Many attributes that underpin success when running a garden centre – preparation, hard work and organisational skills to name three – apply just as much when it comes to selling one.
Another key part of success in both is delegation – which is why it’s worth outsourcing much of the process of selling a garden centre to a lawyer and/or business broker, preferably with experience of selling similar businesses.
They can help you prepare paperwork, evaluate the business’s pros and cons, value the business, find buyers, navigate negotiations and deal with various legalities.
Preparing for sale
Think about your succession plan well in advance of selling a business – and even of making the decision to sell.
You’ll be glad of such foresight should you suddenly need to retire through ill health or another opportunity presents itself that demands a quick exit.
It’s important to ascertain your garden centre’s merits and drawbacks – the former you can highlight in your sales prospectus; the latter you can mitigate as much as is feasible within financial and time constraints.
A would-be buyer of a garden centre would look at things like:
- Turnover and profits
- Facilities – with customers often willing to spend several hours at garden centres, a café, soft play area and other complementary facilities can make your business an experiential destination as well as creating new revenue streams
- Size – even without the above value-adds, a site might offer the room to incorporate them
- Location – although a prime high street spot isn’t typically important for this sector
Your adviser can help you profile a typical garden centre buyer, which can inform how you pitch your sales prospectus.
Think of how the buyer might grow revenues and profits, perhaps drawing on long-held plans you’ve never got round to implementing.
Also put together a handbook documenting every aspect of running the business day to day, from ordering stock to watering plants and using point-of-sale systems.
Valuing a garden centre
Each business has its own idiosyncrasies, so while valuation methods are useful frameworks for reaching a ballpark valuation, a garden centre’s particular pros and cons must be factored in too.
Previous sales of similar businesses will also provide useful benchmarks.
There are four important elements to the valuation of garden centres, according to UK business broker Quinton Edwards (the fundamentals are the same in Canada):
- Value of the asset, land and buildings, with planning permissions offering scope for growth
- Turnover and profitability and potential to grow this further. A multiplying ratio, which rises in concert with evidence of potential, is applied to operating profit
- Value of concessionary income like pet food, clothing and farm shop goods
- Stock and moveable equipment – the value of which is usually finalised shortly before completion (because values typically fluctuate)
The valuer will consider whether the buyer can sustain high gross margins or whether low margins indicate that sales are inflated by too-low prices.
They will consider opportunities for growing margins through efficiencies such as lowering staff costs, marketing expenditure or maintenance costs.
Once you’ve found a buyer – perhaps through your broker, from among your employees or online– your adviser can validate that they’re serious buyers with the financial means to proceed.
Trust is the prime currency during negotiations. Erode it at your peril.
You can offer vendor financing, which means receiving a portion of the sale price in instalments. While this might help get the deal over the line, it’s vital that the buyer has what it takes to run the business successfully since receiving repayments on time depends on it.
If you offer to stay on for a period post sale, set out the precise, time-limited scope and nature of such an agreement to prevent disputes.
The buyer will want to conduct an exhaustive investigation of your business. This due diligence process may uncover skeletons that cause them to recalibrate the sale price downwards – or even walk away from the deal altogether.
So it’s best to be honest about the business’s deficiencies, and prepare an argument for how they can be overcome.
Keep due diligence as short as is reasonable – without applying undue pressure that erodes trust – since the business is taken off the market during this period.