Industrial Equipment Sales and Distribution With Single Manufacturer
October 21, 2023
by a searcher from University of Wisconsin - Whitewater in Chicago, IL, USA
How do I mitigate, or at least rationalize, the single manufacturer risk associated with this business?
Business Overview: Distributor and service provider specializing in heavy industrial equipment. The company is prominently associated with the sales of a single brand of industrial equipment consisting of many different variations of that same piece of equipment. The business also offers a range of complementary products that account for less than 10% of sales.
Price and Performance: Asking Price: ~$2M (inclusive of inventory and real estate) Revenue: ~$2.9M Seller Discretionary Earnings (SDE): ~$700K
Risks: Product Concentration: Heavy emphasis on a single brand for a major chunk of sales. Niche Market: The company operates within a specialized industrial sector. Distribution Agreement: The manufacturer can alter or retract terms without notice. Also, there are specified territorial and advertising limits, with potential penalties for violations.
from Texas A&M University in Elizabethton, TN, USA
If you want the business / job, then propose something like this to owner: phased buyout 100% seller financing. You will work for say 75% wage over 3 to 4 year period, earning your equity, while seller has way out the door and transition that works for them, keeps them super engaged.
Need rules if you walk, or fired. Ways to do this documents in other posts here, basically need some penalty, claw back on your wage discount if fired and equity is clawed back.
At the end of the tunnel, you may have a nice cash flow machine in an industry that you like, on a deal that lowers your personal risk.
from Cornell University in New York, NY, USA