How Manufacturing Companies Can Sell More Effectively

The sale of every privately held business is an adventure that requires skill, determination, and patience. And, if you are marketing your business without professional help, you will need to continue the successful operation of your company while looking for and negotiating with buyers. Because of this we highly recommend the use of a professional advisory firm to close your transaction.

However, because we know that this is not possible for every business owner to afford, today we begin a series of “how to” articles on key issues to be aware of when selling a specific type of company. Our first in this series will focus on how to sell a manufacturing business.

For those looking to sell their manufacturing business, look to investors like Minerva Equity.

As you may be aware, over the last few years in many parts of the country manufacturing has begun to show signs of a revival. “On-shoring” has become popular as companies recalibrate their business plans in the light of rising labor costs overseas, coupled with increased shipping costs and ongoing quality control issues.

Quality buyers will require from you the information listed in the bullets below. If they don’t get it promptly, they’ll move on to other opportunities. In most cases, the acquisition of a manufacturing company is funded through some form of bank financing. If the transaction is $5 million or less, it will likely be an SBA-guaranteed loan product.

 

The bullets below describe the items that are required for bank underwriting. This is NOT optional. At Accelerated Manufacturing Brokers, Inc., we won’t consider representing a client if he or she can’t provide the following items in a timely manner:

  • Three years of tax returns
  • Three years of financial statements, preferably accountant prepared
  • Full documentation on all monies flowing to shareholder, including where these appear on your P&L statements and tax returns
  • A list of industries you serve and the amount of income attributable to each
  • Your top 10 customers and the amount of income attributable to each. Customer names should be removed during the initial stages of inquiry for the seller’s protection – they can be identified as customer 1, customer 2, etc.
  • Aging accounts receivable with written payment terms
  • Aging accounts payable
  • A complete facilities list with make, model, age, acquisition date, acquisition price, and service records, preferably in an Excel format
  • All capital expenditures within the last five years

Finding a quality, cost effective manufacturer is not an easy task for businesses. You typically have many different companies ordering from you and you enjoy helping your clients grow. You have been doing this for so long that you could run the business with your eyes closed, but at the end of the day, you have started to wonder to yourself, How much is my manufacturing business worth? A broker can help you find the answer to that question, but understanding the process is always beneficial to you as an owner. After all, your objective is to receive the maximum value for it. And in order to do that, you must first look at the many variables that come into consideration when looking at the possibility of selling your manufacturing business.

In order to show you the different variables, we have taken data from the last decade of all the manufacturers sold in the United States that met our criteria, and broken it down for your further review in order for you to make the right decision on the sale of your business.

For those looking to make money a different way, there is always the option of remodeling your home and finishing your bathroom.

 

The first step before you begin to engage with buyers to sell your manufacturing business is to make sure you have documented in writing what you do and how you do it. Too often we engage with business owners who have great businesses, but the steps they use to manufacture their products are either between the ears of the owner and/or key employees, or if written down at all, the manuals are very slim and loosely constructed.

It’s also important that you have a workforce with substantial remaining work life. If your entire team will be ready to retire shortly after you, the buyer’s entire investment could be at risk. If your staff is aging and you want to sell your manufacturing business, it’s imperative that you begin to hire and train a younger work force. Some firms establish apprenticeship programs to address this issue.

Manufacturing Company Sales Process

 

After reading this article and understanding the necessary steps and processes that come along with the sale of your manufacturing business, and you’ve decided that selling your business is the right decision, we encourage you to have your manufacturer valued by a professional broker; this will ensure that you are receiving maximum value for your business. 

Financing options in the Construction Industry

There are tens of thousands of construction companies in the United States. In fact, the construction industry, in particular small businesses in the construction sector are responsible for employing more non-college educated men than any other industry.

If you are looking to learn a skill and make a good living without having the debt that accompanies a four year degree, construction is one of the few industries that I really believe you should look into. You may also want to look into home services that are adjacent to construction such as plumbing.

One of the major downsides of running a construction business is finding options to finance that business. Because these companies are often asked to deliver a completed product before getting paid, cash flow can be a problem.

Fortunately, there are a handful of options such as asset based lending, bank revolvers and A/R financing for construction companies that are large enough to qualify. Construction blog has a handful of articles on this topic that I would recommend thumbing through.

For those owners or business executive in the construction or manufacturing industries that are looking to raise capital or sell their business, Minerva Equity may be able to make you an offer. You can also read more into the options available to you when you are looking to sell a construction business.

Here is some beautiful architecture in Madrid, Spain

Loans for construction companies can be from banks or private lending institutions. The benefits of using your bank are that it will generally come with a lower interest rate. In addition, you will likely be able to build up a relationship with your bank and use a basket of their services. The more comfortable you get with them and the more comfortable they get with you and your company, the better terms you will likely be able to negotiate.

If you are looking for fast cash to service your debts or float you until the project is over, this article will be of benefit to you if you are looking for a construction loan.

Debt or Equity in the Construction industry

  • Depending on the size and life stage of your construction business, there may be a handful of options available to you when seeking capital.

For start-up stage businesses, they will likely get a bank loan. Banks are typically not in the business of taking equity in businesses, so they’ll end up giving you a loan that you may have to personally secure. This means that you’ll have to pledge your personal assets as collateral until you pay the bank back with interest.

For reputable bathroom remodeling companies like on point builders in Colorado, the answer has been to bootstrap the company.

If you are able to find a small business investor, you may be able to finance your business with an equity investment. This means you will have a partner (silent or otherwise) in running your business.

A great example of this happens to be my friend Ryan’s business. Ryan runs Colorado Remodels, which, as it sounds, is a remodel company in Colorado (he lives just outside of Denver). I partnered with him in running his business and took a portion of the equity. We decided to do this because we:

  • Already knew each other
  • Had built trust
  • Had complimentary skill sets

Because he is great at providing the remodeling services and I have had success with branding and marketing, we have had a successful partnership. Maybe you can do the same for your business?