Wholesale Distribution businesses are HOT in the world of Business Sales today! My latest listing, made live last week, had 12 enquiries before lunch on the first day and I had a further 6 enquiries today alone. This is only from our 17,000 strong database at LINK and does not include any other business-for-sale sites we list our business on!
Most Wholesale Distribution businesses will be either ‘sales driven’ or ‘logistics driven’ It is important that a buyer understands what their personal strengths are, ensuring whichever the biggest driver is, they are the right person for the business.
You can see already that it is here that a qualifying process is needed and time could be wasted by talking to the wrong people; lots of enquiries but fewer suitable people to purchase your business.
If Sales is the biggest driver in your business we would need to find a person with these sales skills, preferably with a marketing and/or advertising background. They could also have previous experience in setting up distribution networks and/or importing products.
However; there are many Wholesale Distribution businesses where logistics are key. Tapping into networks of stocking distributors and local wholesalers with an existing infrastructure could be key to find a suitable buyer.
Here are some key components to keep the value of your Wholesale Distribution business high;
- Ensure the business has an element of exclusive lines with products that can only be sourced from you. Usually, having exclusive rights to New Zealand as well as Australia could keep the value up but only to the right purchaser.
- Ensure you maintain the relationship with your key-suppliers. Having contracts is key and, most important; can you transfer these contracts to the purchaser?!
- Do you have any customer concentration issues? In other words; if you lose your biggest (group of) clients, how would this influence your bottom line? Any one customer responsible for 20% (for some businesses as low as) 10-15% of business could be a potential risk to a purchaser.
- In these types of businesses it is common (for obvious reasons) to have an optimal operational inventory. You want to be certain that you clear any obsolete stock. We are trying to avoid that the value of the stock at value becomes so high that it becomes a problem to find the required capital to fund it. A purchaser would need capital to purchase the business, but also additional funds for expansion.
- If your location is critical to the success of the business, ensure you have a strong long term lease in place.
- Review your systems and document all your processes. Focus on Price, Quality & Service. Introducing & implementing new technologies to streamline your business will make a purchaser more confident that they do not have to invest in processes.
- The biggest advantage of having systems and documented processes is that the owner’s knowledge is now transferable and not ‘walking out of the door’ as soon as you have left the building. People pay for ‘know how’; keep it in the business!
Also, having systems often means less involvement of an owner. In turn this often means a more attractive investment, meaning a higher sale price!
One of the reasons that Wholesale Distribution businesses are popular businesses to invest in is because it often include the complete package with the right balance between risk & reward; employees, inventory, cashflow, suppliers, asset value but also competitive pressure, low margins and (potentially) large overheads; making it attractive for competitors to grow through acquisition.
Preparing your business for sale right could build a great foundation for a purchaser to build on with solid return on investment to the right purchaser.
Are you concerned about the points above, or you have answered positive to all questions; visit www.BusinessSalesHUB.co.nz and organise a free appraisal to see how much your Wholesale Distribution business could be worth in an open market. At LINK we have an extensive database of 17,000+ potential purchasers. Businesses in this particular industry are frequently asked for.
You can call Rudy today on 0800 377 2637 or send an email to rudyk@linkbusiness.co.nz