A Distribution business needs a large investment to get started and a very efficient staff and infrastructure.
If you own a Distribution business and want to sell it, however, you first need to know how to value and sell for the best price. Take look at the following topics.
What is your Distribution business worth?
In order to calculate the value of your distribution business, the very first thing you have to do is gather all of your financials and compile it into a financial report. Then, provide potential buyers with the following information.
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Distribution business worth more?
There are a few elements that also must be taken into account before you set your asking price. If you have developed partnerships, diversified your delivery areas according to demand, kept your technology up to date and also invested in their use it’s very likely you will have better offers from potential buyers.
If you still have any questions, follow these metrics:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average Distribution business sell for?
Looking at the chart, you’ll notice that Distribution businesses are quite popular in the United States. There have been more than 500 sales in the past ten years, with a total transaction value of almost $900 million — a really huge amount of money.
Average multiple is 3.47x, which means average asking price is more than three times bigger than average gross income.
What is the most frequent deal size?
Most frequent deal size is $600,000, much less than average sale price. However, if you take a look at the chart, you’ll see that in 2018, there have been the same number of sales less than $250k and also between $500k and $1 million.
The million dollar deals are also very high among Distribution business. At least 12 between $1 million and $2 million and 10 between $2 million and $10 million.
Is the Distribution market getting bigger?
Distribution businesses have a lot of momentum in the United State, but 2018 wasn’t the best year ever. This record belongs to 2016, when total transaction value was $145 million.
Last year, it was more than $75 million, almost half of 2016’s numbers.
Are bigger businesses worth more?
On average, that is the case. In 2018, for example, sales less than $250k had a 2.41x multiple, while $250-500k had 3.92x and $500k-1 million, 3.21x, a little bit smaller.
The same happened in 2017, but $500k-1 million multiple was higher than $1-2 million.
What states have the most Distribution business deals?
California, Arizona, Florida, Illinois, Ohio, Pennsylvania and Texas are the best states to sell a Distribution business.
However, Wisconsin, Washington, Oregon, New York, North Carolina, Minnesota, Massachusetts, Indiana, Georgia and Connecticut are also hotspots for sales.
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Distribution business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Distribution business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your Distribution, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the Distribution industry it may likely be a person who already had a firm in the field.
How should I sell my Distribution business?
Marketplaces – (under $500k yearly profit)
Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.
To sell your staffing business, check out:
Broker/M&A Advisor – ($500k – $10m yearly profit)
Medium sized businesses in the $100k-$20m are best sold through brokers who help with finding buyers, negotiating and structuring the deal. To sell your staffing business, check out:
Investment Banks – (Over $10m yearly profit)
Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your staffing business, check out:
How much will it cost to sell my Distribution business?
Generally a business broker will charge 8-12% of the sales price of a distribution business including inventory depending on the deal size. Larger deals attract a smaller fee. Below is a range of fees at each deal value level.
- Under $1m – 12%
- $1m -$4m – 10%
- $4m -$10m – 8%
- $10m -$25m – 6%
- $25m + – 4%
Conclusion
There have been more than 500 Distribution businesses sales in the past 10 years, and total transaction value in this period was almost $900 million. Now is a great time to be selling your distribution business.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!