You move other people's products and live on the spread. A buyer underwrites how durable that spread is, how much working capital it takes to earn it, and how much of it depends on a handshake with a supplier or a customer that was never put in writing.
You know your fill rate, your days of inventory, and which three customers you cannot afford to lose. You carry supplier terms in your head and the relationships that earned them. The margin looks thin on paper, and it is, until you see how much volume runs through it. That is the business a buyer has to be shown, because it does not show itself.
A distributor's real asset is the supplier agreement and the customer relationship, and a buyer prices the risk that either one walks. An exclusive line that lives on a handshake is worth a fraction of the same line in a signed contract. The spread you worked a career to hold is only as durable as the agreements underneath it, and most of those were never written down.
A buyer in this market underwrites four things before they will talk about price. Each one is a discount by default, and a point of value once it is evidenced.
The lines you distribute and the customers you serve, both read for concentration. A buyer models the day the biggest supplier goes direct or the biggest account leaves.
Exclusivity, territory and terms. What lives in a signed contract is value. What lives in a relationship is a risk the buyer discounts.
Inventory and receivables tie up cash. A buyer separates the earnings from the capital it takes to produce them, and prices the peg accordingly.
Gross margin tested for how it holds, and vendor rebates tested for whether they recur. Earnings propped up by a one-time program come back out.
The same four things, turned from risk into value. This is the preparation a Value Protection Study and the Cordis MRI are built to run.
The key lines moved from handshake to signed agreement, with exclusivity and term, before a buyer asks what happens if they walk.
The account base mapped and broadened where it can be, and the durability of the top accounts documented.
The inventory and receivables cleaned and the peg established, so the number is not argued at the table.
Every adjustment and every rebate filed beside its proof, tested the way a buyer's accountant will test them.
His biggest supplier line, a third of the business, ran on a thirty-year relationship and nothing in writing. Before the market saw the company, that line was put under a signed agreement with exclusivity and term. The business did not change. What a buyer could underwrite did, and the number moved with it.
More in practiceThe Cordis MRI runs your own financials through the underwriting model of every buyer lane, and returns the range, not a single number. The Value Protection Study turns that read into a sequence. Both happen before anything goes to market.