In today’s highly competitive business landscape, transforming a distributor or reseller into a valuable company may appear to be a daunting task. Distributors often face the challenge of being undervalued due to the lack of differentiation and vulnerability to price wars. Increase the value of your distribution business using ideas from this article!
However, the key to unlocking true success lies in setting yourself apart through innovation and the development of intellectual property (IP). In this comprehensive article, we will delve into effective strategies and success stories that will empower you to maximize the value of your distribution business and position it for growth and acquisition.
The Power of Developing Your Own Intellectual Property
Creating and owning intellectual property is a game-changer for distributors. It provides a unique selling proposition and sets you apart from the competition. Let’s explore the success story of Miles Faulkner, the founder of Blended Perspectives, a renowned reseller specializing in Atlassian products.
Faulkner recognized the need to establish a more valuable reseller and embarked on developing their own intellectual property called the Marketplace Analytic Research Service (MARS). MARS was designed as a powerful tool to guide Atlassian users in selecting the most suitable aftermarket apps. By owning MARS as intellectual property, Blended Perspectives stood out among the multitude of Atlassian resellers.
This differentiation not only enhanced their appeal to prospective clients but also made them an attractive acquisition target for Contegix, a larger reseller of Atlassian products. The acquisition showcased the exceptional value of creating unique products and services in a highly competitive marketplace.
From Middleman to High-Value Provider
Let’s turn our attention to the inspiring journey of Mahul Sheth, the visionary behind VMS Aircraft. Sheth started his entrepreneurial venture in 1995 as a distributor of airline parts, offering a “one-stop shop” for airlines and their maintenance crews. While initially surviving on modest gross margins of 22-23%, Sheth was determined to evolve his value proposition and build a more valuable company.
He recognized the critical importance of meticulously handling the materials required by airlines for optimal safety and performance. Sheth’s commitment to excellence led him to invest in a clean room facility that minimized dust and purchase dry ice containers to create optimal storage conditions for certain materials. Additionally, he introduced the practice of repackaging materials into smaller containers to cater to airlines’ specific needs.
This transformation from a simple reseller to a value-added provider propelled VMS Aircraft’s gross margins to an impressive 60-70%. Along this remarkable journey, Sheth attracted the attention of a French company eager to enter the U.S. market. Recognizing the unique offering and layer of value-added services created by VMS, the French company chose to acquire VMS for 7.4 times EBITDA, solidifying the incredible value derived from differentiation and innovation.
Strategies for Success
- Pinpoint Your Unique Selling Proposition: In a highly competitive field like distribution, it is crucial to identify and amplify your unique selling proposition. Determine what sets your distribution business apart from others and emphasize it. It could be proprietary technology, exceptional customer service, specialized industry knowledge, or a combination of factors. Highlighting and leveraging your unique aspects will help differentiate your company and attract attention from potential acquirers.
- Invest in Intellectual Property: The development of intellectual property is a powerful tool to elevate your distribution business. Create innovative solutions, proprietary technologies, or specialized processes that differentiate you from competitors. Owning exclusive intellectual property not only adds value but also positions you as a thought leader in your industry.
- Focus on Value-Added Services: Elevate your business by shifting from being a simple middleman to a value-added provider. Identify ways to enhance your offerings and go the extra mile for your customers. Whether it’s meticulous handling, customized packaging, or additional services, providing exceptional value beyond the core product will set you apart and foster customer loyalty.
Transforming a distributor into a valuable company requires a strategic approach centered around innovation, differentiation, and the development of intellectual property. By pinpointing your unique selling proposition, investing in intellectual property, and focusing on value-added services, you can unlock the true potential of your distribution business.
The success stories of Miles Faulkner and Mahul Sheth exemplify the remarkable results that can be achieved by embracing these strategies. In a fiercely competitive marketplace, embracing innovation and intellectual property will enable you to rise above the competition, increase the value of your business, and position it for potential acquisition. Seize the opportunity to unleash the full potential of your distribution business and pave the way for a successful future.
Remember, by leveraging innovation, differentiation, and intellectual property, you can transcend the limitations of a traditional distributor and become a sought-after player in your industry.