BUYING A SMALL BUSINESS

Pro Flora Earnings

Business for sale: A Florida-based floral wholesaler priced at $2.2 million.
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This company buys flowers from about 30 domestic growers and from suppliers in Holland, Israel, and Latin America. It then sells them wholesale to more than 200 retail customers. The company's drivers make deliveries by refrigerated trucks along seven routes five days a week. Hydrangeas are especially popular right now, and thanks to aggressive importing, the company is able to keep them in stock year round.

Forty percent of inventory is sold prior to delivery, and 58 percent is sold directly from the backs of trucks to florists who climb onboard to see what looks good. The remaining 2 percent wilts. The business is somewhat seasonal, with quiet summers and spikes in demand around Valentine's Day, Easter, and Mother's Day.

Having the right product mix is key. "When we got into the business 22 years ago, if we carried 30 items on our truck--that was expected," the owner says. "Today, we have to have 75 or 80 different items, otherwise the florists come on the truck and say, 'Wow, you're out of flowers."

The company employs 22 people, and the owner says most if not all of them will stick around after a sale. As part of the deal, he will provide 90 days of transitional assistance. Depending on timing, he may also help out when the first big holiday rolls around.

Price: $2.2 million, including equipment valued at $508,000. The business is prequalified for a 10-year SBA loan to finance 80 percent of the price. If discretionary cash flow stays constant, a buyer should be able to cover monthly payments of $24,000. The current owner will sell or lease a warehouse separately.

Price rationale: One rule of thumb for valuing wholesalers of any kind is to divide revenue in half and then add inventory. Here, half of revenue is $2 million and the value of inventory is currently $23,000. Using this admittedly broad guideline, the price appears to be in the range of fair to slightly high.

Pros: The company's drivers double as salespeople, cultivating good relationships with the retailers they visit each week. They can provide you with stable sales. At the same time, this company's growth prospects are good, thanks to the fact that it is located in one of the country's fastest-growing regions.

Cons: Wholesalers across all industries have been buffeted as their suppliers have begun selling directly to retailers and consumers via the Web. Even so, this company's numbers have held fairly steady. The seller attributes flat sales in 2006 to his growing interest in the real estate business, which is why he's selling.

Outlook: This company is well established in a growing geographic market and has remained consistently profitable. To keep it that way, a new owner's top priority should be romancing key employees, including the purchasing and sales managers, and those drivers. May we suggest you start with a dozen roses?

Gross
Revenue
EBITDA* Net Income as a % of sales
2004 $3.6 million $405,000 11.25%
2005 $4.1 million $514,000 12.5%
2006 $4.1 million $478,000 11.65%

*Earnings before interest, taxes, depreciation, and amortization.

Inc. has no stake in the sale of the business featured. The magazine does not certify the accuracy of financial or other information provided by the seller. Inquiries should be directed to David Schlegel of VR Business Brokers (904-726-1670 or vrbusinessbroker@bellsouth
.net
). Inc. also publishes paid business listings in the back of the magazine.

Last updated: May 1, 2007




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