How much is a Wholesale Brand worth when Selling the Business?

[Dillon M. Leonard]

Hi! I've developed a successful Wholesale Business in Louisville, KY that has made close to 6 figures this year and has had growing profits for the past 3 years, I'm getting into Commercial and Leaving Residential and plan to cash in and sell my Wholesale Business, I just have no idea what it be worth or what to ask?

Essentially I'd be selling the Brand Name, 3 Premium Domains for the Geographic Areas we cover, a solid 800+ Buyer List, and Lead/Disposition Website. The (3) Domains alone are worth $4,000.00+ as undeveloped Domains according to GoDaddy.

Does anyone have any idea what something like this would sell for? 

THANKS in Advance!

[Charlie MacPherson]

@Dillon M. Leonard  While I'm a business broker, let me start by saying that I would not represent your business, as I work only in Maine, New Hampshire and Vermont, so this isn't self-promotion - but I'll give you an idea of how we value a business that we're representing for sale.

A business is valued based on the total cash flow to the owner from all sources.  When I analyze a business, I derive that primarily from tax returns but also scour P&Ls for "add backs". 

Add backs are expenses incurred by the seller that won't necessarily be there for the buyer.  Things like depreciation (tax expense, not a real expense), one-time remodeling of a showroom, one time (or very infrequent) repairs, upgrades, etc.  Also added back are personal expenses paid by the company - health and life insurance, 401K, that "business meeting" you had in Hawaii, non-working family members on the payroll, etc.

These combine to create a number called SDE, or Seller's Discretionary Earnings.  We then apply a multiplier, which depends on the industry, competitive profile, length of time in business and several other factors.  I've seen multipliers as low as 1 and as high as 7 and getting to the right multiplier takes a lot of research on our part.  Most run between 2 and 4.  That's the value of the business component of the sale.

In larger companies (roughly $10M+) , there is a different method called EBITDA - earnings before interest, taxes, depreciation and amortization.

To that SDE value, we add the value of assets (vehicles, machinery, etc) and real estate, if any is to transact.  These give you the total sale price.

Trying to sell a wholesale business is going to be very tricky.  First, unlicensed wholesaling is illegal in pretty much every state, so the underwriter for an SBA loan will probably decline. 

Next, what is your book of business?  Is it one-off sales (not good) or do you have a large number of repeat buyers (better).

For example, think of a heating oil dealer.  The one I'm thinking of has several hundred customers that puts an SDE of almost $300,000 in his pocket each year.  That's a book of business that has value.  He's on the market at $750,000, so there's a very realistic break-even scenario.

As a wholesaler, you would have to convince a buyer that you have something worth selling - and a "buyer's list" doesn't cut it.  Anybody in the business knows that the overwhelming majority (I'd guess over 99%) of people on a wholesale buyer's list are dreamers who will never transact. 

The value of the brand name and domain names is whatever you can get on the open market.  Your buyer will probably be an inexperienced newbie who watched a wholesaling webinar or took some weekend wholesaling guru course.  He'll take a home equity loan on his house and go into debt because he was told that unlicensed wholesaling is a great way to make a lot of money in a hurry.  That's your best shot at a sale.

Good luck in your pursuit of commercial.