Outsourcing Your Selling—An Independent Distribution Exit Strategy
Most owners of Independent Distribution businesses have spent years living for the sake of running their business. Many think about exit strategies much in the same way that they think about writing a will. They tell themselves they're too busy, or wind up putting it off for any reason they can think of. After all, they've worked for long hours and have made years of sacrifice, how does one think about giving up everything that they've working so hard to build?
Sooner or later, a day comes when the owner grows tired of receiving that order late in the afternoon from the buyer who demands that it ship today. Employees move on and the owner once again picks up the slack as he hires and trains new people. The economy slows down and times get difficult, and making a profit becomes difficult or impossible as hard earned savings from better years evaporate.
Does any of this sound familiar? If so, the time has come to seriously think about exit strategies. You've invested and reinvested time and money over and over again, now it's time to think about yourself and how you will use the business you created to enjoy life without working.
Perhaps you've read about the five Exit Strategies for Your Business in Entrepreneur Magazine, and decided that neither going public or lifestyle business transition make sense, and that selling the business, acquisition, and liquidation are the only options to consider.
Selling the Business, Liquidation, and Acquisition Options
Unfortunately, if you are a small Independent Distributor who doesn't have great name recognition or other tools that make you unique, selling the business may not bring more revenue than Acquisition by another Independent. However, dreams of selling the business and living off its revenue quickly fade as one realizes the value of the business is mostly with the real estate and inventory owned. Sadly, many Independent Distributors who have put their businesses up for sale have reported that most offers from other Independents were not much higher than what the e-scrap dealer offered, after adjustments were made to consider business real estate as a separate entity. As owners of Independent Distribution companies we understand this all too well, as we know how little we offer to buy excess from OEM and CMs, and understand that another distributor's cherry-picked inventory is worth much less.
Fortunately, there's another option that the magazine's author completely overlooked, perhaps because it's relatively unique to our industry. The solution is to outsource your selling to another Independent Distributor.
In many cases, this solution will make so much sense that you'll wonder why you ever waited so long. When you outsource your selling to PC Components you essentially become a consignment customer of PCC.
No fees or other commitments.
You maintain ownership of your business.
You continue to have many business tax deductions that you now may have.
Your business provides you with ongoing revenue.
You can rent, lease, or sell any business real estate that you own.
You no longer need to pay employees or payroll taxes.
You can cancel your IPSE and other trade association memberships.
There's no need to obtain or maintain ISO, ESD, or other certifications.
You no longer need to inspect, count, catalog, or advertise inventory.
You benefit from PCC's ability to sell parts for market price.
You benefit from PCC's ability to close more sales.
You can continue buying inventory and simply ship it to PCC to sell.
For companies who own inventory whose sales are not at least double their expenses, it's a no-brainer, as PCC's share would be less than your current expenses. Even when your sales are several times higher than your expenses, outsourcing may be a great solution, as it frees up your time and real estate so that you can use these assets to generate revenue in other ways.
If your time and quality of life are the two most important things to you, then the only disadvantage may be that you've waited so long and can't get back the years that you spent doing everything yourself.
In Case You're Wondering
By the way, in case you are wondering why PCC doesn't do this itself, the reason is simple. My son Joseph, has worked for PCC since high school, and now holds a Director's position. If it weren't for him, I'd probably ask you to sell our inventory so that I might retire and move to some tropical island. Having a son involved in the business changes everything.
Due to the fact that PCC is already offering hundreds of millions of parts for sale, selling your inventory makes perfect sense to PCC. Of course we have an initial expense to catalog everything, and an ongoing expense of storage, but we can make a profit on your inventory even if you don't because our overhead is already paid by sales from existing inventory.
I'd love to chat with you about joining our team of clients who provide PCC with inventory.
The Outsourcing Calculator is a tool developed by PCC to help Independent Distributors decide whether they are better off to continue selling their own inventory, or to allow PCC to outsource inventory sales.
Try the Inventory Outsourcing Calculator below and then give us a call!