4 Critical Things You Must Do While Selling Your Manufacturing Business

Selling Your Manufacturing Business
4 Critical Things You Must Do While Selling Your Manufacturing Business

When Your Business Is On The Market Is It Time To Relax?

You’re ready to retire from manufacturing. You’ve done your homework, interviewed business brokers and M&A professionals and chosen a representative who specializes in manufacturing. You’ve listed the company and the marketing process has begun. Is it time for you to relax yet? Not quite. Here are 4 critical things you must do while selling your manufacturing business.

1. Concentrate On Sales

During the time your business is on the market, buyers will want to see current numbers. Your broker likely provided a valuation based on the past 3 completed fiscal year’s numbers. If your quarterlies are trending down, expect the purchase price to be discounted.  It’s not just the buyers who are concerned about this; it’s also the lending institutions.  If the deal can’t get through underwriting, the price must come down. When your business goes on the market, it’s not time to relax, but rather be hyper vigilant about sales. Ask your current customers what else you can help them with. Touch base with all past customers to renew the relationship. Anything that boosts sales and strengthens the customer relationship will help to get you to the finish line.

2. Concentrate On Organization & Curb Appeal

We’ve all been in the irritating situation of having a home on the market.  It’s got to look spiffy every day. When your business is on the market, it’s the same drill. Buyers equate a mess with a disorganized business, which will be difficult to transition into.  Likewise if they see organization, they will make certain assumptions about the business. Get rid of everything you don’t need. If you haven’t looked at it, smelled it or touched it in a year, you probably don’t need it. Organization also means a clean and safe shop environment.  Stacks of metal chips around a machine don’t make you look busy. A buyer will equate that with machine tools that are not taken care of.  Walk through your plant with the eyes of a buyer. Ask yourself while surveying each item or section, what would a buyer want to see?  Curb appeal is important.

3. Concentrate On Quick Reporting

As noted above, when a manufacturing company is on the market, numbers are critical. But, the reporting of the numbers is equally important. It doesn’t matter if your sales are up 10% over last year if the buyers can’t see the report.  Having accurate reports available at the end of each quarter and annually is mission critical when the business is on the market.  For quarter end, you’ll need financial statements and for year end, the tax return as well. If your company is on the market, speak to your accountant about getting the tax return done early. If they know in advance they can usually accommodate.

Here’s a word of caution on financial documents. Often the documents show different numbers. Usually because the financials may come from an internal system, and the accountant is including things like depreciation or inventory adjustments, which might not be on the internals. Be prepared to have your accountant provide reconciliation between the two documents. Buyers need to connect the dots. If there are unexplained discrepancies between the two documents, buyers will disengage from the acquisition process. When they see discrepancies, they reason that the books aren’t organized, perhaps the Seller is hiding something and they’re probably wasting their time.

4. Concentrate On Documentation

When you’re selling your manufacturing business, it is critical that your core processes are clearly documented. Hopefully your M&A professional urged you to do this BEFORE taking your business to market. Even if you have documented processes, companies normally don’t document everything, reasoning that the key players already know the basics. When you’re trying to sell your business, you should be documenting such that any newcomer could figure out what needs to happen for the business to run. Buyers will pay more for manufacturing companies that have documentation on core processes. It provides them with the comfort that transition will be smooth.

Following these 4 critical steps while you’re selling your manufacturing business will ensure a shortened sale cycle and a better result.

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