Seasonal Profitability Analysis: Which Products Peak When
A handmade candle maker looked at her annual profit and thought business was stable at ~$1,000/month. Then she analyzed by quarter. Q4 (holiday season) was $4,200. Q1 was $600. Q2 was $450. Q3 was $350. Same business, but the story was completely different—and it changed how she managed production, inventory, and pricing. This article teaches you to see the seasonal patterns in your profit.
Why Track Profitability by Season?
- Cash flow planning: Q4 windfall allows you to invest in Q1-Q3 operations.
- Inventory management: Some products need heavy stock in peak season, minimal in off-season.
- Capacity planning: Know when to invest in help vs. when to streamline.
- Pricing strategy: Peak season items command premium pricing; off-season items need aggressive discounting.
How to Analyze Your Seasonal Profitability
Use the same 3-column profit analysis framework, but with a time-based lens.
Step 1: Organize Data by Quarter (or Month)
Create four separate profit calculations—one for Q1, Q2, Q3, Q4. For each quarter, calculate total profit by product.
Q4 (Oct-Dec):
Holiday Candles: $2,800
Gift Sets: $900
Everyday Candles: $500
Q4 Total: $4,200
Q1 (Jan-Mar):
Holiday Candles: $100
Gift Sets: $200
Everyday Candles: $300
Q1 Total: $600
Step 2: Calculate Seasonal Index
Divide each quarter's profit by the annual average to see which quarters outperform/underperform.
Seasonal index:
Q1: $600 ÷ $1,400 = 0.43 (43% of average - weak)
Q2: $450 ÷ $1,400 = 0.32 (32% of average - weakest)
Q3: $350 ÷ $1,400 = 0.25 (25% of average - weakest)
Q4: $4,200 ÷ $1,400 = 3.0 (300% of average - peak)
Step 3: Identify Which Products Drive Each Season
Not all products are seasonal the same way. In the candle example, holiday candles are 67% of Q4 profit but only 17% of Q1 profit.
| Product | Q1 | Q2 | Q3 | Q4 |
| Holiday | $100 | $80 | $70 | $2,800 |
| Everyday | $300 | $250 | $200 | $500 |
Real Case: Jewelry Maker's Seasonal Surprise
A jewelry maker discovered unexpected seasonality:
Q1 (New Year's Resolutions)
Expectation: Q1 would be weak after holiday spending.
Reality: Her "self-love" jewelry line (rings, bracelets for yourself) spiked 40%. People buying gifts for themselves as New Year gifts.
Profit: $1,200 (higher than she expected)
Q2 (Spring/Easter)
Expectation: Weak quarter.
Reality: Easter gifts and spring weddings boosted sales 30%. Bridesmaids gifts were particularly strong.
Profit: $800 (better than expected)
Q3 (Summer Slump)
Reality: Weakest quarter. People on vacation, less spending on jewelry.
Profit: $420 (50% below average)
Q4 (Holiday Peak)
Reality: As expected, 2.5× annual average. Engagement ring gifts spiked in December.
Profit: $3,500 (holiday season strength confirmed)
Her strategy changes:
- • Q1: Stock heavy on self-love designs, run January sale focused on these.
- • Q2: Create bridesmaid and Easter collections. Invest in marketing these.
- • Q3: Run deep discounts (35-40%) to clear slow-moving inventory and generate cash for Q4 investment.
- • Q4: Prepare inventory heavily. Push engagement ring designs. Premium pricing (no discounts).
Seasonal Pricing Strategy Based on Profitability
Once you know your seasonal patterns, adjust pricing strategically:
High Season (150%+ of average): Premium Pricing
Raise prices 15-25%. Demand is high, so price elasticity works in your favor. You can capture more profit without losing volume.
Example: Holiday candles usually $45 → Raise to $54 during Q4. Customers expect premium pricing for holidays. Profit jumps 20%.
Average Season (80-120% of average): Maintain Pricing
Keep prices stable. Demand is healthy but not stretched. Focus on consistency and customer satisfaction.
Low Season (<80% of average): Aggressive Discounting
Deep discounts (25-35%) during weak periods to move inventory, generate cash, and keep production flowing. Better to sell at lower margin than not at all.
Example: Candles normally $45 → $28 in Q3 summer slump to drive clearance sales.
Use Seasonal Data for Capacity Planning
Seasonal profitability reveals when you need help and when you can streamline:
Peak Season (Q4 Holiday Rush)
If Q4 profit is 3× your annual average, you need peak season support. Hire temporary help, upgrade equipment, or start production earlier in the year.
Example: Candle maker starts holiday candle production in August (3 months early) to distribute production load.
Off-Season (Q3 Summer Slump)
Use slow quarters for product optimization, equipment maintenance, skill development, or content creation (photography, writing). Don't waste off-season capacity—reinvest it in business improvement.
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