Buying a hardware, building supply or garden store in Florida

These are neighborhood hardware stores, lumber and building supply yards, and garden centers. A hardware store sells fasteners, tools, paint, plumbing and electrical parts, and lawn and pool supplies to homeowners, handymen and small contractors. It earns extra from services the big stores do poorly: key cutting, paint matching, screen and glass repair, propane, small engine repair and tool rental. A building supply yard sells lumber, drywall, block, roofing and other materials, mostly to contractors who buy on account and pay monthly, and delivers by truck and forklift. A garden center sells plants, soil, mulch, fertilizer and pottery, and some offer design or installation.

Most customers pay at the counter, but contractor accounts are bills you have to collect. The inventory is large, often thousands of items, so a lot of cash sits on the shelves. Many independent stores belong to a buying cooperative for better prices, advertising and a familiar sign. A typical team is the owner, a store manager, counter staff who know how to fix things and, at a supply yard, drivers and yard hands. In Florida, hurricane season brings rushes on plywood, tarps and generators.

• Counter staff who can tell a customer how to fix a running toilet or wire a switch. That advice is why people pay a little more than at a big box store.
• Inventory that sells steadily, with little dead stock, and computer counts that match the shelves.
• Contractor accounts spread across many builders and trades, plus steady walk-in homeowners.
• Service income from keys, paint, rentals and repairs.
• Contractors who pay on time, with few old unpaid balances.
• A convenient spot for a neighborhood or for job sites, with parking and room for trucks to load.
• For garden centers, someone who keeps the plants healthy, so few are thrown away.

Florida has no state license for a hardware or building supply store as such. You'll need your own sales tax registration from the Department of Revenue, since the seller's can't be transferred (section 212.18). The local business tax receipt can be transferred to you for a small fee (sections 205.033 and 205.043).

Some products come with their own rules:

• Plants: to resell nursery stock bought from growers, each store needs a certificate of registration from the Division of Plant Industry at the Florida Department of Agriculture and Consumer Services (FDACS), renewed yearly (section 581.131). If you grow your own plants, the same law treats you as a nurseryman. Ask the division what a new owner must file.
• Propane: filling customers' cylinders takes an FDACS category II dispenser license, and a cylinder exchange cage takes a category III cylinder exchange license. Each location needs its own (sections 527.01 and 527.02). Ask FDACS what a change of owner requires.
• Pesticides: selling restricted-use pesticides takes an FDACS dealer license, and the law says to get it before you take over the business (section 487.048).
• Fertilizer: the state license is held by the company named on the label (section 576.021). But some counties, Pinellas among them, ban selling nitrogen or phosphorus fertilizer from June through September.

• Inventory at closing. Have it counted independently at cost, leaving out damaged, discontinued and obsolete stock. It's often a big part of the price.
• Co-op or dealer agreements. Will the membership carry over? What equity stake or minimum purchases does it require? And if it doesn't, what happens to the sign?
• Contractor accounts. Get a list of what each contractor owes and for how long, decide whether you buy those balances or the seller collects them, and see how sales held up when local building slowed.
• Storm years. A hurricane can lift one year's sales well above normal, so look at several years.
• Equipment. Check the age of forklifts, delivery trucks, paint machines and any rental fleet.
• The seller's unpaid taxes. Buying more than half of a business or its assets can make you liable for the seller's unpaid sales tax and other Department of Revenue taxes, up to the price you paid or the value of what you bought, whichever is greater (section 213.758). To protect yourself, get a certificate of compliance from the department before closing. You may also hold back part of the price and pay it to the state within 30 days. Let your attorney handle this.

• Which departments and customers bring in the most profit, and how has that changed over the years?
• How much of your stock hasn't sold in the past year, and what do you do with it?
• Who are your biggest contractor accounts, and how quickly do they pay?
• How do sales in a hurricane year compare with a normal year?
• Which of your counter staff do customers ask for by name, and are they planning to stay?
• Are you in a buying cooperative, and what would I need to do to keep the membership?
• If you were staying another ten years, what would you add: rentals, delivery or a bigger garden section?