You've always liked
flowers and you think the idea of turning emotions into floral expressions
sounds like tremendous fun. You are between careers and have been
investigating business opportunities in your community. Yesterday, while
perusing the real estate magazine in your county, you notice that the
family owned, downtown flower shop is for sale. The ad says it's a turnkey
operation. This is your lucky day. Or is it?
Let's look before we leap, OK? Here are some factors to consider:
What is the current state of health of this business?
You should be able to see the financial records and consult professional
help if needed.
What is the reputation of this business in the community?
If there are negative feelings about the business in the community, you
need to consider a name change and making a big show of the change in
management. Factor in the cost of a face-lift on the façade of the
physical facility.
What assets are included in the selling price?
If you are buying the building, equipment, coolers and inventory, you need
to carefully assess the age, condition and viability of these items. For
example, there may be $10,000 worth of inventory in the store, and the
seller may be able to document the value by showing invoices. However, if
the inventory is shop worn, out of date or not in keeping with your
business plan, the value of that inventory to you may be quite a bit lower
than that $10,000.
Are you also buying the Accounts Receivables as an asset? If so, you
should do some serious research into the exact state of these accounts.
Many traditional florists have struggled with house accounts. They have
extended credit as a matter of tradition, rather than good business sense
and have found themselves in extreme cash flow trouble.
What liabilities are you buying?
You'll need to be very clear about any debt or bills you will be taking
over. Be sure that you hire professional help to outline any such debt in
your sales agreement. Because of seasonality of the flower business and
the existence of house accounts, many retail florists have difficulty with
cash flow; you should avoid any situation where you will be paying bills
run up by the previous owner.
Also, you should take time to consult with the Wholesalers that you will
be buying from. Discuss your payment terms and lay the groundwork for a
healthy business relationship with a reputable Wholesaler or two.
What about the business name?
If the name of the business is valuable in your market, you probably won't
want to change the name of the business. In any case, consider a clause in
the bill of sale limiting the use of the name by the previous owner in the
future. This can be very sticky in the case of an owner's own name, for
example "Smith Florist".
Will you need to hire all new staff?
Sometimes a previous owner chooses to stay on and work for the new owner.
This can pose tremendous difficulties for all involved, so tread lightly
on this territory. It's an extreme analogy, but think about the
difficulties in open adoptions between birth and adoptive parents.
Everyone has their own style and it can be difficult to accept change or
let go of something you have worked very hard to build.
That being said, many valued staff members at successful florists have
weathered the change in ownership of their place of employment. Do make
every effort to retain good people. Just be sure to be clear about your
expectations so that the separation can be as painless as possible should
that become necessary.
What is the correct timing?
Take the holidays into account when you plan your purchase of a flower
shop. Valentine's day is the single largest day, but Christmas is more of
a marathon. Mother's Day, weddings, proms, graduations and anniversaries
team up to make the spring months a nice busy time. Depending upon your
market, the summer can be a difficult time to make ends meet.
Ideally, you'd take over a shop with enough time to get your feet wet
before a holiday, but not with so much down time that your funds dry up
before you can get going.
What other opportunities exist, and at what cost?
Here's the acid test. Take the time to sort out the options. Let's work on
the assumption that you WILL own a flower shop in the next year. Take a
big sheet of paper and draw a line down the center. At the top of the left
column, write "Buy and Existing Flower Shop". In the Right column, write
"Open a New Flower Shop". Now draw a line through the middle of the paper,
so you have a top and bottom. The top is for pros and the bottom is for
cons. Fill in the grid with as many items as you can figure. Ask your
trusted business friends and floral professionals for help. You'll be
considering such items as the finances and the marketing plan of your
business. When you have completed this exercise, you should have two
things. One is a good tool to help you make a decision. The second is the
beginnings of a business plan.
Whatever your decision, a business plan is essential. It is your roadmap
for success and will be necessary for a business loan. It is worth the
extra time at the onset of this journey to compare the options and make
the best decision you can.
