We're getting ready to list our outdoor gear shop and the numbers are a mess. Q4 is huge for us, but the rest of the year is much softer. Every broker we talk to wants to apply a multiple to trailing twelve months, but that just averages everything out and makes us look mediocre. Meanwhile, a competitor with flatter sales but similar annual revenue is getting a higher multiple. Has anyone dealt with this? How do you present seasonal spikes without looking like you're cherry-picking?
Valuation
How seasonal sales spikes throw off e-commerce valuation math
We sold a ski apparel brand two years ago. Same problem, opposite season. What worked for us was presenting three full years of monthly data and letting buyers see the pattern themselves. Trying to normalize it into a smooth line actually made buyers suspicious.
The TTM average is standard but it doesn't mean you can't adjust. If you can show a multi-year history of the same spike, it's not an anomaly, it's the business model. Buyers discount what they don't understand though, so clarity matters more than clever math
Are you working with an M&A advisor or trying to sell it yourself? That makes a big difference in how the numbers get framed.
Self-listing at the moment, but we've had two advisors quote us fees that ate most of the upside. Might rethink that. The monthly data point is helpful, thanks. We do have four years of history with the same Q4 pattern.
Four years of consistent seasonality is actually a selling point, not a problem. The issue is that most buyers run a simple model and seasonal businesses break the model. If you're self-listing, build a simple chart showing monthly revenue for each year overlaid. Let them see the pattern instead of arguing about the multiple.
Also watch your working capital. Q4 spike means inventory build in Q3, which eats cash right when you're trying to look healthy on paper. Buyers will ask about that.
The working capital point is a good one. We got dinged on that during diligence. Had to explain why our cash position looked thin in September every year.
Why not just sell in January? Then your TTM includes the full Q4 you just finished.