Selling a food and drink distribution business involves careful planning to ensure that, not only is it placed on the market at the right time, but that it is also operating at its most efficient.
There are many ways in which you can maximise the value in your business, but it helps to have the support and expertise of professional business sales brokers with knowledge of your sector.
Selling My Business has extensive experience of selling food and drink distribution businesses, and can offer the guidance you need at this crucial point in your business journey.
Common reasons for selling a business include approaching retirement, a desire to move on to a new planned venture, or sometimes ill-health. In other cases, the business has come to a natural conclusion as far as the owner is concerned, and the exit strategy incorporated into the original business plan is being executed.
According to the Federation of Wholesale Distributors (FWD),
“Food and drink wholesale distribution makes a vital contribution to the UK economy, turning over £29 billion annually, employing nearly 60,000 people evenly across the country, and generating gross value added of £3 billion annually.”¹
So if your market is experiencing an upturn, and conditions are favourable, this too may make it a good time to sell.
By understanding the business sales process, you can take steps to prepare your business for sale in good time. It is common for business owners to start planning two or three years before they intend to place their business on the market, so what might you need to consider in terms of the general sales process?
This document is sent out to interested parties when the business first goes on the market. It contains information on why you are selling the business, your preferred timeline for sale, and the history behind it.
Crucially, the information memorandum also provides potential buyers with information on suppliers, customers and members of staff, and financial data including sales forecasts. You need to ensure the information you provide is accurate and reliable, as the due diligence phase will reveal any anomalies and questionable transactions.
Obtaining a fair valuation for the business is a key part of the sales process. The EBIDTA method (Earnings Before Interest, Depreciation, Tax and Amortisation) may be used, but you need to ensure that non-tangible assets such as goodwill and brand reputation are also included, alongside your ownership of physical business assets.
To ensure your exit from the business is as smooth as possible, and that it also meets your goals, you will need to consider the warranties and indemnities you are prepared to provide, and how the value will be extracted on sale. Receiving staged payments may be more beneficial than a large lump sum, for example, which is likely to considerably increase your tax liability for the year.
But apart from these general business sales issues, what challenges do you face that are specific to the food and drink distribution sector?
If Brexit means the introduction of closed borders, it would significantly affect distribution timescales and general efficiency of operations. Closed borders around Europe, and between Northern Ireland and the Republic of Ireland, could be disastrous for food and drink distributors that are already operating on narrow profit margins.
The existing shortage of drivers in this sector could be exacerbated by Brexit if workers from the EU face restricted access. Driver shortage has been an ongoing challenge, partly due to the unsociable hours required, and the general lack of facilities when on the road.
Attempts to manage congestion on the roads, particularly in urban areas, have led to a range of environmental measures being introduced by the government. Congestion charges and restrictions on the number of large distribution vehicles on some city roads, means that deliveries and timescales can be disrupted, with the resulting danger being failure to meet your contractual agreements.
Selling My Business can help you at every stage if you are selling your food and drink for a wholesale distribution business. We will provide a fair and accurate valuation, and ensure your money is extracted tax-efficiently.
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