Market Garden Notes for Participants

                                        THE MARKET GARDEN                                                 

                                                    INSTRUCTIONS FOR PARTICIPANT

Stephen Wilson and his cousin Claire Alcock have just graduated from university, one with a degree in economics and the other in engineering.  They have both considered the possibility of joining large companies as graduate trainees, but have finally come to the conclusion that they want to go into business for themselves.  The opportunity has arisen because they have been offered the opportunity to buy a garden centre in Banbury, where Stephen has worked in the university holidays.  Mrs Palmer, who owns and has run the garden centre for the last eight years, plans to retire, and would like to sell the business to people she knows rather than to strangers.  It is for this reason that she has offered first refusal to Stephen and Claire.

The business has been running for twenty years.  Its customer base is mainly local, and is composed mostly of individual amateur gardeners.  Her stock is therefore fairly conservative and comprises well known shrubs and plants plus some hardware: garden tools, flowerpots, wire netting etc.  Mrs Palmer owns the land and buildings freehold: the land is about an acre in area and there is a barn and a greenhouse.  The business also owns a van – it is old but still running.

Annual turnover has been reasonably steady and has averaged about £180,000 over the last five years.  Mrs Palmer has paid herself any profits, which have been fairly consistent, around £2000 per month.  Running expenses have included around £200 per month for heating and lighting, rates (£400 per month), running costs for the van of £250 per month and costs of staff.  Joe, the odd job man, who does the heavy lifting, occasional repairs and delivers orders where necessary, earns £9000 per annum; Stephen used to earn £120 a week during the 3 month summer holiday period.  Since Mrs Palmer had no loans outstanding on the property or the business, the only other major expense she had to face was purchasing the stock itself.  She has not spent any money at all on advertising the business, preferring to rely on word of mouth, and has built up a nucleus of loyal and regular customers.

There is not much information available about the marketplace, since Mrs Palmer did very little market research.  However, Claire and Stephen have done some preliminary analysis of the figures and have established that the population of their target area is around half a million.  Currently around one per cent of these do regular business with the garden centre, spending on average £40.00 per year.  Stephen and Claire have also

looked at local planning documentation and have noted that a new housing estate is to be built half a mile away.

                            THE MARKET GARDEN

                                INSTRUCTIONS FOR PARTICIPANT

Mrs Palmer has offered to sell the business to the friends for £95,000.  Most of the value is in the land itself and the building.  She herself lives in a little flat down the road which she is planning to keep on.

Stephen and Claire have already decided to buy the business.  They have in fact had the property valued for mortgage purposes at £87,000; the rest of the price includes £4,000 for the stock (it is August and therefore the season is nearly over) and a modest £4,000 for goodwill.  Claire's father has offered a loan of £45,000 at 8%, (which he wants repaid within 20 years with no repayment for 5 years) and they have each managed to raise a mortgage of £30,000 at 10 % (these are 30 year mortgages with no capital repayments for 5 years).