What Buyers Look For in a Home Decor or Furniture Store

What the store earns, and how a buyer reads it

A buyer starts with the earnings left after a paid manager. If you work the floor, buy the product and close the sales yourself, a buyer will adjust your pay to what it would cost to hire someone for those jobs. Our posts on seller's discretionary earnings and add-backs cover how that adjustment is built and which items a buyer will accept.

Furniture retail has a seasonal pattern that buyers will look for. Sales often rise around moves, holidays and tax refund season, and they slow in stretches that the owner knows well and a stranger does not. Give a buyer monthly sales for at least three years so they can see the pattern for themselves. A store with a steady line of repeat customers, interior designers who send clients, and builders who furnish model homes is worth more than one that lives on a few big weekends.

Gross margin by category matters as well. Upholstery, case goods, outdoor furniture, lighting, rugs and accessories carry different margins, and a store that sells mostly low-margin items for high prices may look healthier than it is. A buyer will want the point-of-sale report by department and a plain list of what sells and what sits.

Inventory is a large part of the price

Inventory in this trade is bulky, expensive and slow to turn, and it is usually counted at the closing and added to the price. A buyer will walk the floor and the warehouse with a clipboard. They will separate current stock from discontinued items, floor samples, damaged goods and special orders waiting on customers. Floor samples and old stock are valued at what they would bring on a clearance sale, which is often far under what the owner paid.

Special orders deserve their own attention. A customer who has put down a deposit on a custom sofa has paid for something the store has not yet delivered, and the buyer takes on that obligation. Keep a clear list of open orders, deposits held and expected delivery dates. When a buyer finds customer deposits spent on operating costs, the deal usually slows while the buyer and the seller work out how to make the deposits good.

How the stock is financed matters too. Many stores use a floor plan line or vendor credit to carry inventory. A buyer will want to see how much is owed to each vendor, whether payment terms have been met, and what happens to those terms when the store changes hands. Our post on earnouts, holdbacks and working capital pegs explains how inventory and payables are usually settled at the closing.

Vendor relationships and exclusive lines

Some of the best value in a furniture store comes from lines no one else in town carries. A dealer agreement with a well-known upholstery maker or a regional rug importer may include territory protection, which keeps competing stores from selling the same product. These agreements often limit assignment, so the maker may have to approve the new owner. Read each one and find out who has to sign.

Buyers also ask about the owner's personal relationships with vendors. If the best prices come from a handshake with one sales representative, a buyer will wonder what happens when the owner leaves. Introduce a buyer to the key vendors before the closing when you can, and write down which terms are in a contract and which are habit.

Trade shows and buying calendars matter in this industry. A store that buys for the next season at a market held twice a year needs a new owner who can attend and place orders on time. If your sale falls close to a buying window, plan for who commits the money and who owns the stock that arrives afterward.

Showroom lease, delivery and service

The showroom lease is probably the biggest fixed cost. Furniture stores need large floor areas, and rents on that space can climb fast at renewal. A buyer's lender will want enough term left to cover the loan, and the landlord has to consent to the assignment. See the lease is part of the deal for how that conversation usually goes. If the building is owned by you or a family company, a buyer may want to lease it or buy it, and the guide on real estate attached to the business describes the choices.

Delivery is where many furniture stores make or lose money. A buyer will ask whether the store owns trucks and employs drivers, uses a third-party carrier, or hands off to a white-glove delivery partner. Each choice has a cost and a risk. Owned trucks mean insurance, maintenance and driver turnover. A carrier means less control over the experience on the customer's porch. Damage claims, returns and warranty repairs also show up in the numbers, and buyers will ask for a record of how many deliveries ended in a complaint.

Service after the sale is a part of the brand. Stores that repair, refinish or reupholster pieces often keep customers for decades. A buyer will want to know who does the work, whether the person is an employee or an outside shop, and how many jobs are waiting.

Online sales and the customer list

Most furniture and decor stores now sell something through a website, and buyers will check how much. Website sales, social media traffic, a customer email list and a record of repeat purchases all count. A store with a clean customer database, built from the point-of-sale system and the online checkout, can market to past buyers at almost no cost, and a buyer can see that value at once. A store whose customer records are scattered across paper receipts and one salesperson's phone is harder to price.

Reviews and local reputation carry weight in a business where a purchase costs a lot and lasts for years. Keep your review profiles current and answer complaints in writing.

What tends to sink a sale

Furniture and decor stores run into a familiar set of problems. The inventory count at the closing comes in far under what the owner expected. Customer deposits are not backed by cash. The lease has little term left and the landlord asks for a higher rent. A key salesperson or designer leaves with the clients. Sales reported on the point-of-sale system differ from the returns. Vendor agreements cannot be assigned without consent that no one asked for in time.

Confidentiality matters here because vendors, staff and customers all talk. A rumor that a store is closing can lead vendors to tighten credit and customers to hold back orders. Our post on how we market a business confidentially explains how we keep a store's name out of the process until a buyer has signed a nondisclosure agreement.

Getting ready

Count the stock before a buyer does. Mark the slow movers and decide whether to clear them. Reconcile customer deposits to cash. Get the lease reviewed for renewal rights and assignment terms. Gather the dealer agreements and note which ones restrict a transfer. Clean the books so that sales, cost of goods and payroll tie to the tax returns, and read our guide to getting financials ready for a buyer.

When you are ready to see how a buyer would look at your store, the page on selling a home decor or furniture store is a good place to start. At Business Advisors of America we begin with a valuation built from your own numbers and work with you through to closing.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.