The wholesale business is one that legendary coach Vince Lombardi would have loved. It's all about the basics - blocking and tackling. And those companies that are best at the basics tend to perform the best over time.
Wholesale businesses are appealing to buyers because it is the quintessential "middleman" business. Wholesalers don't make the product and they don't deliver it to the ultimate consumer. With that being said, it is essential that wholesalers add value to their service through excellent execution of their roles, availability when and wherever needed and by forging strong, long-lasting relationships with their customers.
When initially developing an evaluation for a wholesale business one thing is very tricky - wholesale/distributor businesses tend to show a smaller than average return on sales, but a good return on investment. Thus pricing a wholesale business for sale will need to reflect that dynamic.
There are six other, important factors that affect the value of a wholesale business:
- Exclusivity in products or manufacturers represented. This exclusivity can be in the form of an exclusive geographic territory or market segment.
- Range of Products. Too much concentration in a few products can make your business too vulnerable to market changes. On the other hand, too many products can increase costs and investment.
- Number of Manufacturers Represented. Once again it is important to find a good balance. Too few manufacturers increase risk, but too many may lead to service problems.
- Proprietary Systems. What systems do you have in place that makes your business stand out from the rest? An example of a proprietary system would be automatic replenishment systems that generate sales based on historic data.
- Experienced Staff. As you well know, staff can make or break a successful business. The buyer of your wholesale business will want to know if key people will stay on board after the sale.
- E-Commerce Systems. These days, e-commerce is essential. Is your business set up to take and fulfill orders over the Internet?
The sale of a wholesale business is not typically glamorized like the sale of a neighborhood business. But that doesn?t mean these businesses aren?t being bought and sold frequently. When you are preparing your wholesale or distributor business for sale, you need a strong, experienced broker by your side to guide you through the steps. Determining the value of your wholesale business is just the beginning.?
Ready to talk? Our team of experienced Denver business brokers can help when you are ready to buy a business or sell a business. If you would like to learn more about the process contact us or schedule a consultation today. If you would like to learn more about how to sell a business or how to buy a business, visit our Seminars page to sign up for one of our monthly events in Denver.
