Are distributor/reseller businesses good search fund investments?

July 10, 2025

by a searcher from University College London, University of London in Kuala Lumpur, Federal Territory of Kuala Lumpur, Malaysia

Hi all, I have been coming across a lot of distributor and reseller businesses. The business model is just importing products from abroad and reselling them in the local market. They typically do not have a high margin and limited value add potential. They range from medical devices, pharmaceuticals, consumer goods, etc. Have others looked at these type of business and what are your thoughts?

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Reply by a searcher
from Rice University in Columbus, OH, USA

I own and operate a distribution and manufacturing business. Generally, distribution companies are terrible acquisitions, which explains the low margin profile you're seeing. They're stuck between their manufacturers and their customers - the manufacturer will try to push their prices up while the customer will try to push their prices down. This pressure from both sides results in low margins because most distributors don't have any kind of bargaining power. The only situations where that's different is where the distributor is a value-added reseller and offering value to the manufacturers they buy from and to the customers they serve. TLDR; if it's a box-in-box-out distributor, move on.

Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA

I bought a distributor via self-funded search. It’s going well, but it’s very different from the situation you described above. Being a pure importer and reseller can be tough. Dealing with overseas manufacturing and logistics makes it hard to plan an inventory. Not to mention recent tariff impacts. If your customers are one-off purchasers it’s even more difficult because you’re always searching for new customers. Barriers to entry on a business like that are low as mfg overseas will usually sell to anyone with a checkbook. May be better off building rather than buying one of these type of businesses. If the distributor has consistent vendor and customer base it could be worth pursuing. As long as there’s good reason mfg doesn’t want to sell directly to end customer and you have a repeat customer base it could be a solid business.

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