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STRATEGY

Business for Sale:Pacific Northwest Computer Reseller

An overview of a business offered for sale, including a price rationale and pros and cons of the purchase.
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THE BUSINESS Log on to this deal: a VAR, or value-added reseller, of high-end computers, components, peripherals, and software. Thanks to an emphasis on high-quality staffing, this retailer has strong ties to corporate clients (custom configurations are roughly 50% of sales) and to consumer techies fond of pricey upgrades. Last year, with only 23 employees, it had $13.6 million in sales--four times the VAR industry average. The owners, who have started and sold another successful business before, are ready to do it again. Before they download the company, they'll train the new owners about vendor relations and purchasing strategies.

PRICE $6 million

OUTLOOK This company's margins have risen from 5.8% to 11.3% in just three years of operation, and sales this year should reach $20 million. What's the secret? The founding couple's credentials: he comes from a corporate purchasing background; she's a certified public accountant. That's added up to a lean-and-mean purchasing style, state-of-the-art inventory management, and a newly upgraded accounting system. A new owner could program the business for hypergrowth by launching new retail outlets or pushing mail-order or Internet sales.

PRICE RATIONALE This deal may be a great bargain. Computer sales, service, and software companies tend to sell for 57% of annual gross revenues. Based on last year's sales figures, that suggests a price of $7.75 million. But before you ring up the sale, read the fine print: $6 million buys you only the business, not its current inventory or leased 5,600-square-foot store.

PROS With this follow-the-dots management system, making money might be as easy as turning on your PC.

CONS An unforgiving marketplace with plenty of competition down the street and on-line. And if you're the kind of entrepreneur who might balk at this company's tight controls, move on. --Jill Andresky Fraser

*before depreciation, interest, taxes, and owner compensation
Financials (in 000s) 1994 1995 1996
Gross Revenues $3,029 $7,398 $13,598
Recast Earnings* $176 $617 $1,530

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Colin Thompson of Zirkle & Co., at 509-928-1737.




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