9 min read

How to Sell a Manufacturing Business

By Sunbelt Marketing on Feb 17, 2021 9:56:43 AM

How to sell a manufacturing business

Imagine this: You’ve spent years — decades, even — pouring into your business. You’ve labored and toiled day-in and day-out to create something truly special, and you’ve made it! Your business is thriving, you’re producing excellent products and bringing in equally excellent profits, and though you’ve experienced your share of bumps in the road, you’ve built an empire you can take pride in.

But now, something’s changed. You’ve built your business, taken care of it, and achieved your goals, but lately, you’ve felt like it’s time to move on to new horizons. Maybe you’ve decided to retire. Perhaps you no longer have that same passion, and you want to try out something new. Whatever your reasons for wanting to move on, you know it’s time to pass the business on to someone else.

There’s one problem, though — you don’t know how to sell a business. You’ve definitely built some solid business skills over the years, but that doesn’t mean you’re ready to broker your own sale. There’s a lot to consider when you’re selling a business, and right now, it seems like an overwhelming prospect.

Does that scenario sound familiar? Well, you’re in luck because Sunbelt Atlanta is here to help! We are a team of expert business brokers with over 70 years of collective experience buying and selling businesses. If you’re looking for a manufacturing business broker, you’ve come to the right place.

At Sunbelt Atlanta, we’re passionate about taking the frustration and headaches out of brokering the sale of your business. We know you’ve worked hard, and we believe you shouldn’t have to wade through the complicated process of selling your business all on your own. We’re ready to partner with you every step of the way so that you can reap the rewards from your years of hard work.

Are you ready to get started? We are too. Selling your manufacturing business doesn’t have to be painful. In fact, we’re here to make it easy! Let’s walk through the process of selling your manufacturing business — we’re certain that by the end of this post, you’ll feel a lot more confident about the whole process.

Step #1: Clean It Up

The #1 most important thing you need to do before putting your business on the market is to make sure that everything is shipshape and in order. With so many manufacturing businesses on the market — so many options for potential buyers to choose from — your manufacturing business broker is going to have a much easier time drawing attention to your business if you’ve taken the time to make sure everything is neat.

Let’s put it this way: If you’re hiring a chef for your restaurant, are you going to hire the one whose kitchen is tidy and run efficiently or the one whose kitchen seems buried under a thick layer of flour and grease? The first one, right? Of course. Selling a manufacturing business works just the same way. When buyers look for potential acquisitions, they’re significantly more likely to choose businesses that appear well-managed, clean, and efficient.

Here are a few specific elements to pay attention to:

  • Your Facility: When a potential buyer visits your facility, you definitely want to put your best foot forward! If you’ve gotten used to working around piles of supplies, dust, and empty boxes, now is the time to tidy up. Make sure your facility is clean and free of any junk lying around. Show your potential buyers that your facility is well-kept, your equipment is functioning properly, and your employees know how to keep things clean. You’ll be glad you did!
  • Your Inventory: In addition to cleaning up your facility, make sure to clear out the warehouse, too. Do you have a product that hasn’t been selling well for a few years? Make sure to clear out any remaining inventory from your storage space. Do you have old or stale products lying around that just aren’t sellable anymore? Make sure to remove or dispose of those properly before any buyers have the chance to view your facility. Buyers want to see clean, well-organized products stored in inventory, and a tidy warehouse is a sellable warehouse!
  • The Books: Have you kept up with your company’s financial records over the years? If not, or if there are gaps or lapses in the books, now is the time to clean it up. When it comes to brokering a manufacturing business deal, it comes down to simple dollars and cents — if you can demonstrate clearly that your company has a solid and well-recorded track record of growth over time, you’ll have no problem attracting a suitable buyer.
  • Your Written Procedures: When in doubt, write it down. Any time there’s a shift in leadership, there are going to be bumps in the road. It’s necessary for the new leader to come in and make their mark on the company, but to ease that transition, clearly written procedures, company policies, and important systems should be written out. Be prepared to present any potential buyers with thorough documentation of every bylaw and procedure relevant to your company — your buyer and your new managers will thank you.

Once you’ve cleaned up your facility, inventory, books, and written procedures, you’re ready to put your business on the market with your best foot forward. A clean and well-kept manufacturing business is sure to stand out to potential buyers, and your manufacturing business broker will have no trouble at all attracting those buyers to you.

Step #2: Prepare for Future Leadership

You can’t sell your business without a buyer, so it’s important to think about who you want in charge of everything you’ve built. After all, you’ve created a legacy, and even though you’re not going to be directly involved with the management of the company anymore, we understand that you still want to protect that legacy. That’s why it’s important to start preparing for a shift in leadership early.

Of course, part of that preparation comes along with the first step — by cleaning everything up and clearly establishing written records and policies, you set your business’ future owner up for success. But keep in mind, it’s not enough to simply say, “Here you go — now figure it out!” You want to make sure your successor has been properly trained and that their vision for the future of the company is in alignment with yours, even if they’re looking to make changes and bring in a fresh perspective.

Here are a couple of things to keep in mind when you’re preparing for a change in leadership:

  • Consider your buyer. Are you selling the company to a family member, friend, or business partner? If so, make sure you train them to fill your position. Teach them the ins and outs of your day-to-day job process and make sure they fully understand the responsibilities they’ll carry as the new leader of the company. Also, make sure they understand what, how, and why you manufacture and teach them how to do quoting, sales, and any other tasks you would normally do.

And even if you’re not selling your manufacturing company to someone you know, make sure that that person who will be hired or promoted to your position is ready to take on that role. It can be challenging for some business owners to train a successor — you’ve built a company, and it makes sense that you want things to be done your way. But remember — as long as you’ve trained the right person and chosen a successor you trust, your legacy will live on.

