When Selling Your Manufacturing Business, Is It Time To Relax? Find Out How These 4 Things Can Drastically Reduce Your Price.
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 steps you must take when selling your manufacturing business.
1. Be Hyper-Vigilant On Sales
While 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 years' 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; the lending institutions are, too. If the deal can't get through underwriting, the price must come down.
When your business goes to market, it's not time to relax; rather, it's time to 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 customer relationships will help you get to the finish line.
2. 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 selling your manufacturing business, 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 properly maintained. Walk through your plant with the eyes of a buyer. Ask yourself, while surveying each item or section, what a buyer would want to see. Curb appeal is important.
3. Be Timely On Financial 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 and year-end, you'll also need financial statements and the tax return. 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 items like depreciation or inventory adjustments that might not be on the internals. Be prepared for your accountant to provide a 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 if the books aren't organized, the Seller is probably hiding something, and they're wasting their time.
4. Core Processes and 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 document it so that any newcomer can figure out what needs to happen for the business to run. Buyers will pay more for manufacturing companies with documentation of core processes. It provides them with the comfort that the transition will be smooth.
Following these 4 critical steps when you're selling your manufacturing business will ensure a shorter sale cycle and better results.
Interested In Getting a Complimentary Business Valuation?
No obligation - No upfront fees: START HERE