Value Drivers for Paint Wholesalers
The paint wholesale industry is reliant on many other industries to be successful. One of the major industries paint wholesaling relies on is construction. When construction experienced a decline in 2020, so did paint wholesale. However, this industry rebounded and has remained strong, including an 8.6% increase in 2021 alone. The biggest issue for this industry is the possibility of manufacturers selling directly to retailers. This process completely rules out the need for wholesalers. Many companies have in-house buyers which helps them save on costs. As such, paint wholesalers have a lot of competition. This forces them to stay adaptable to the changing markets. These factors impact the value of a paint wholesale company. When valuing a paint wholesaler, a business appraiser will analyze key value drivers for paint wholesalers.
Peak Business Valuation, business appraiser, helps paint wholesale owners understand the value of their current or potential business. There are many things impacting the value of your business. These value drivers are important to understand whether buying, selling, or growing your business. A business valuation will discuss specific value drivers and determine a fair market value for your paint wholesale business. For more information, schedule your free consultation below with Peak Business Valuation, business appraiser.
Key Value Drivers for Paint Wholesale
Below we discuss key value drivers for paint wholesalers. Through a business valuation, you can learn specific value drivers that will help your paint wholesale company increase its value. For questions, schedule a free consultation with Peak Business Valuation, business appraiser.
World Price of Crude Oil
The first factor impacting the value of a paint wholesale business is the price of crude oil. Crude oil is a crucial ingredient in paint. As such, the paint industry is dependent on the world price of crude oil. Crude oil is very volatile. It can affect the financial performance of a paint wholesaler. At Peak Business Valuation, our business appraisers look at historical price averages. This helps the valuation analyst understand a company’s operations during a normal year. This is often a better indicator of value.
Technology
The paint wholesale industry is experiencing many changes. One of those changes includes implementing the use of technology. Wholesale is the middleman between manufacturers and retailers. Because of this, technology is an important piece of the process. Technology can help track the progress and process of your paint. Wholesale warehouses must be organized to maintain efficiency. Using technology to minimize delays is a great way to maximize efficiency. Technology has moved the world from manual labor to automated systems and processes. When valuing a paint wholesaler, the business appraiser will analyze your profit margins and operating margins. They will compare the efficiency of your paint wholesale business to similar paint wholesalers.
Balancing eCommerce & Back-End Processes
As technology increases, consumers expect more online shopping options. As such, a wholesaler needs to consider the option of an eCommerce business. In addition, many retail companies are now utilizing online purchasing. For a paint wholesaler to be successful with an ecommerce revenue line, the paint wholesaler must be extremely organized. They must also be well aware of the products in their warehouses and quantity. Errors in this department can be deadly for a business. This is where the need for technology comes in. Technology can help in two different ways. The first is to ensure the eCommerce business is running smoothly. The second is to ensure the back-end inventory is being accounted for. This helps streamline the process. In the valuation process, a business appraiser will analyze the types of revenue coming through, whether eCommerce or normal transactions. Revenue streams impact the value of your business.
Recurring Revenue
The paint wholesale industry has many barriers to entry. To create a successful paint wholesale business it is important to gain key partnerships with manufacturers and retailers. These key partnerships will bring in recurring revenue. This steady flow of income brings consistency to your business. Recurring revenue should be the main source of income for a paint wholesaler. This is a competitive market and an imperative value driver. This value driver will take time, patience, and great communication with the right people. As a business appraiser values your paint wholesale business, they will look at your revenue streams. The most valuable revenue streams are recurring revenue.
Product Pricing
As previously mentioned, the world price of crude oil is volatile and currently very expensive. This is causing extreme inflation, including paint price increases. While this cannot be avoided, your wholesale price needs to remain competitive with other wholesalers. Reevaluate your business plan to ensure you are offering optimal customer service, maintaining key partnerships, and finding ways to cut costs while remaining profitable. This is a very difficult position to be in. However, if a paint wholesaler wants to remain in business, they have to make sacrifices. Economic conditions are always changing, as will your pricing. Make sure as a business owner that you are aware of the competition. As a business appraiser values your paint wholesale business, they will compare your profitability ratios and financial ratios to similar paint wholesalers.
Summary
As you can see, there are many value drivers impacting the success of your paint wholesale business. This industry is very competitive. However, it is also experiencing a decline in demand as manufacturers go straight to retailers. To be successful in this industry, focus on key value drivers. Understanding these drivers will help you know the needs of your business. A great way to understand the fair market value of your business is to obtain a business valuation. A business valuation will determine the value of your paint wholesale business and key value drivers.
Peak Business Valuation, business appraiser, values businesses across the country, including paint wholesalers. We would love to answer any questions you have about the value of a paint wholesaling business. Schedule your free consultation below.
Valuing a Paint Wholesaler, Valuation Multiples for a Paint Wholesaler, and How to Value a Paint Wholesaler.
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