Business Valuation for Buying a Furniture Store
In recent years, the strong housing market has driven record growth in the new furniture industry. Furniture stores have profited from this growth through increased sales. One way you can profit from this growth is by purchasing a furniture store. If buying a furniture store interests you, a valuation for buying a furniture store can help.
Peak Business Valuation, business appraiser, values furniture stores across the country. We value hundreds of businesses for purchase every year. We are happy to provide you with a furniture store valuation and help you understand how to increase the value of a furniture business. Schedule a free consultation with Peak to learn more about how to value a furniture store.
What is a Business Valuation for a Furniture Store?
A furniture store valuation is an assessment of the financial standing of a business. This includes analyzing the financial documents, selecting a combination of valuation methods, and identifying the risks and opportunities of a furniture store. Business appraisers will also determine the fair market value of a furniture store based on their analysis. To learn more, read Valuing a Furniture Store.
Furniture Store Valuation Methods
During a valuation for buying a furniture store, business appraisers use a combination of valuation techniques to determine the worth of a furniture store. The most common valuation methods are the income approach, market approach, and asset approach. We discuss these approaches below, but you can also see How to Value a Furniture Store to learn more.
Income Approach:
The income approach is a common valuation approach that analyzes the income potential of a business. The income approach can assess the current value of future cash flows or use the income from the most recent 12-month period to value a furniture store. This approach also accounts for risk in future income projections. To learn more about the income approach, check out The Income Approach Made Simple.
Market Approach:
The market approach is what many people imagine when they think about valuing an asset. In the market approach, business appraisers compare a furniture store to similar stores recently sold. Valuation professionals use valuation multiples applicable to the industry to determine the worth of a furniture store. See Valuation Multiples for a Furniture Store to learn more about the market approach.
Asset Approach:
The asset approach values a business according to the worth of the assets that it owns. Inventory, real estate, and brand recognition are typical assets for a furniture store. The asset approach is less common but is useful for asset-heavy businesses. The asset approach also accounts for the liabilities a furniture store has.
Negotiating a Fair Purchase Price for a Furniture Store
A key element in buying any business is negotiating a fair purchase price. Failing to negotiate a favorable purchase price for a furniture store will cut out potential profits. A valuation for buying a furniture store will help you understand the market value of a store. Knowing this will make sure that you don’t overpay in the purchase of a furniture store. A furniture store valuation also increases transparency between buyer and seller, thus simplifying the negotiation process.
Building a Strong Furniture Store Business Plan
After you finalize the sale of a furniture store, creating an effective business plan is essential to your store’s success. Using a furniture store valuation can help you build a strong business plan and prepare for long-term success. A valuation for buying a furniture store includes a summary of the opportunities and risks in your store. Using this information in the creation of your business plan will help you maximize the value of a furniture store. Check out Using a Business Valuation for a Business Plan to learn more.
Understanding Opportunities of a Furniture Store
Before you proceed with the purchase of a furniture store, you need to adequately understand the growth opportunities. In a furniture store valuation from Peak, we will include an analysis of the key value drivers of a furniture store. Implementing key value drivers will increase the value of a furniture store and increase your confidence in the store purchase. Check out Value Drivers for a Furniture Store to learn more. Some opportunities and key value drivers for a furniture store are:
Easing Fiscal Policy:
Many consumers consider new furniture a ‘big purchase’. Many may even need to finance their purchase. With inflation and fluctuating interest rates, furniture purchases are becoming more viable for many shoppers.
In-House Financing:
As mentioned above, many consumers will want to finance their furniture purchases. This offers a unique opportunity for furniture stores that offer in-house financing. By offering financing to potential buyers, furniture stores can increase their margins on items sold on credit.
Online Presence:
Consumers are increasingly doing more of their shopping online, including furniture purchases. Stores that have a strong online offering have a higher value than stores with only physical locations. Part of having a strong online presence includes the integration of 3D and augmented reality into the buying experience.
Diversified Product Lines:
Furniture stores that have a diversified product mix attract a larger variety of customers. Per IBIS World, living room furniture, bedroom furniture, and dining room furniture account for 37.8%, 32.9%, and 17.9% of furniture sales, respectively. Furniture stores that can cater to all three, and address current trends such as home office furniture, have a higher value.
Peak Business Valuation has years of experience helping business owners understand the key value drivers in their business. With a valuation for buying a furniture store from Peak, you can understand the current value of a furniture store and how to increase the value moving forward. Schedule a free consultation below to connect with our team of experienced professionals.
Identifying Risks of Purchasing a Furniture Store
In addition to understanding opportunities, you must understand the risks of a furniture store before purchasing. Minimizing risk is one of the most important steps to running a successful business. A furniture store valuation includes the risks identified in the valuation process. Some risks for a furniture store are:
- Housing Market Volatility: New furniture purchases are directly related to the strength of the housing market. In a weak housing market, there are fewer new houses built and less new buyers move in, driving down demand for new furniture. Furniture stores can address this risk by creating a strong, returning client base.
- Rising Used Furniture Sales: More and more consumers are trying to reduce their environmental impact. One of the ways they are doing this is by buying used furniture instead of buying new. Additionally, increased antique shopping among furniture shoppers poses a threat to furniture stores selling new furniture.
- Competition: The new furniture market is not dominated by two or three main competitors. Conversely, the high saturation of smaller, local furniture stores drives competition. This also leads to price competition, reducing profit margins on furniture sales. Things such as a loyal customer base and strategic location can minimize competition risks.
- High Startup Costs: Furniture stores frequently have high initial costs. Between inventory, real estate, and employee salaries, furniture stores require a high upfront investment to get started. Purchasing existing furniture stores is one way to avoid high startup costs.
Securing Financing for Buying a Furniture Store
Buying a furniture store is expensive and typically requires outside financing. While there are many viable options to secure financing, a loan from the Small Business Association (SBA) may be right for you. Small business owners frequently turn to the SBA when seeking loans for a business. SBA loans have favorable terms such as low down payments, low interest rates, and long repayment terms.
When applying for an SBA loan, SBA lenders frequently require a business valuation before approving an application. If you are thinking of applying for an SBA loan, getting a valuation for buying a furniture store will help simplify the loan process. Peak Business Valuation works with over 90 SBA lenders nationwide and can provide you with a furniture store valuation. You can also read SBA Loans for Furniture Stores to learn more.
Obtaining a Furniture Store Valuation Report
At the end of your valuation, you will receive a comprehensive valuation report. This report is a summary of the furniture store valuation including the opportunities, risks, strengths, and weaknesses of the furniture store. It will also include the fair market value of the furniture store determined by valuation professionals during the valuation. Using the valuation report will help you increase the value of your furniture store at every step. From the negotiation process to creating a business plan and managing risk, using the valuation report is essential.
Conclusion
Buying a business can be a strenuous process full of unknowns. By obtaining a valuation for buying a furniture store, you can better understand the opportunities in a store. You will also know how to increase the value of your furniture store and create a successful business. A furniture store valuation will prove to be useful in every decision you make.
Peak Business Valuation has years of experience valuing furniture stores and helping future buyers understand the valuation report. We have a team of valuation experts who will work with you to maximize the value of your business. We can also help you understand how to value a furniture store and the factors that may change the store’s value. Schedule a free consultation today to get started with Peak!
