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Hello from Martha’s Vineyard! That’s my father in law Kirk. He’s run a wood flooring business for 40 years without an email, so he won’t see this.

Seasonality Quirks and Features

Welcome to mid August, the proverbial Mad Max Fury Road wasteland of deal making.

If you live in the US, employees are trying to duck out of the office for a long weekend before annual planning season kicks off… followed by an expensive and emotionally draining conference season… and capped off with a violently back-end-loaded Q4 sales crunch.

nervous about that board forecast you submitted in a bout of Q1 optimism?

Which made me think of seasonality.

But first, a quick detour. So I watch a lot of car walkthroughs and reviews on YouTube. One of my favorite car influencers is Doug DeMuro.

Doug cranks the nerd volume up to 11. He wears ill fitting tee shirts with another ill fitting tee shirt underneath. He makes CFOs look like GQ models

Amongst his audience (which is in the tens of millions) there's an inside joke when it comes to a car's "quirks and features." These are the characteristics of the vehicle that are unique and odd. Things like hidden fuel door releases, detaching exhaust tips, tiny gloveboxes, or weird cup holders. Doug leaves no stone (or rear view mirror) unturned.

take it easy man, it’s August! we on vacation!!

In many ways I think it's the finance team's job to uncover the quirks and features of its customers. This allows you to get more in the way of the money when they're ready to transact.

Wait… the finance team? Isn't that the sales team's job?

Kinda. They have the most customer conversations, and they're usually the ones who stumble onto the seasonality and the discretionary budget dumps in the first place. But it’s your job to aim these highly paid and powerful weapons in the direction of the money. Plus, understanding when your customer buys makes you so much better at forecasting

So let’s talk seasonality.

Industry specific seasonality

SLED runs on the school calendar as much as the fiscal calendar.

State, Local, and Education buyers tend to get active in Q2.
Summer is coming (Ned Stark voice), which means schools can finally deploy systems without disrupting classrooms.
And many government and education budgets close on June 30, creating a second deadline: spend the money before the fiscal year ends.
The urge to buy and the window to actually implement land inside the same chaotic eight weeks.
If you’re selling into education, missing June can mean missing the year.

Federal runs on September 30, and it’s a big, slow-moving prize.

The federal fiscal year ends September 30, which creates a mad dash to obligate whatever budget remains before the clock runs out.
The last few weeks of September can be a feeding frenzy.
There’s a quirk on the other side of the calendar, too.
If Congress starts the new fiscal year under a continuing resolution, agencies generally operate around the prior year’s funding levels and face restrictions around kicking off certain new initiatives.
So Federal can go from a September spending sprint to an October holding pattern almost overnight.

If you sell into accounting firms, you’re dealing with two calendars at once.

The Big Four don’t all operate on December 31 fiscal years.
PwC and EY close June 30, Deloitte’s fiscal year ends in May, and KPMG closes September 30.
But the more important calendar might be tax and audit season.
From January through April, accounting firms are serving their own customers, which means your buyer may effectively disappear.
They resurface in late spring, right as several firms are approaching fiscal year-end and beginning to think about the next budget.
Sometimes the best sales window isn’t determined by your customer’s fiscal year… It’s determined by their customers’ fiscal year.

Retail runs on a 52/53-week calendar, with many retailers closing their fiscal year in late January or early February.

The calendar is designed to get the entire holiday season, and the returns that follow it, into Q4 before the books close.
Budgets reset around the new fiscal year, making late winter and spring an important window to sell and deploy.
Then the doors start closing…
By fall, many retailers are entering some version of a holiday code freeze.
Nobody wants your shiny new software release taking down checkout on Black Friday.
From Thanksgiving through the first week of January, the mandate is pretty simple: Don’t touch anything that could break the cash register.

Agriculture gets paid when the crop gets sold.

For many farms and agricultural businesses, cash flow is inherently seasonal.
Harvest turns inventory into cash, which can make the period after harvest an important purchasing window for equipment, technology, and other investments.
Then December adds another incentive.
Section 179 and other accelerated depreciation rules can make buying qualifying equipment before year-end especially attractive for businesses looking to reduce taxable income (puts on John Deere trucker hat).
Sometimes seasonality is really about when the customer actually has the cash money.
Also, accounting, for the win!

Healthcare has its own version of “use it or lose it.”

Many hospitals and health systems operate on annual capital budgets, which can create a year-end push to commit remaining dollars.
But getting the budget is only half the battle.
Deployments have to work around clinical operations.
And elective procedures often pick up late in the year as patients hit their insurance deductibles (knee replacements are cheaper on Nov 1 than Jan 1)
That can make procurement around that time of year easier, but implementation slower

Higher education runs on two calendars at once.

Many colleges and universities close their fiscal years on June 30, creating a natural deadline for budgets and purchasing.
But their operating calendar is dictated by students.
If you’re replacing a CRM, student information system, payments platform, or anything else that touches campus operations, summer is often the cleanest implementation window.
Which means the buying decision has to happen months earlier.

Insurance has a January 1 no fly zone.

A huge amount of commercial insurance and employee benefits business renews around January 1.
That means brokers, carriers, and benefits teams can spend much of Q4 buried in renewals.
It’s not necessarily that they don’t have budget for your software… they just don’t have time for you.
Then January hits, renewals get behind them, and everyone starts coming up for air.
Your customer’s busiest quarter can be your worst selling quarter, even if it’s when they have the most money.

A Word on Q4 budget flushes…

If you sell into marketing teams they often have a use it or lose it proposition where their budgets don't roll over to the next year.

You can be that mistake!

Joking aside…

If you think about the timing of your customer's deal cycles (i.e., do they sell to the midmarket or enterprise? are deal cycles typically 6 or more months?) they may need to begin spending in Q3 and Q4 in order to hit their Q1 pipeline goals to get out of the gates hot.
But also, worth cutting net revenue retention forecasts by a hair…
Budget flushes are typically not spent on existential must haves (vitamins vs painkillers).
Take the money and run this year, but be careful around renewal rate next year.

Quirks that have nothing to do with the calendar

Signature thresholds: Every customer has a dollar figure above which the deal goes to procurement, or up to the CFO, or out to a competitive bid.

Pre-approved vendor lists: Government agencies and school districts mostly can't buy from you directly. They buy off contracts that somebody else already competed and awarded, and if your company isn't on one of those lists the deal doesn't happen regardless of how badly the buyer wants it. Getting listed is its own project (a lengthy one), and finance has to fund it out of a budget ahead of time.

Capex versus opex: Plenty of customers are sitting on a funded capital project right next to a frozen operating budget. The same dollars can be structured as implementation rather than subscription if you’re creative.

Board calendars: School boards vote in public on a published schedule, and anything over the threshold waits for the meeting (I’ve yet to attend one but I hear they get contentious)

Enjoy the time off this summer (unless you’re selling into SLED or FED… in that case, back to the coal mines!!!)

HAGS!

Find Your Right Hand Person

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The person you need is reading this newsletter.

Get in touch with my recruiting arm here.

Run the Numbers

Apple | Spotify | YouTube

In this episode of Run the Numbers, I sit down with Seun Sodipo, CFO of Plaid, to unpack network effects at the heart of great fintech businesses and AI adoption within finance teams. We cover: