How Distribution (General) Businesses Are Valued
Distribution businesses are valued on Seller's Discretionary Earnings (SDE) or EBITDA. The valuation depends on customer concentration, vendor exclusivity, and gross margins. Distributors with exclusive territory rights, value-add services, and diversified customer bases command premium multiples. The key question buyers ask: how defensible is this revenue, and would customers easily switch to a competitor?
SDE = Net Profit + Owner’s Salary + Owner Benefits + Discretionary Expenses
They then multiply your SDE by an industry-specific multiple derived from comparable transactions. For Distribution (General) businesses, that multiple currently ranges from 2.5x to 4.5x.
Quick Example
A Distribution (General) business with $300K in SDE at a 3.5x multiple would have an estimated value of $1.05M. At the full range of 2.5x–4.5x, the estimated value is $750K–$1.35M.
Current Distribution (General) Multiples
These ranges reflect recent transaction data for general distribution businesses. Companies with exclusive vendor agreements and diversified customer bases consistently trade at the upper end.
| Revenue Range | Typical SDE Multiple | What This Means |
|---|---|---|
| Under $1M | 2.0x – 2.8x | Small distributor, limited accounts |
| $1M – $3M | 2.5x – 3.5x | Established accounts, vendor relationships |
| $3M – $10M | 3.0x – 4.5x | Exclusive agreements, management team |
| $10M+ | 4x–7x EBITDA | Regional or national platforms |
Want to understand how these multiples work and what EBITDA vs. SDE means for your business? Read our full guide: How Service Businesses Are Valued.
What Drives Your Number Up (or Down)
Two Distribution (General) businesses with the same revenue can be worth very different amounts. Here are the factors that separate high-multiple from low-multiple businesses:
Drives Multiple Up
- Exclusive territory or vendor agreements — protected positioning that competitors can't replicate
- Value-add services — kitting, assembly, inventory management, or technical support
- Diversified customer base — no single customer over 15% of revenue
- Strong gross margins — margins that reflect value-add rather than commodity markup
- E-commerce and digital ordering — online platform that reduces sales costs and expands reach
Drives Multiple Down
- Commodity distribution — products available from many competitors
- Single customer concentration — one account provides 30%+ of revenue
- Owner manages all relationships — all vendor and customer contacts depend on one person
- Thin margins — competing on price with low gross margins
- Working capital intensive — large inventory requirements relative to revenue
If you’re not sure where you stand on these factors, our Exit Readiness Assessment scores you across all of them in about 3 minutes.
Frequently Asked Questions
What is the average distribution business worth?
Distribution businesses typically sell for 2.5x to 4.5x their Seller's Discretionary Earnings (SDE). For a business with $300K in SDE, that translates to an estimated value of $750K to $1.35M. Companies with exclusive vendor agreements and diversified customer bases trade at the higher end.
What SDE multiples do distributors trade at?
Based on recent transaction data, distribution businesses trade at SDE multiples of 2.5x to 4.5x. The defensibility of revenue — exclusive agreements, switching costs, value-add services — is the primary valuation driver.
How can I increase the value of my distribution business before selling?
Secure exclusive territory or vendor agreements, add value-add services that justify pricing, diversify your customer base, build a sales team so relationships extend beyond you, and develop e-commerce capabilities for efficient ordering.
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