Basic valuation

The basis of the valuation is more or less identical for all companies. The Nimbo Guide to Business Value provides you with useful background information and everything you need to know about the topic.

Calculation example for a wholesaler

Assumption: A wholesaler with up to five employees achieves a profit of 50,000 with a turnover of 500,000.

Multiply the profit by an industry standard multiple. There is no binding multiplier that could be named here. For small to medium-sized wholesalers, a multiplier between 3 and 6 is common.

If we assume a multiplier of “4”, the valuation would be:

Value = Profit x Multiplier = 50,000 x 4 = 200,000

General value drivers

It is not only the profitability and size of a company that determine its value. A number of internal value drivers also have an impact – both positively and negatively – on the selling price. Based on the base valuation, the value can increase or decrease by up to 25%. The most important value drivers here are:

  • Independence from the owner : For a buyer, the question arises whether the success would continue without the current owner. The less the company depends on the activities and relationships of the owner, the higher the average bids are.
  • Growth prospects and potential: Investors are interested in the future prospects of a company. Questions that are important here: Is the main market growing? What percentage growth do I forecast for my company over the next three years? Is there potential within the core competence that could be exploited profitably? Is there a shortage of skilled workers or is it easy to recruit new employees? Is there sufficient cash flow for replacement and expansion investments?
  • Market position: This takes into account the catchment area and the pricing policy of the company. Companies that operate not only regionally and companies that can enforce prices that are above the market average receive, on average, significantly higher purchase offers.
  • Balance: How dependent is the company on individual customers or business partners (e.g. suppliers)? Companies without large concentration risks receive, on average, higher purchase offers.
  • Employees: One motivation for purchasing companies can be access to new qualified employees who are difficult to find on the labor market. Companies that can attract and retain sought-after employees receive, on average, significantly higher purchase offers.

Industry-specific factors for wholesale trade

Which factors are particularly relevant when evaluating a wholesale business? What determines value besides the obvious things like sales and profits and the general internal value drivers? What influences the attractiveness and thus the value of the company? If your company presents itself exceptionally positively in the following points, this can mean an additional increase in value of around 10-15% on the base value.

  • Supplier structure as a value driver: The supplier structure has a significant impact on the value of a wholesale company. If it is well thought out and diversified, it has a whole range of positive effects. Advantages can include: lower costs and higher margins due to greater negotiating power, greater security of supply and shorter reaction times to changes due to a broader supplier base, etc. A good supplier structure increases the value of the company.
  • Amount of trading margin: Most wholesale companies aim for a trading margin in the range of 15-30%. Industries with specialized or high-priced products may achieve higher margins, while highly competitive or price-sensitive markets may have lower margins. It is important that you as a wholesaler regularly review your trading margins and optimize them through efficient business management, good supplier relationships and smart pricing strategies, thereby increasing the value of your company.
  • Optimal inventory turnover rate: The inventory turnover rate in wholesale trade varies greatly depending on the industry, product type and business model. It has a direct and significant impact on various aspects of the wholesale business, including liquidity, cost structure, efficiency, competitiveness and financial ratios. Increasing turnover speed improves operations, reduces costs and increases profitability, ultimately increasing the overall value of the company.
  • Share of own brands: The percentage of private labels has a significant impact on the value of a wholesale company and can increase it considerably. Private label products can differentiate the product range and set the company apart from competitors. They are not dependent on others, can be more innovative as they wish and need, develop new products or adapt existing ones and generally react more quickly to market changes. A successful private label increases customer loyalty, as customers tend to stick to products and brands that they perceive as high quality and reasonably priced. Private label products generally offer higher profit margins than branded products because the production and distribution processes can be better controlled, thus reducing costs.
  • Exclusive distribution rights to the products: Exclusivity agreements enable you to achieve higher margins because you have a special market position as the sole source for certain products. Their negotiating position with retailers who want to distribute the exclusive products is strong. New competitors find it more difficult to enter the market because the most attractive products are sold exclusively through them. Companies with exclusive distribution rights offer a high level of earnings security and are valued higher. One potential danger is dependence on a few suppliers. If these agreements end or suppliers change the terms, this can have negative consequences.

Nimbo business valuation for wholesale

In addition to figures such as sales and profits, the Nimbo company valuation also takes into account the value drivers mentioned above. Free version available!