Buying a wholesale distribution business in Florida

These are wholesalers of many kinds of goods: consumer products, apparel, electronics, auto parts, beauty and personal care, pet supplies, marine supplies, nursery plants, medical and janitorial supplies, and much more. Many are importers that buy from overseas factories and sell to retailers, online sellers or other wholesalers in Florida, across the country, or into the Caribbean and Latin America.

Wholesalers earn the difference between what they pay and what they charge, and sometimes freight charges and fees. Margins vary widely: everyday goods that anyone can sell earn thin margins on high volume, while exclusive brand rights or the company's own private-label products can earn more. Customers usually buy on account and reorder regularly.

You'd be buying inventory, supplier relationships, customer accounts, a warehouse, and often trade names, websites and online marketplace accounts. A small wholesaler may have just a few people: buyers, salespeople, warehouse staff and a bookkeeper. In many, the owner personally holds the supplier relationships, sometimes built over decades and in another language.

• Exclusive or authorized distribution rights, in writing, that a new owner can keep.
• A broad customer base with repeat orders, not one big retailer that sets the terms.
• Products customers can't easily buy direct from the manufacturer or online, or service (fast delivery, small minimum orders) they can't get elsewhere.
• Inventory that sells through steadily, with little obsolete stock.
• For importers, clean customs records and a good customs broker.
• Systems that track inventory, landed costs (the full cost including freight and duties) and margins by product and customer.
• Trademarks or private-label brands owned by the company, not the owner personally.
• Suppliers who know other people at the company besides the owner.

Most wholesalers need only a local business tax receipt and a sales tax registration with the Department of Revenue, plus resale certificates from customers who buy to resell. Buying more than half of a business or its assets can make you liable for the seller's unpaid state taxes, up to the price or the value, whichever is greater (section 213.758, Florida Statutes). To protect yourself, get a certificate of compliance from the Department of Revenue before closing. You can also hold back part of the price and pay it to the state within 30 days.

Some products need permits that don't follow the business automatically:

• prescription drugs: a DBPR wholesale distributor permit, applied for before the sale (section 499.012);
• cigarettes: a DBPR permit for each place of business, which can't be assigned (section 210.15);
• alcohol: state and federal licenses;
• nursery plants: a yearly certificate of registration from the Florida Department of Agriculture and Consumer Services (section 581.131);
• food: a food permit from the same department, which doesn't transfer (section 500.12).

Importers also deal with U.S. Customs, product safety rules and tariffs. Ask which permits the business holds, and confirm with each agency how a new owner gets them.

• Supplier agreements, and how dependent the business is on one or two suppliers or one country. Ask whether a supplier could start selling direct.
• An inventory count, its age, and how it's valued. Old stock is often worth far less than the books say.
• How much of sales goes to the biggest customers, and how long customers take to pay.
• Import costs: tariffs, freight, customs records and any open customs issues.
• Trademarks, domain names and marketplace accounts registered to the company. Marketplace accounts can be hard to transfer, so check each platform's rules.
• Product liability insurance and any recalls or safety complaints. An importer can be treated as the maker of a product it brings in.
• Sales tax filings, including sales into other states.

• Which suppliers would you need to introduce me to personally?
• Are any of your distribution rights exclusive, and are they in writing?
• How much of your inventory is more than a year old?
• How have tariffs and freight costs changed your margins?
• Do any of your products need special permits?
• What share of sales goes to your top five customers?
• How do customers find you, and how do they place orders?