Business valuation of a food distribution company
Before starting with your food distribution company valuation, consider these industry statistics:
In the US there are currently over 2,600 such businesses classified under SIC code 5149 and NAICS 42441. Food wholesalers generate a combined annual revenue of $160B. The industry employs over 132,000 people. The average food products distributor makes over $61M in sales with a staff of 50. Sales per employee average about $1,200,000.
Business valuation for food distributors
Successful privately owned food distributors are desirable acquisition targets for both their competitors and professional investment groups. So the selling prices of similar food distribution companies are an excellent source of comparable data you can use when valuing your own company.
To make such a comparison work, calculate the ratios of business selling prices to the firm’s financial metrics. As a result, you get what is known as valuation multiples. And you can use the multiples to come up with an estimate of your business market value.
The typical valuation multiple for this wholesale industry sector is based on the business yearly gross revenues or net sales.
Example: Food distributor business valuation based on its revenue
To illustrate the idea, let’s take a typical food products wholesaler with an annual gross revenue of $50M and inventory of $25M. Choosing a set of valuation multiples gives us the following valuation results:
| Multiple | Multiple value | Business value ($’000) |
|---|---|---|
| Low | 0.17 | $33,365 |
| High | 1.38 | $94,005 |
| Average | 0.46 | $48,070 |
| Median | 0.34 | $42,135 |
| Average Business Value | $54,394 | |
The value of inventory is added on top of the business value determined using the valuation multiples. This is quite typical for wholesale companies. One reason for valuing a company in this way is that inventories in wholesale industries vary over time as owners adjust the volume of products available.
Food Distribution Company Valuation
Current food distribution business sale prices help you determine the value of any other distributor operation. So you can refine your results by running the calculations using other financial figures such as net or gross profits, EBIT or EBITDA, cash flow, owners equity and assets.
See Valuation Tour