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Paul’s Perspective – Distribution & Drones

October 8, 2016

Distribution and Drones

I do not like to name drop, but…… some 18 months ago I was appointed to the Board of a US quoted company.  The Company was notable for a number of things, including the fact that one of my fellow four Directors was the former CEO of Walmart, Mr Bill Fields.  It was a real privilege for me to be working with Bill and the other accomplished Directors and I learned a huge amount from them.  Walmart is, for those that don’t know the stats, the largest retailer in the world by a country mile.  Revenues in 2015 were a mere $486 Billion (yes, that is a B) which puts the second retailer in the world (Costco) to shame with a mere $112 Billion top line!

Board meetings in the Napa Valley were great fun and I was privileged to have the opportunity to take counsel from such well-seasoned businessmen.  I shall never forget those Board meetings, but also the lessons that I learned for business more generally.  And that is where ‘Distribution’ comes in.

Distribution was the headline agenda item for almost every single meeting we ever held.  In the same way that ‘AOB’ was the defacto last item on every agenda, Distribution was always the first.  We spent hours debating distribution and the importance of it to so many businesses.  For many businesses distribution provides a real point of difference; a USP that sets them apart from their competition.

With time, ‘Distribution’ can be built.  It takes time and effort to build and you must be careful to build balanced Distribution that does not leave your business reliant on a particular sales channel which may be out of your full control.   Here at Bluebox there are so many businesses that we see, on a weekly basis, with great products, great service offerings and great innovation…but very weak distribution.  I don’t enjoy telling such business owners that their product, service or IP is great, but that their business is lacking real value as a result of this missing piece of the puzzle.

But fear not.  If you have a great product or service, but limited distribution, the sale of your business can be used to your advantage.  Bluebox are completing an increasing number of deals where the ‘driver’ of the sale exercise is the identification of a buyer whose distribution is significant and, critically, ‘useable’ by them in the business they are divesting.  It can, and often is, a true ‘win-win’ scenario.  We recently sold a business with a great digital product to a FTSE 100 buyer that had the distribution that our client’s business needed.  Structured in the right way It delivered a very big price to our client.

If you can take the time, and I would argue it is of critical importance that you do, all business owners should ‘map out’ the distribution that they currently have and assess the ways that this could be strengthened.  An ‘Acqui-Hire’ deal is a way to structure a deal whereby you benefit, in particular by achieving a higher price, by leveraging a third party’s distribution.

On the basis that 100% of a business WITHOUT distribution is worth far less than 50% of a business WITH distribution, some very interesting opportunities arise.  They may not be obvious, but they are often significant. Create a shopping list of exactly what your business needs to grow and, if as is the case with many, the Distribution is on there, consider an Acqui-Hire deal to create value.

Drones

I recently purchased a cheap and cheerful drone to use in the wonderful fields adjacent to our house.  It is fairly easy to fly, great fun to use and takes photo and videos from the air that put something very different into the family photo album.  Drones will, unless the Civil Aviation Authority clamps down hard on them, become the next big thing for kids and adults alike and it would be remiss not to mention them in my blog given the pleasure my new gadget is giving me.  Try the Hubsan X107 (available for less than £50) if you want something functional, cheap and cheerful before you move for the GPS stabilised versions which start at £400 and up!

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