Now may be the right time to improve your business or to harvest your investment. This article presents some ideas for your consideration.
Business Improvement Opportunities:
• If you don’t already have one, consider establishing an “Advisory Board” of four to five successful senior executives from outside your company – including several from outside our industry. Seek out individuals with areas of expertise that augment those already available.
• There is also a great pool of talent available if you want to upgrade your sales team or your management team. Look for people who have a proven track record for improving performance and profitability.
• Operators are more open to proposals now than they have been in years. They want someone to bring them new ideas to help them grow their businesses and their profits. Ancient loyalties have gone down in value.
• If you are expecting growth, market pricing on available assets is lower: you can buy refrigerated trucks and trailers at very favorable pricing, commercial real estate is becoming available in most markets at favorable prices.
• There are an increasing number of opportunities to acquire other distributors at fair prices. This can help you grow capacity, knowledge, customer base, and geographic reach.
Business Sale Opportunities:
• We see potential buyers that need additional warehouse capacity scouring contiguous geographic areas for foodservice distributors that fit their model for expansion.
• We see potential buyers searching for specialty businesses to expand their breadth of offerings and increase revenues and improve customer loyalty and retention.
• We see good matches for potential sellers reaching out for new ownership. Some want to fold in their business to another company before more value is diminished. Others seek to be acquired as a stand-alone entity and help their operation take advantage of growth opportunities with new capitalization.
What to Do?
Planning your growth – whether it includes buying another distributor or simply expanding your warehouse capacity – requires a clear assessment of your strategic interests and financial capabilities. Your goals should be to position yourself for success – and your objectives should be to build skills and capacity now for when the economic upturn kicks in.
• Potential sellers should identify and work with a proven advisor with experience in our industry to clean up their financials and prepare your optimal go to market strategy before seeking a buyer. Depending on your desired timing and the state of your business, the advisor’s business review and improvement process can encompass a quarter or 12-18 months of revenue building and/or cost cutting opportunities to drive a higher valuation for your business.
• Potential buyers should conduct a careful review of business, financial and personal goals – then develop a list of opportunities. We see many owners wisely taking stock of what their next growth areas should be – specialty items, customer segments, geographies – then matching their financial capabilities with the best opportunities.
Last, a word for potential sellers out there, the market is not just comprised of bargain hunters. There are many quality distributors looking for good businesses and seasoned management teams to go with them. We have distributors of all sizes calling to find out about the sellers we represent. They’re in healthy financial condition and are actively planning their next move. It’s not just the giants in our industry looking for growth; it’s the healthy local or regional distributors, often with cultures similar to yours, as well.
For additional information on this topic, please visit http://www.ksadvisorsllc.com/finance_report.htm and see our recent articles on stand alones vs. fold-ins situations, and other articles on buying or selling a foodservice distribution business.
Bill Beattie is Managing Director at Keiter Stephens Advisors(www.ksadvisorsllc.com), a foodservice distribution finance and consulting subsidiary of Keiter, Stephens, Hurst, Gary & Shreaves. They have worked with over 50 privately-held distributors across the country. KSA services include:
-Mergers and Acquisitions: guiding the sales and acquisitions of foodservice distributorships and regional sales territories
-Profitability Improvement on both the vendor and customer sides
-Custom Strategic Services, including transition planning for family-owned distributors and driving management consensus with KSA’s 3-1-1 Planning Process
-Custom Finance Solutions, including finance strategy development, distribution center expansion analysis, lease or buy decisions on real estate and equipment, and cost segregation studies.
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