up with the shrubbery.
Lawn Doctor, the largest "automated lawn care franchise" in the United States, boasts an average annual gross profit margin of 68% for locations that have been open for at least two years. Even though summer is the season most often associated with yard maintenance, the company provides services year round. Their website provides "Lawn Care Tips By Season" and their services include assessments and periodic visits to maintain each customer's yard, thus providing potential for a revenue stream beyond summer's end.
Seasonal Business Challenges
The bills don't stop - while it is true that many costs will decrease when the business is not operating, some large obligations will remain constant. For example, any business with leased space will be responsible for paying the bank every month regardless of the season. Other constant bills which may apply include insurance, utilities and security costs.
For businesses with weather sensitive equipment, arrangements must be made to protect valuables. Finding storage or weatherizing equipment and locations for the off-season can also produce new costs.
Each year the business is responsible for reaching out to old employees and/or recruiting new ones. Hiring takes time, money and other resources since prospective employees have to be interviewed, screened and trained before the business opens.
Unlike business that remain open all year long, seasonal businesses must survive each year on the cash flow generated over the course of a few months. While the business is open, it is important to maximize profits as they will be needed to cover any costs that linger year round.
The Bottom Line
Even though summer sales may cease after a certain date, the responsibilities of a seasonal business owner will continue throughout the year. Maintaining a watchful eye over cash management, equipment and personnel all year long can improve the chances of a seasonal business making it successfully from one season to the next.
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