Seasonal variation can be an inexact science. The time of day, month, and even year can create vast differences in business performance. And now with the advances in real time data bringing this type of information at our fingertips, understanding timing matters more than ever. By understanding a business’s seasonality you can yield greater success in the future.

For the purpose of this exercise, seasonal variation can be thought of as a sort of “month-to-month” tracker of statistics.

Businesses often face seasonal variations, and when assessing business performance it can be hard to distinguish what is a “seasonal variant” from month on month, vs when a business is clearly underperforming.

For instance, an ice cream parlour during summer will often do better than during winter. Where the data will become applicable is comparing with the month on month growth of the ice cream parlour for the year, or during different parts of the day. In the world of tech, this may be considered the same as an e-commerce site selling activewear (like Stylerunner) having greater sales of certain products in summer than in winter. This timing may even extend to different parts of the day, depending on the buyer personas that form the customer base.

The regular and predictable changes are of less interest to business owners and accountants than where products would be underperforming. It is integral for organisations to understand and measure seasonal variations within their market so they may best prepare for the future.

Using simple averages, analytical tools such as seasonal plots can allow you to understand how much seasonal variation the business is experiencing. Seasonal factor, which is the sum of these averages, is found by taking the aggregate economic performance of an industry and plotting it year on year. On a long enough timeline, the business will return to the same point it was at a period of time ago (adjusted for inflation and industry growth). This period is known as the business cycle.

Once the business cycle is established, businesses can optimise their workflow for periods where business is expected to be slow. For example, an I.T. company will create 3-6 month contracts at certain times of the year such as Q2 and Q3, in anticipation of greater business traffic. These contracts will either wind-down or conclude during the quieter periods.

Almost all businesses will go through slower periods throughout the year. Finding ways to use this time effectively can make or break a business. With the business cycle established, lull periods can be anticipated and utilised for preparation time. Preparation can mean anything from building renovations to expanding your operations.

If the business cannot afford to spare this preparation time, then understanding the impact that the time of year or month can have will allow you to create marketing campaigns to call upon to smooth out these rough patches. For most businesses, this means putting “sales” of products on, and offering discounts to customers to incentivise them to return during these periods. For services, they may push their name out into the market in print or digital, so as to raise awareness for their business. Many advertising campaigns are solely built on the premise of protecting businesses during quieter periods, and once they can be recognised they may be executed on.

As a business, understanding the effects of seasonality will allow you to objectively measure performance, build up a true baseline for performance and also allow for your customer base to be best serviced during the busier parts of the year.