We understand the commitment to the community florists make and the attachment they have to their business. This dedication makes it challenging (and emotional) when it comes time to sell. To help your exit strategy go well, we have put together a detailed review of how to value and sell your flower shop in a stress-free and successful manner.
About The Floral Industry
Flower shop owners (florists) play an integral role within their communities and are often at the forefront of the planning stages for the biggest events within their communities, including ceremonies, weddings, school events, and more. This leads to a highly rewarding business for successful florists, and the profit margins are excellent in many cases. There are approximately 35,600 flower shops in the United States.
How to Determine The Value of Your Flower Shop
You can determine the value of your flower shop with a professional market-based valuation from an experienced business broker. This involves analyzing your shop’s financials and comparing them to industry standards. Below are the acquisition multiples (or “rule of thumb” data) for flower shops and similar business models.
- Flower shops sold between 1.59 and 3.34 times the Seller’s Discretionary Earnings (SDE)
- Flower shops sold between 1.89 and 3.48 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Flower shops sold between 0.30 and 0.43 times the annual net sales
The Sales Process for Flower Shops
The sales process begins with a business valuation from a professional valuation and then progresses to the preparation, marketing, due diligence, and closing stages. To best explain the sales process in this review, we break it down into five stages, highlighting your role (and your broker’s role) throughout the sale journey.
The Planning Stage
You can calculate your own valuation by determining your SDE and EBITDA and applying the rule of thumb data listed above. However, a DIY valuation is not reliable and prospective buyers are not likely to find it legitimate. Professional valuation, on the other hand, is much more dependable and trusted. This is because potential buyers know that a professional broker will optimally calculate the SDE and apply the most up-to-date rule of thumb data, along with applying the correct adjustments based on factors that may not be reflected in your EBITDA or SDE numbers.
The Preparation Stage
You then need to prepare the documents for your flower shop; your broker, attorney, and CPA can also assist you with this step. Notably, you should collect your tax returns, profit and loss statements, and other financial documents prospective buyers may request. You will also need insurance and lease documents (if applicable), a list of employees, and a list of your vendors.
The Marketing Stage
Maintaining confidentiality is crucial when selling a flower shop as it can disrupt business operations and scare away potential buyers. A non-confidential sales process may result in public news of the sale, leading to the cancellation or non-renewal of existing contracts. To ensure confidentiality, it is important to work with a broker who understands the sales process and has access to private networks and databases within the industry.
In addition to maintaining confidentiality, your broker should screen offers, negotiate with potential buyers, assist with contingency planning, and finalize a deal that aligns with your exit strategy goals. This step should conclude with a signed letter of intent (LOI) from the selected buyer, ensuring that the process runs smoothly and the sales price is maximized. By working with a reputable and experienced broker, you can ensure a confidential and successful sale of your flower shop.
The Due Diligence Stage
Due diligence is a stressful time for far too many flower shop owners who are following through with their exit strategy. The good news is the process does not have to be stressful. By working with a qualified and experienced business broker, you can ensure a due diligence map is properly implemented to ensure each step goes smoothly and is completed efficiently. Specifically, due diligence usually involves a review of your financial, legal, and organizational information, a discussion about the business details (often in Q&A format), and a visit to your flower shop.
The Closing Stage
The closing stage is an exciting time for the seller (and the buyer) as it is often the end of a long process with ups and downs. However, the work is not yet finished, so it is important that your team remains focused. During closing, your attorney may review the purchase agreement and ensure all final signatures are properly attained. The buyer should also send the payment, and you (the seller) will notify employees, update business information, and provide the buyer with full access and all the information they need to take over business operations.
Speak With an Experienced Business Broker at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions help flower shop owners (and owners of similar business types) sell for fair market value. If you own a flower shop and are contemplating your exit strategy, then contact our brokerage and consultancy today to schedule a consultation and receive a free business valuation.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!