Buying a business: Greengrocers

Why not take the healthy route?

Do you know your onions? Can you sort the plums from the pears? In other words if fruit and vegetables is your bag then maybe you should consider owning a greengrocer’s.

Buying a readymade greengrocery business means you can jump straight into the market with the all important client base you’ll need to get started. And if that wasn’t enough you’ll also be helping keep the nation with it’s five portions of fruit and vegetables a day – how much more incentive do you need?

The market

In 2000 alone, the UK fresh fruit and vegetable market was worth £7.41 billion. And despite claims that we are neglecting fresh produce for processed alternatives, the former still accounts for 61.6% of the value of all fruit and vegetable sales.

Fruit has been the biggest growth market with more people using fruit as an alternative to snack foods, attempting to implement healthier eating patterns. Bananas and apples are the best loved. In the same way, fresh green vegetables are gaining in popularity – although to a larger extent led by pre-packed salads, which doesn’t help the greengrocery market.

Predictions for the market over the next few years are more of the same: fresh vegetable consumption overall in decline, but increased fruit sales. More fruit-based snacks and a wider range of exotic fruits, along with campaign to encourage fruit consumption will help to maintain this growth.

The greengrocer’s is generally thought of as an old fashioned business but this doesn’t seem to have diminished its appeal.

Business agent Everett Mason and Furby, reports sales of greengrocer’s are ever popular and rising. This area still has an image – not without substance – of attracting an older clientele, but customers are also very loyal, especially if you provide a good and friendly service.

There is a general perception among the general buying public that a greengrocer’s will provide better service and quality than a supermarket. This may bring you a new customer from time to time but to retain that person, you will also need to be convenient.

Everyone knows that a supermarket tends to provide a cheaper and handier service than a much small shop. Ironically, though, if a greengrocery is placed opposite a supermarket it is more likely to thrive. To the customer, because both shops are so close, it’s practically the same as doing a one-stop shop – and they’re taking advantage of the best parts of both.

Location

Location is clearly very important. The local greengrocer’s that services a housing estate is less likely to survive these days as people tend to drive to the local supermarket for its cheapness and convenience, neglecting local businesses. This isn’t going to change but a greengrocer’s can make the most of its circustances by having a good location.

It is also worth noting that the fruit and vegetables market is a seasonal one. Consumers know that there are times of the year when certain products will cost more. Obviously, this will also affect you, the greegrocer, so think about time of year when buying your business. And don’t forget that all the stock is perishable so you’ll need to start buying in what you need straight away.

Be wary of buying a business that doesn’t appear to be doing well, despite good market conditions. There are always other reasons (such as poor management) but a greengrocer’s that has alienated its client base in spite of, for example, a good location, will not be worth much.

Who is it suited to?

Business agent Michael Taylor of Everett Masson and Furby notes that many enquiries into buying greengrocer’s come from people in the trade. “But although it certainly helps,” he says, “that doesn’t mean you necessarily have to have experience to take one on.”

It isn’t a complicated business that requires a good deal of specialist training so much as one in which trial and error will be the best teachers. You might be able to predict what your customers want, but you can’t predict that they’ll turn their noses up at okra or ugly fruit until you offer such products for sale.

Having said that, it should be part of the package that the outgoing owner will give you some rudimentary training in how to run the business. You will need to know where the supply markets are and which ones the outgoing owners regularly go to. Although you may choose not to continue using a particular supplier, it’s helpful to carry on with a current arrangement at the start. Depending on the amount of time the outgoing owners spend with you, you may also be introduced to the regular customers and be given tips on the types and quantities of produce currently ordered. Any pointers that enable a smooth hand over will be to your advantage.

The popular image of your friendly greengrocer who addresses you by name and always has time for a chat is not entirely a fallacy. You will have to be a ‘people person’ to be a success.

As an ‘old-fashioned’ business, you need to make sure that your customers are getting old fashioned service too. This means that you provide reasonably priced, good quality products and employ sociable staff.

What to look for

Although it may help your cause to buy a greengrocer’s near a supermarket, there are other locations that will do just as well. In a main shopping thoroughfare, for example, your business will fare better than one in a housing estate.

Before you buy, you should research your area thoroughly. Ask other businesses in the area what kind of prosperity they are enjoying – and whether they have any opinions about the business that you are looking to buy.

Obviously you’ll be looking closely at the accounts of the outgoing grocer – this is essential too. But gathering information from as many sources as possible will halp you make the right decision.

If there are other greengrocery businesses within a reasonable distance of the one you’re interested in, it doesn’t always have to a problem. Competition breeds business because people will come to an area specifically to benefit from having several similar shops to choose from (rather in the way you often get several restaurants together).

“Find out about the possibilities for expanding the business into delivery,” advises Michael Taylor. “Lots of restaurants and hotels will look to local greengrocers’ to supply them with really fresh produce.”

Visit any existing restaurant customers of the business you’re thinking of buying to see if they would be prepared to carry on with you if you decide to buy. If and when you buy the business you will also need to make new contacts – making a start as part of your research can only help save time later on.

How much will it cost?

Leasehold/freehold: As with all properties, whether you go for leasehold or freehold will make a difference in price. For example, one large greengrocer’s in the West Midlands is advertised as costing £145,950 for the freehold and £55,000 leasehold.

