Seller with a $25m in sales company looking for advice

September 12, 2024

by an intermediary from City University of New York, Bernard M. Baruch College in San Francisco Bay Area, CA, USA

I am a one man company that I'm projecting $25m in sales this year. I'm looking to retire and trying to find someone to buy and take it over. I received 6 offers so far and rejected all. Here are my issues and looking for any advice you can share. I'm looking for $3.5m for the company and I guess the best way to describe my company is a niche wholesaler. Issues are as follows:

1- I do over 90% of my business with 1 manufacturer and 1 major retailer. Both relationships are very solid and have had them for 15 years. Retailer cannot get the product anywhere but me due to quantities available and price. SBA doesn't like 1 manufacturer and 1 distributer and I also don't touch goods so no warehouse or assets. Issue: tricky for buyer to get a loan
2- Offers have come in where they want my receivables and payables. I am afraid to do that, as buyer might take in the receivables but possibly not pay the payables to the manufacturer. Then the manufacturer would come after me.
3- I want about 85% up front, and I would finance the balance. Most, but not all of the buyers want to give me a smaller amount up front and pay over time. Most offers have come in $2m or less up front. I can work 50% and generate profit of $650k this year and probably $700-$725k next year without the headache if I keep the company.

Any help or feedback would be appreciated. If you want to take it off-line, I can be reached at redacted

Reply by an intermediary
in New York, NY, USA

Hi Marty,

Regarding the financials, I would go over your balance sheet and evaluate if there are add-backs (i.e., what you consider expenses may not be so for the new owner, and those would be added back to reflect the true EBITDA). Customer concentration is an issue, but if you have long term contracts in place and it isn't easy to switch to a new supplier (and you will be willing to remain for a transitional period with the company to help the new owner establish their own relationship with the customer). it is less of an issue. I believe that your worry about payables could be solved by specific attention in the wording of the transfer. If the payables are to the company, not to you, if they are not paid for some reason by the new owner, the manufacturers would have to go after the new owner and not you.

Reply by a lender
in Stuart, FL, USA

Marty, the best thing you can do is have a business valuation completed on your biz. If it comes back at a lower price, which based on your estimated SDE of 650k, it probably will. You may decide not to sell. As far as lending is concerned, yes you have concentration issues with the vendors. You have a SMB, no need to give away any A/R or working capital. If the buyer doesn't have enough money to run your business, they are not the buyer for you. This is a hard SBA deal but not impossible. I think you are going to have a harder time selling if you get a lower valuation mostly because you are not super motivated to sell which is fine. Can you get contracts in place from both the manufacturer and vendor? That will help with the lending side of things. Hope this helps.

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