The REAL problem with Seasonal Business — Product-Market Fit
My current startup is focussed on helping parents make it easier to manage kids’ activities. Kids’ activities see a big spike in Summer season with 8 weeks of camps/classes to be booked, and then another spike before school starts. I was warned by many about the dangers of running a seasonal business. The main risk was the infrequent usage of the app. This makes it hard for the users to actually remember it when they are actually looking for kids’ activities. Spiky revenue in the long term was the other challenge.
I thought hard about it and started to look for examples of businesses that are seasonal and successful. I could think of examples of businesses that were seasonal to varying degrees. Turbotax for tax filing was the most obvious one. Almost all transactions of Turbotax are bunched around the tax filing deadline. I argued that once you acquire a user population during summers you can continue to engage them through other related services through the year. After all, while kids activity booking is spiky and seasonal, the activity participation and overall development are done year round. So there, in principle, were many strategies to convert a seeming seasonal business to be a year round business.
But the real problem doesn’t lie in managing seasonality once you have an established business. The real problem of seasonality for a startup is that your product market fit cycle gets extended over several years instead of say 12 months. As a consumer start up you have to account for ~6 iterations to get the product-market fit and let’s assume each iteration is 2 months. So you need 12 months of elapsed time to get to product-market fit. Now, if your product can be tested only for 2 months in a year, 6 iterations can take 6 years! I understood this with clarity only after trying it.
So my advice to budding entrepreneurs is that if your product has seasonal demand, figure out a way to get more iterations out in a short elapsed time to get to product-market fit.
This was originally posted on LinkedIn, in May 2016