We had a nice company come on the market about a year ago but it failed to sell because of an inventory issue with the suppliers and to be frank, an inventory issue with the seller not knowing how much inventory he had or didn’t have.
The business is a distributor of machinery that is quite large and heavy. At the time, all inventory was held in a yard, so each time a shipment came in temporary workers were used to off load the trucks and sort the units into pallets in the yard.
We took the business off the market for year to allow the owner to regroup and reorganize how he tracks his inventory. What he did was even better. He hired third party logistics (3PL) companies to hold inventory for him. So instead of holding inventory in a single yard, the inventory is now stored in three third party warehouses across the country. Instead of having to track and manage inventory, all he has to do now is press a button (or perhaps a few) to get the inventory reports from the 3PL firms.
In addition, he has fewer employees, a smaller health care plan, fewer temps to hire and since he really hated to manage inventory, one less headache at the end of the month. He figures the move saves him about $50,000 a year by using the 3PL providers.
Finally, it makes the business much, much easier to relocate, which can be an important point when selling a business. It also opens up where the business could be relocated to. Previously, because of the size and weight of the product, the business needed to be relocated near a port city, preferably on the west coast, which mean LA, the Bay Area or Seattle. Now, it could be anywhere.
It is a nice mid-size company, and now it can go to the right buyer practically anywhere in the US. I can’t wait until it hits the market again.
compasspointcapital
com