  • Make sure your staff has a long remaining work-life. There’s a trend in the manufacturing business — many employees are choosing to retire, and manufacturing companies are left in a lurch looking for new people to fill those positions. For that reason, if your buyer notices that a significant number of your staff will soon retire after you leave, they’re going to be hesitant about buying the company. To lower the risk for your potential buyers as much as possible, ensure that the majority of your team members will be around for a significant period even after you’re gone. The stability and growth potential will attract buyers!

Step #3: Assess the Value of Your Business

Once you start to feel secure and confident that you’re ready to leave the business and let your successor take over, it’s time to get your business assessed! However, estimating the total value of your business is a little bit more complicated than adding up your net profits. In order to calculate a fair valuation for your business — find the best asking price for your company — your manufacturing business broker will need to know a few things:

  • How much money your company makes: This one is a no-brainer — of course, a significant portion of your company’s net worth comes from your profits. However, that’s not the only factor that matters…
  • How much you pay in taxes: Your tax information is going to be a massive deciding factor when it comes to estimating the value of your businesses. As a result, your manufacturing business broker is going to ask for at least three years’ worth of your tax returns. They’ll be able to estimate the amount your business owes in taxes and present that information to potential buyers.
  • The industries and customers you serve: Believe it or not, buyers will take into consideration the magnitude of the industries and clients you serve. If you can show your potential buyers that your manufacturing business already heavily serves any big and financially significant clients, that’s going to impress them. Buyers will see that power and potential in your business and be much more likely to proceed with the purchase.
  • The total value of your equipment and inventory: You have specialized manufacturing equipment, and those are significant assets for your new buyer. Make sure to have a spreadsheet listing each item in your facility with detailed information about the make, model, year, purchase date, purchase price, and service records for each major piece of equipment.

Additionally, make sure to take stock of your inventory — you’re going to clean it up anyway, and that’s a perfect time to take stock of the total value of everything you have stored. Calculate the value of all of your inventory after you’ve removed anything that is no longer sellable and make sure to report that information to your manufacturing business broker.

  • All capital expenditures from the last five years: As the old saying goes, “You have to spend money to make money,” and you probably know that better than most. However, any capital expenditures you’ve made should be calculated as part of the value of your company. If you’ve made any major capital purchases within the last five years, make sure to provide information documenting them to your manufacturing business broker.

With all of the information listed above, your manufacturing business broker will be able to come up with a reasonable estimate of the total value of your business. From there, they’ll be able to share with you a fair asking price — the amount of money you’ll make from the sale of your company. Then, you’ll be able to put your manufacturing business on the market and wait to hear from potential buyers!

Step #4: Prepare Yourself for the Change

After the ink is dry on the final paperwork, you’re sure to feel a sense of pride and relief — you built a business, sold it, and hopefully made a significant profit. It’s an incredible accomplishment, and we look forward to congratulating you when that day comes.

However, in all the excitement, it’s easy to forget that your life is going to look pretty different. You won’t be in the same leadership role you once were, and that kind of significant life change can cause some mental strain. That’s why it’s important to prepare for the change early — that way, when you’ve sold the business, you’ll easily slide into your new role.

To begin preparing to leave, consider what your role in the company will be post-sale. Will you walk away entirely? Will you take on a smaller leadership role? Will you become a shareholder? Think about the amount of involvement and responsibility you want to retain even as you pass the leadership role on to your successor. Whether you want to continue working for the company or wash your hands of the business world for good, it’s best to figure things out ahead of time.

Additionally, don’t underestimate the psychological effects of leaving behind the company you founded. It’s not often talked about, but many former business owners struggle once all the paperwork is filled out and they no longer hold ownership of the company. After all, when you’ve spent years investing your time, energy, and heart into something, it’s natural to become emotionally attached.

Before you sell your manufacturing business and move on to the next step in your life, make sure to prepare yourself psychologically. Consider how you’ll use the time you used to spend at the business and make sure to have a new business, project, hobby, or activity to look forward to. And if you find you continue to struggle emotionally significantly after the inky is dry, make sure to reach out to a licensed counselor or therapist — such professionals are excellent at easing you through major life transitions.

Your health comes first, and that’s why it’s necessary to prepare to take care of yourself once the sale is over! Your life is going to look different, but that doesn’t mean it’s over. Look forward to the new freedom you’ll have once you’ve sold your business and make sure to keep yourself mentally healthy and happy every step of the way.

Step #5: Find the Right Support

Last but not least, the most important part of the process of selling your manufacturing businesses is finding the right support. That means working with a manufacturing business broker who understands who you are, what you do, and how to sell your company to ensure a profit and protect your legacy.

At Sunbelt Atlanta, we pride ourselves on our excellent business acumen, a track record of successful sales and client satisfaction, and over 70 years of collective experience. Our team of expert manufacturing business brokers is always happy to work with you to get the most value for your business. We understand that you’ve worked hard to make your business what it is, and we want to make sure that when it’s time to sell, the process is painless and profitable!

If you’re interested in partnering with us to sell your manufacturing business, we’d love to hear from you! Send us an email or give us a phone call — you can find all of our information on the contact page on our website. And if you’d like to schedule a confidential discussion just to get the ball rolling, there’s a quick and easy contact form right on the homepage of our website.

We’ve been brokering business deals since 1979, and we’re confident that our service is unmatched. If you’re looking for the right manufacturing business broker to facilitate the sale of your business, look no further — Sunbelt Atlanta is here to help.

Sunbelt Marketing

Written by Sunbelt Marketing