How to Sell Your Manufacturing Business In 2019 – 6 Critical Steps

At the start of 2019 American manufacturing is booming, and those exiting corporate America are looking to face new challenges and own their own business. You may be nearing retirement age and looking for new experiences outside of your life’s work. If you are looking for a place to start, here are our basic tips for selling your manufacturing business in 2019. Check out the rest of our blog for more “How To’s” for selling your manufacturing business.

Step 1: Prepare your heart and mind for sale – Are you really ready to sell?

Selling the business you have built from the ground up is not an easy decision to make, and perhaps the most difficult step in selling is to commit to the idea! This is an emotional undertaking and it may take some time. Make sure you have thought through what retirement will actually look like for you. Determining your emotional readiness is a critical first step. Many Sellers don’t fully explore this, and experience Seller’s remorse once they are under contract.  The sale process from marketing to sale conclusion and the post sale transition time can be 2+ years. Planning early will help you be better prepared and can have a positive impact on the bottom line.

Step 2: Prepare your business for a new owner – Systems & Training

Selling your manufacturing business is all about continuity and making sure the day-to-day process will run under new leadership. You should be able to step away and hand off the keys without the business coming to a screeching halt. Think about your functions and whether things like quoting, programming, and sales can be done by other people. Do you have written processes? Do you have any key employees that have the skills and knowledge to cover your roles? If not, you will need to begin training. In some cases, a buyer may be an entrepreneur with little hands-on manufacturing experience. Even the most qualified buyers will ask if there is someone in place to take over your responsibilities. Document your procedures, train & cross train. The goal is to create an operation that can be transitioned to a new owner like the flip of a switch.

Step 3: Prepare your facility for show – First Impressions Matter

No one loves doing chores, but a tidy shop floor will do wonders when you start walking through the business with potential buyers. Think of it like selling a house-- piles of waste and messy rooms distract from the quality of the facility when giving tours. Obviously, some manufacturing processes can be dirty by nature, but there is a difference between an active work floor and just a plain old mess. Clean up scraps and trash, remove clutter, and tighten up your inventory. Make your shop safe, clean, and attractive to someone who is considering spending the next years of their life on those floors.

Step 4: Prepare your books for underwriting - Due Diligence & Acquisition Loans

Buyers are going to ask to see numbers, lots and lots of numbers. They want to make sure the business truly is doing well and that they are making a quality investment. You should be prepared to share documents including financial statements, equipment lists, and employee censuses. In addition to requests from the buyers, any banking institution working on the deal will require certain documentation. Your P&Ls must match your tax return, and any discrepancies will need to have a logical explanation. Here at Accelerated, we ask for three years of tax returns and financial statements before even providing a valuation. Reach out to your accountant and make sure your books are up-to-date, clean, and accurate. Doing this work up front will increase buyer’s confidence in your company and save you a ton of time in the final stretch of due diligence.

Step 5: Understand the Tax Consequences

It’s imperative that you understand the tax consequence selling your manufacturing business. The sale price doesn’t really matter as much as what you get to keep after taxes. Will it be enough to fund your retirement needs? Reach out to your CPA or tax specialist to have a conversation BEFORE  receiving offers for your business.

Step 6: Hire a Professional

According to a recent Forbes article, 90% of business listings never sell. Hiring a business broker allows you to conduct business as you have been, while qualified buyers are culled from. You don’t have to waste your time vetting or interviewing every prospect that comes through the door, and you face much less risk of your employees or competitors sniffing out your intended sale. A broker can provide you with an appropriate value for your business, and take care of the leg work. Your focus stays where it belongs, on your business.

In Summary:

Six Critical Steps To Selling Your Manufacturing Business In 2019:

  1.  Prepare your heart and mind for sale
  2.  Prepare your business for a new owner
  3.  Prepare your facility for show
  4.  Prepare your books for underwriting
  5.  Understand the tax consequences
  6.  Hire a Professional Intermediary

If you have any more questions, contact us at info@acceleratedmfgbrokers.com.

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