How to value a seasonal online business

A full year contains every season exactly once, so a twelve-month total is the one figure a seasonal pattern cannot bend. Any shorter window, annualised, is biased — and the direction of the bias is decided by which months you happened to pick.

This is why a monthly multiple, or a "last three months annualised" figure, is especially dangerous here. We explain the general problem in monthly vs annual multiples; for a seasonal business it stops being a rounding issue and becomes the whole valuation.

The month after a peak always looks like a collapse, and the run-up to a peak always looks like growth. Comparing a month with the one before it tells you nothing about a seasonal business. Compare each month with the same month a year earlier instead:

• This December against last December tells you whether the peak itself is growing or shrinking — which is the number that actually decides next year.
• Off-season months year on year tell you whether the floor is holding. A business whose peak is steady but whose off-season is eroding is losing the part of its year that pays the fixed costs.
• Twenty-four months, not twelve. One year of history shows you the shape once. Two show you whether the shape repeats. With only one year you are being asked to assume it will.

If the year-on-year comparison shows a real decline underneath the seasonal swing, price that separately; we cover it in what a declining online business is worth.

Two businesses with the same annual profit and the same price are not the same purchase if one hands over its peak next month and the other just finished it.

• Payback starts at the next peak, not at closing. Buy just after the season and most of the first year's profit arrives ten or eleven months later. The annual figure is unchanged; the time until the money comes back is not. See how long until a bought site pays for itself.
• Stock is bought before it is sold. A seasonal store usually builds inventory ahead of its peak. Buy in the build-up and you may be paying for that stock on top of the business — which is a reimbursement for goods, not part of the valuation. Agree in writing what is included at what figure.
• The seller has no reason to run the last peak hard. If the sale closes after the season, the seller earns it. If it closes before, you do — and you should ask what has already been spent preparing for it and whether anything has been held back.
• The peak may hang on one thing. A single marketplace promotion, a single event, or one ranking for one seasonal search term can carry the whole year. If it does, the risk is concentrated in a few weeks you cannot rehearse before you own the business.

Each sale in our database carries one stated annual profit and one stated annual revenue figure, as the listing reported them, alongside the sold price. There is no month-by-month series behind those figures, so we cannot tell which businesses in our sample were seasonal, and we publish no seasonal adjustment because we have nothing to measure one with.

What the medians below are good for is pricing a full year. If you give the calculator a genuine twelve-month figure, you are comparing like with like: an annual figure against sales priced on annual figures. If you give it an annualised peak, no comparable set will rescue the answer.

The first two columns cover every non-demo sold deal of that type with a stated profit. The price range is measured over the paid report's window — the most recent 200 priced sales of that type — on the profit basis. A dash means we hold fewer than five comparables on that basis and publish nothing.