Distribution businesses are a popular type of business that purchasers often call business brokers for.  Unfortunately, there are relatively few distribution businesses for sale on the market in Toronto or southern Ontario, Canada at any given time.  This article will examine some of the unique characteristics of a wholesale or distribution company and why the demand for them is what it is.

An established network
Once a wholesaling business is going, it is essentially a matter of monitoring cost metrics and supplying customers with the products that are in demand.  The corollary to this is that starting from scratch is very difficult to do. 

A distribution company might import electrical or plumbing supplies, as an example, and have a diverse set of retail clients it has established relationships with. 

Nurturing established business relationships
Oftentimes, a distribution business spends a great amount of time to foster good relationships with their customers so that they can compete on variables other than price.  For instance, a wholesale business might be focused on delivering quality merchandise, superior customer service and be attentive to the needs of the market.  Also, having good supplier contacts and being able to bring things to market quickly and without much complication are all features that end clients appreciate and may be willing to pay a premium for.

Difficult to import products to the Canadian market without a good distributor
From the perspective of overseas manufacturers or suppliers, it is challenging and sometimes next to impossible to enter the Canadian marketplace profitably without an established distributor.  The reality is that there are local business practices, customers and (to some extent) personal relationships that require a connected wholesaler to do business with.

Businesses that supply reusable goods are in demand
If you are thinking of selling a distribution business, the ones that are in high demand are those that supply products that need to be re-ordered often.   Also, distributors with a diversified customer base will command a higher selling price than those that rely on sales from a small group of clients, all other things being equal.

Use a business broker that has experience selling distribution businesses
Selling a distribution business requires a level of business acumen and familiarity with the industry in order to be successful.  Contacting Canadian business brokers with deep knowledge of the business model is a good start.  There are many moving pieces to a sale of such businesses (knowledge of inventory, accounting, margins, relevant laws, etc.) so work with a professional that can help you.

Please contact Steve Skrlac, MBA if you are considering buying or selling a distribution business in the Toronto area or southern Ontario.