Selling a wholesale or distribution business: what changes your price

From Matt Behrens, who has bought businesses for 15 years · 2026-10-02

If you own a wholesale or distribution company, your business sits in the middle: suppliers on one side, customers on the other, and a warehouse full of product in between. A buyer will look at each of those links and ask which ones could break. The good news is that most of them can be strengthened well before you sell.

The situations that change your price in wholesale and distribution

Your supplier agreements

A distributor is only as secure as its right to sell what it sells. If your best lines come from one or two suppliers, a buyer wants to know what the agreements say, how long they run, whether you hold exclusive rights in your territory, and whether the supplier must approve a new owner. A handshake that has lasted twenty years feels solid to you, but to a buyer it is an unwritten risk. A buyer will think about what happens if your contact retires or the supplier is sold to a new owner, and will price in that risk.

Read your agreements closely, or have a professional do it. Look for termination terms, change-of-ownership clauses and any rights the supplier has to sell direct. If a key agreement is informal, consider asking the supplier for something in writing while you are still the owner and the relationship is strong.

Inventory: what it is worth and how old it is

Inventory is usually the biggest asset on a distributor's books, and buyers do not take it at face value. They ask how it is counted, how it is valued, and how much of it is slow or obsolete. Aging inventory may be worth much less than its cost, and a buyer will reduce the price accordingly.

Do a real count, separate the fast movers from the dead stock, and decide what to do with the old inventory before a buyer does it for you. Clearing it out may cost you something now, but it gives the buyer a cleaner number and gives you credibility.

Working capital and the cash tied up in the business

A distributor needs cash to buy product and wait to be paid. A buyer will ask how much working capital the business needs to run normally, and will expect it to be left in the business at closing. Expect close attention to how fast customers pay, how long you take to pay suppliers, and whether those habits have changed.

Matt's experience: When I evaluate a distribution business, I immediately look at the inventory and sort it by how fast each SKU moves. For the slower SKUs, I work out the carrying costs (borrowing cost, real estate, environmental, material handling and so on), whether the inventory is really still in the warehouse or was simply never removed from the books because there were no standard inventory audits, and whether it adds value to the business. When I close, I need to know there is enough inventory to operate in the normal course. Stale inventory that doesn't move doesn't help me operate, and I can't value it the same.

Steady, well-documented habits here make your earnings easier to believe. Sudden changes, such as stretching your payables to make a year look better, tend to be noticed.

A few large accounts, your sales reps and your margins

Buyers ask how much of your sales come from a handful of accounts, and whether those customers buy from you or from a particular salesperson. If your reps hold the relationships, a buyer will ask whether they will stay and whether they have any agreements. Margin trends matter too. Falling margins can point to pricing pressure or a mix of business getting worse, and buyers will want a clear explanation. Finally, the warehouse itself matters: a lease that is about to end, or a building you own, changes what the buyer is really taking on.

What a buyer and a lender will ask

• Three years of financial statements that tie to tax returns.
• Sales by customer and by product line, with the largest accounts flagged.
• Supplier agreements, and what they say about exclusivity, term and a change of ownership.
• An inventory report showing age, turnover and what is slow or obsolete.
• How inventory is counted and valued.
• Customer payment habits and supplier payment terms, compared with prior years.
• Gross margin by product line or customer, and what is driving any change.
• Sales reps, their roles, how they are paid and any written agreements.
• The warehouse lease or ownership details.

What to fix 12 to 24 months out

1. Get your key supplier relationships into written agreements where you can, and understand what a sale would mean for each.
2. Count inventory on a schedule, and clear out what is clearly dead stock.
3. Keep track of working capital month by month, so you can show what normal looks like.
4. Reduce dependence on your largest accounts by adding new customers, and keep the big ones well served.
5. Make sure your reps have a real relationship with the company, not only with you, and talk with them about their future.
6. Watch your margins by line and customer, and be ready to explain changes.
7. Look at the warehouse lease or property early, and decide how you want to handle it.

Common questions

Will a buyer pay extra for my inventory?

Usually a normal level of inventory goes with the business, because a buyer needs it to operate. The agreement typically sets a target level of inventory and working capital, based on a count near closing, that you leave in the business. Old or slow stock is discounted or left out, and you should not expect to be paid dollar for dollar for inventory on top of the price. How it works depends on the agreement, so talk to a professional early. (See our guide on working capital for more.)

What if my main supplier will not commit in writing?

That is useful to know. Buyers will see it as a risk, so look at what you can do to reduce it, such as adding other lines, building stronger relationships with more than one supplier, and spreading the ownership of that relationship across multiple people in your business and the supplier's business.

Should I pay down what I owe suppliers before I sell?

Keep your normal habits and be able to show them. Sudden changes in how you pay can confuse the picture, so talk to your accountant first.

This guide is educational planning information, not legal, tax or investment advice.