California Flower Shop
The Business A 50-year-old flower and gift shop located in the San Francisco Bay area. As florists go, this is a pretty big one: the average flower shop has yearly sales of less than $300,000. About 80% of this store's retail sales are flora -- mostly fresh-cut flowers, floral arrangements, and potted plants -- but the shop also does serious business in high-end gift items (such as Hummel and Lladro figurines and Dresden crystal). Five wire services, including FTD, account for 10% to 12% of flower orders. The owners -- a surgeon and his wife who have operated the business at a loss to offset tax liability -- are selling so they can retire.
Financial Summary 1991 1992 1993
Gross revenues $1,175,000 $1,137,000 $1,062,000
Recast earnings before $70,000 $70,000 $60,000
depreciation, interest, taxes,
and owner compensation
Price $350,000 (not including real estate)
Outlook Flowers and plants are truly a growth industry. (You knew that was coming.) The U.S. market has bloomed to almost double its early 1980s value, reaching $11.4 billion in 1993. But it's not all roses for the traditional retail florist, whose sales have grown by only 12% in that time, as flower sections have popped up in supermarkets and as toll-free phone-order services and catalog marketers have thrived. At this store, price competition is intense, with at least two significant competitors of roughly the same size nearby. Customers love the cutesy knickknacks, though: nationwide, gross retail gift sales have more than quadrupled since 1981, and while gift shops average about $100,000 in annual sales, this place does more than twice that.
Price Rationale Flower shops tend to sell for around 40% of gross sales (that would be $425,000 here) or two times earnings ($120,000). Overall, this shop's costs are high: payroll, at 32% of sales, should be closer to 25%. And the cost of goods sold, which ought to be about 36% overall, is 41% of sales. An average of the figures yielded by the sales and earnings approaches results in what insiders consider a likely price of $273,000. But given its healthy sales, the shop could approach the asking price, depending on how adjustable expenses are.
Pros Sales are strong. Find ways to prune overhead and you could have a flourishing business here. And just think: you'd get to play amateur psychologist, suggesting a conciliatory bouquet for that errant husband or proposing the perfect arrangement for some love-struck suitor.
Cons The potting soil will always be richer than you are: perishable flora keep net margins as skinny as 3%. And the highly allergic need not apply -- we're talking pollen central here. -- Christopher Caggiano
Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Business Team at 510-837-3325.