With a leasehold business, the value will be based on profit making and goodwill, for example 10 times the weekly taking. With freehold, obviously the value of the bricks and mortar is added on.

Accommodation: If you want to live on the premises, this will cost more. How much depends on the size of the living area and, again, whether you are buying or leasing. Without accommodation, you might start at around £35,000 including everything except stock, but this might only buy a lock-up rather than full shop.

The West Midlands greengrocer’s mentioned above for example, has three-bedroom accommodation included in the total £55,000 leasehold price.

Stock: The value of stock is different to many businesses because it has a very short shelf life. You will always have to restock within a matter of days. Check the definition and see whether equipment and fixtures and fittings are included. Training: Even if you are in the grocery trade you will still need to know the location of the fruit and vegetable markets, the good customers in the area, and the ins and outs of the accounts. The latter will take the form of a detailed handover rather than a full training programme, but you should check that you will be provded with something of this nature before you go ahead and make the deal.

Goodwill: Some would say this is the most valuable part – and the most difficult to quantify. Your accountant and business agent will assess the goodwill in terms of the business being as profitable and stable as it is claimed.

But in practical terms, goodwill could be the outgoing owner introducing you to valued customers and accounts and to premier suppliers. There is nothing to force them to do this but hopefully it will be something you will be able to arrange with them.

How much can I earn?

Most greengrocery businesses don’t restrict themselves to fruit and vegetables when there is a significant mark-up to be made on expanding the range of products sold. Apart from supplying to restaurants and other businesses, seasonal goods can really boost a profit.

If an average greengrocer’s makes £5000 a week selling its standard fruit and vegetable lines, it can almost double this by adding seasonal products. For example, Christmas trees might increase takings to £8000 or £9000 over the festive period.

Then when spring comes, bedding plants, which are popular for providing instant colour after a dreary winter, can add up to as much as £4000 to the £5000 average. The margin on plants is so huge that you’ll be able to sell them to customers for a reasonable price and still increase your takings. Some months you will need this extra cash to make up the shortfall on expensive produce, but cashflow management is hardly exclusive to the greengrocery business.

When you start your new business, you may want to put your own stamp on it, but be careful not to bring in sweeping changes immediately. Your first customers will be existing ones and they won’t want to see massive changes straight away.

That isn’t to say don’t ever spice up the décor or re-arrange the layout but it will greatly increase your chances of making a profit initially if you introduce changes gradually. Then after a few months when you’re on first name terms with all your regulars you’ll be ready for that fluorescent pink vegetable rack you’ve always wanted.

A greengrocery business is sociable, potentially lucrative and reasonably easy to run. And there seem to be plenty of opportunities in the sector. So why not weigh up the options and take the healthy route.

Case study: S&J Organics

If you want to get into the fruit and vegetable business but don’t think a greengrocers is for you, there are a number of alternatives to consider. Market stalls or barrows are more low-key operations, and you could consider delivery or actually growing produce.

Steve Merritt and Juliet Fay have combined the latter two with a pledge to educate the buying public about organic produce. Between them they run S & J Organics which delivers homegrown vegetables in a ‘boxes scheme’ to a rapidly expanding customer base in the Wiltshire area.

The business has grown over the past five years, largely by word of mouth. When they started there was less awareness of organic foods but a growing interest. Now this has changed, bringing in more competition, but S & J benefits from continued customer loyalty and curiosity about its products.

It’s important to offer the kind of service your competitors can’t run to, says Merritt:

“We send out a newsletter to our customers and have open days where they’re invited to visit the farm and look round. These have been particularly successful.

“Our idea is to put customers in touch with where their food has come from. Supermarkets increasingly sell organic foods for very little – we can’t compete with that. But we can offer this more intimate service designed to educate our clients – something the larger stores can’t do.”

Getting S & J Organics off the ground hasn’t been an easy ride, though. Merritt maintains that the most important qualities for succeeding in this business are flexibility and an ability to deal with the many frustrations that arise.

“We grow about 70% of the fresh produce we sell as well as working with other suppliers to provide other goods such as bread, meat and fruit. But co-ordinating the retail and delivery side with planting, caring for and harvesting our crops does mean a certain amount of flexibility is needed.

“For example, potatoes will wait a couple of days for planting but you have to deliver on time. The retail side has to take precedence at times and this is frustrating when you want to get on with the growing side.”

And the variety of produce required for box schemes means you’ll need a willingness to experiment with different ways of doing things. Not to mention a passion for organic farming.

So if you fancy going down the shop route, growing and selling your own produce may be an excellent alternative. And as S & J has hound out, public tastes are catching up with a whole host of new ideas.

Tips for success

To sum up, here are the top tips that could help you grow your way to success in a thoroughly green business opportunity:

Location is crucial

Remember, supermarkets don’t necessarily spell trouble but you need to avoid lone greengrocery businesses on housing estates for expample, and go for shopping parades instead

Look for evidence of a wider clientbase

Expanding your services to deliver to restaurants and so on, can be lucrative. If the business already has this in place, so much the better

Speak to other shop owners in the area

Find out how the area is doing generally in terms of business. This is not to get all the gossip but to find out if this is the solid investment it appears

Ask how much of a handover you’ll get

The current owners may be on good terms with their customers so introductions will be helpful

And once you’re in, don’t make changes all of a sudden

It’s a fact that you’re staple market of older customers will vote with their feet if you upset the apple cart too quickly

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