As a distributor, selling your company may be the long-awaited reward for your years of effort. However, doing so requires that you discover and apply the correct strategies to sell your distribution business successfully.
Without adequate knowledge, you may end up selling your company for less than it’s worth. This could be the result of having too few potential buyers or not taking the appropriate steps to prepare your business for sale.
Read through this article to gain insight into the techniques you can apply to sell your distribution company and make a great profit while you’re at it.
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Tips to Increase the Value of Your Distribution Company
To increase your company’s value, you need to view your business from the buyer’s perspective. You may notice several issues that need to be addressed when you view your distribution company through the lens of the buyer, including unfavorable financial statements, back taxes, etc.
Buyers often seek growing companies with a great cash flow. They look for businesses with potential for growth and development.
Also, taking on the view of the buyer will help you to determine what makes your business stand out from the competition. When you are aware of these strong points, you’ll be able to use them as selling points.
As a seller, all your attention should be on items that will increase your company’s value and attract potential buyers. Here are some tips that can help you achieve this:
#1. Maintain a Strong Relationship with Vendors
Apart from financial success, building a strong relationship with vendors makes your business attractive to potential buyers.
Distribution companies are always in competition with each other, and this competition involves trying to acquire as many vendors as possible. Therefore, when you build solid relationships with your vendors, it makes you stand out and helps you to retain them.
In planning your exit, you should ensure that you have a significant number of loyal vendors. A long list of loyal vendors guarantees a rise in the value of your company.
Also, to increase value, you should demonstrate your role as a crucial business partner to the supplier. You can do this by showing the supplier that you consistently and efficiently sell many of their products to vendors.
Having a solid relationship with both suppliers and vendors increases your company’s value and, subsequently, the number of buyers.
#2. Build Customer Relationships
As a distributor, you also need to focus on your customer relationships. Reliable customers will help you create more value for your business in the long run.
As an owner of a distribution company, you should try to study each of your customers to assist you in determining the most valuable customers based on the rate at which they buy your products. Doing this will ensure that you maintain a good relationship with such customers.
Having data and metrics for your customers is one way to improve your knowledge of your customers. Some examples of the data and metrics you can look at include order volume and frequency, average order size, and delivery efficiency.
Furthermore, you should be able to prove to potential buyers the strategies you are utilizing to expand your customer base.
#3. Include Extra Value
To avoid disappearing into the crowd of distribution companies, you must add extra value to your services. A value-added service will ensure customer retention.
Potential buyers are aware of this and will likely try to purchase a company that has many customers as a result of its extra services.
Also, providing extra services gives your distribution company an edge with which to compete against large distribution organizations due to how difficult it can be for large companies to render a customized service approach.
There are several areas where you can create extra value for your customers. They include:
- Same-day or next-day delivery
- Careful inspection of goods
Including some of these services can build your customer base. With a large number of loyal customers, you will have many buyers offering to purchase your company.
#4. Properly Manage Your Inventory
This tip has to do with the proper management of your company’s operations. You should ensure that you document every aspect of your operations. This includes:
- Your total products
- The average number of days it takes to sell new stock
- Obsolete stocks
- Order fulfillment rates
- Rate of backorders
- Total demand rates of products
Potential buyers will request this data to determine how efficient your distribution company is. When the data presented is favorable, they will likely be interested in purchasing your business.
#5. Pay Attention to Distribution Channels
Many distribution businesses are beginning to make use of the internet in carrying out their operations. The rate of distribution through traditional channels is declining as more and more distribution companies are beginning to use platforms such as Amazon.
This is because these platforms make it easier to connect distributors with their customers, even without physical representation. To increase sales, you should also use these platforms to carry out your business.
However, this doesn’t mean you should abandon the traditional channels of distribution entirely. You should continue to maintain your offline customers, in addition to including some services that set you apart from your competitors as discussed above.
#6. Assess Your Company’s Ability to Grow
Timing is everything when you’re trying to sell your distribution company. To get maximum profit, you should strive to sell your distribution company when productivity is high. This will attract buyers that are ready to pay a good amount for your company.
#7. Find the Right Timing
Before engaging in the process of selling your company, you should work on every aspect of the business to ensure growth. Keep in mind that the growth rate of your company will determine the selling price.
That is why you should improve your facilities to increase growth, and, as described in previous tips, make sure that you have what it takes to broaden your customer base.
Steps to Take in Selling Your Distribution Company
After you have raised your company’s value and done all the necessary prep work, there are certain steps you need to take to actually sell the business. Here are some general guidelines to follow:
- Determine the reason why you are selling your company and ensure that your business is in good shape.
- Put your financial records in order (specifically, you should try to improve your financial records).
- Appraise the value of your distribution company. You should hire a business broker to help you with this.
- Organize and compile all your financial statements and tax returns. This will require that you meet with your accountant.
- Get the documents detailing your assets.
- Find a buyer. This stage is a huge undertaking during which you may need to involve a business broker. Upon finding a buyer, there will be different screenings and other processes involved to complete the transaction.
To make the process of selling your distribution company easier, you should contact a business broker. A broker will be able to offer some recommendations that will help you prepare your business for sale.
Once you are ready for the sale, a broker can use their experience and resources to secure a great deal.
Contact Zoom Business Brokers
Hiring a broker is your best bet if you want to make a great profit when selling your distribution company. And at Zoom Business Brokers, we pride ourselves on being able to do just that.
We have a team of professional brokers who are well equipped to guide you through this process due to the experience they have gained from selling various companies.
With us, you can expect nothing less than the best. So contact us today and let us assist you in every possible way to sell your distribution company.