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  • The Most Sophisticated Retail Business Model – Florist Shop

    Nov 16, 2021

    Retail entrepreneurship offers a broad spectrum of business models.  The first business model to exist was a retail stand where vegetables and fruit grown on the vendor’s own property or harvested in the wild were sold.  This business model continues to exist today at community farmer’s markets.  The most significant evolution in retail, in approximately the last thirty years, was the establishment of the virtual store online where products could be sold to customers beyond a small geographic area through the employment of delivery services with national & international reach. This enhancement in the retail business model combined with search engine optimization (SEO), pay-per-click (PPC), and email advertising has been a game changer for entrepreneurs as it has allowed for increased proactive marketing to generate sales versus the passive business model (historically enhanced with television, radio, and print advertising possibly supported by direct mail) that has traditionally existed in retail where a business owner essentially waited (hoped), a customer would visit their store.

    IBA, as the oldest business brokerage firm in the Pacific Northwest, has successfully sold over a thousand retail businesses.  These transactions have ranged from grocery stores to fashion boutiques and from hot tub & boat dealerships to kitchen & sporting goods stores.  Interestingly through professional engagement with this large spectrum of business models, one type of business has clearly emerged as the most sophisticated to operate for a main street, retail entrepreneur. That business is the florist shop.

    The complexity of this business model is wonderful news to main street entrepreneurs because it creates a significant barrier to successful competition by large online retailers.  The reason owning & operating a floral business is sophisticated and difficult to scale to a national marketplace is because it is a hybrid business model requiring attention to detail on multiple levels.

    The first-tier activity related to successfully operating a florist shop is the procurement of a perishable commodity (flowers) along with support merchandise (containers, ribbon, gifts, etc.) that often has a seasonal component. These purchases require attention to detail and strong record keeping.  Incorrectly bought product can end up in a dumpster or sitting on a shelf for 11 months until it is viable again (e.g., Valentine’s Day or Mother’s Day focused merchandise).

    Materials obtained, items need to be manufactured into finished products that will result in customer satisfaction involving a process where a proper balance between artistic design and profitability needs to be achieved.  Produce a floral design that does not successfully pass scrutiny in a 360-degree review or incorporate proper analysis of the cost of goods and labor then the business model is destined to fail.

    Design talent and processes in place to successfully create a product, the business model next incorporates the retail components of customer engagement in both live and online contexts.  This effort alone can tax even the most astute gift or pet store owner; however, sales do not stop at the store door for a retail florist.

    One of the special elements of buying flowers is that the gift often gets delivered to the beneficiary as a surprise. This delivery requires a florist shop owner to manage logistics and transportation on an equal level to FEDEX in their local marketplace.  Proper staffing and routing can be the difference between developing a loyal group of repeat customers for Valentine’s Day and Mother’s Day and having a large number of customers deterring one-star reviews on Google and Yelp.

    The complexity of the flower shop business model should be evaluated before starting or purchasing a company in this industry.  The multitasking required to be successful should not be underestimated.

    Knowledgeable about the operational sophistication of the business model, an entrepreneur may ask why take on this challenge.  The following are four reasons why owning a florist shop is a wonderful opportunity:

    1. Artistic Entrepreneurship – There are very few business models where artistic ability can be combined with entrepreneurship.  Art, by its nature, when done well is unique and creates a loyal customer base.
    2. Profitability – Artistic products sell at the value perception of the customer. This creates the opportunity to make a good profit margin on every sale.  A common sales tool in the floral industry to increase sale size is to offer products at three levels (good, better, and WOW!!!).  Who among us wants to be the one who sends their spouse flowers on their anniversary at the good purchase level?
    3. Control – Many retail business models require an entrepreneur to make an educated guess regarding customer preference. The reason Nordstrom has the Rack is that guessing customer preference is an inexact science.  Florist shops have the unique advantage in that a majority of their products can be bought on short notice or after knowing customer orders.  This creates the ability to control waste and efficiently use resources.  A florist shop owner also has the ability to set minimum order values for customers and price delivery costs appropriately to insure profitability.  The fact flowers are a discretionary purchase also equates to customers being driven by emotion and not need or price. Compare that with someone needing to buy tires for their car. Which generates the bigger customer smile someone getting flowers or new tires?
    4. Flexibility – Most retail business models are fairly static. A benefit of floral industry entrepreneurship is that it is a flexible business model that can be tailored to match the opportunities and talents of the business owner.  A florist shop can expand into offering enhanced gifts in a retail setting, incorporate a café, do large events & weddings, establish corporate customers (hotels, restaurants, medical offices, etc.) that get weekly orders, maintain plants, decorate Christmas trees and do interior design, or expand into corporate gifts (e.g., gift baskets).  IBA has seen all of these enhanced floral, business models run successfully in transactions we have facilitated as a business brokerage firm.

    Similar to florist shop ownership not being appropriate for all retail entrepreneurs, the professional sale of a flower shop is not something performed at a high skill level by every business broker.  It takes significant knowledge and experience to correctly value a florist shop for sale, convey wire service accounting methodologies to the unfamiliar, and facilitate a sale employing best practices.  In the Pacific Northwest, no business brokerage firm has sold more florist shops than IBA. The following page of our website provides a selection of some of the sold florist shops on our resume:  https://ibainc.com/industries-served/horticulture/

    IBA is a recognized floral industry expert on a national level with many appearances at conventions and as an author in trade journals.  We also take pride in serving as an information resource related to the purchase or sale of florist shops, floral wholesalers, and retail & wholesale nurseries   If you are considering the sale or purchase of a flower shop, we would welcome the opportunity to provide an overview of our services.

    Insider Note: Seasonality exists in the floral business marketplace.  More florist shops sell between October – May than any other time of the year.  The reason for this occurrence is that the three, major floral holidays occur during this time period (Christmas, Valentine’s Day, and Mother’s Day).  It is in the best interest of the buyer for a smooth transition of ownership for the party to receive the cash flow from one or more of the holidays and relevant transition training as a component of the transaction. 

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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