Five Steps Selling a Manufacturing Business

If you are thinking about selling your manufacturing business, use the five key steps below to learn how to sell a manufacturing business in California fast and for the highest market value.

Reasons to Sell

Some of the common reasons why you may decide it is time to sell your manufacturing business are:

• You have lifestyle changes- Some lifestyle changes may need you to take a different direction and leave your business. For instance, you have a new hobby, started a family, or health issues that force you to spend most of your time away from your business.

• Bored with the routine- Too much of anything makes you bored and lose motivation, no matter how good it is. Therefore, it is normal to feel bored if you have been in the business for years and wish to try something new.

• For better opportunities- As an entrepreneur, you are constantly thinking of new ideas. When a better opportunity comes along, it can be a smart decision to sell your manufacturing business and free up capital for something new. 

You also want to look at preparing a business exit strategy that can  help you identify a plan to transition or exit your lower middle market manufacturing business in California.

Determining the Valuation of Your Manufacturing Company

When selling a manufacturing business, one of the first things you need to determine is the valuation of the manufacturing company. If you are sure of the exact worth of your business, you can confidently come up with the price to give to a potential buyer.

You may ask, “How much money is reasonable to sell my manufacturing company?” Some of the ways to determine how much your California manufacturing company is worth include the following.

Use The Business Revenue

It is possible to tell how much you can sell a manufacturing company based on its annual income.

A manufacturing business broker will help you determine how much the manufacturing company is worth based on the value of comparable businesses.

Tally The Value of Assets

The value of a manufacturing business includes all assets, manufacturing business mergers and acquisitions, fewer liabilities, and any debts. 

The value you get after making these calculations gives you an idea of how much the business is worth. 

However, you cannot get the exact value that the business is worth since, in most cases, a business is worth more than its assets.

Do A Discounted Cash-Flow Analysis

This formula looks at the business' annual cash flow and uses it to predict the future. You then use a Net Present Value calculation to discount the forecasted cash flow value to today. 

You can find a net present value calculator online and use it to do a discounted cash-flow analysis.

Use Non-Financial Formulas

You can use other methods rather than numbers to help you determine your business' value. For instance, you could consider its strategic position and potential strategic value to give you an idea of the approximate price of your business.

Check out this guide to help understand business valuation methods.

How do you Increase Business Value?

After you determine the value of your business, you may find yourself thinking, "This is not the highest value that I can sell my manufacturing business." Luckily, there are several ways to boost the company's value and increase the amount you receive when you sell it. 

Some of these ways to improve your business value include the following.

Increase Your Sales and Lower the Expenses

Evaluate the operations of your business and come up with a way to increase sales. For instance, you can consider improving the production of goods and looking for a broader market. Offering new products and services will also help you make more sales. 

Additionally, strive to cut costs and expenses in the business as much as possible. You will need to learn how and where to strike a balance to have low costs without negatively affecting your sales.

Make Formal Agreements with Employees, Suppliers, and Customers

More often than not, a non-formal agreement may seem significant as it creates a friendlier working environment. Nevertheless, formal agreements have greater advantages, such as protecting the company on the supplies and operations front. 

Moreover, legal contracts help boost the value of the business.

Maintain Consistent Revenue Growth

When any buyer is thinking about buying your manufacturing business M&A, one of the surefire places they will check is the consistency of revenue growth. 

Having consistent revenue growth even at low rates is better than having high earnings followed by surprisingly low earnings. Even at low rates, steady growth will prove to the buyer that the business will likely improve with time.

How Do You Get Your Business Ready for Sale?

Unlike other assets, it is barely possible to sell your business quickly. Instead, you need to take time and get the business ready for sale. The better-prepared businesses are for sale, the more the amount they earn. 

The steps to follow when getting the business ready for sale are:

• Identify potential buyers - These are the people who are showing high interest in investing in it. Find out what initially attracted them to the business and retain these features.

• Solve any legal suits in the business - No buyer will want to purchase a manufacturing company with any unsettled legal issues. Therefore, settle these disputes at all costs to avoid scaring away potential buyers.

• Plan one on one meetings - It is advisable to meet your potential buyers one on one. It gives them a chance to know more about the face of the business by meeting you rather than your employees.

• Act hard to get - When striving to strike a deal, make your business ready for sale by creating a demand for what you are about to sell. As the buyers seek to get the business, this means more profit for you.

• Get your numbers ready - Your numbers are the main selling point of the business. As you prepare your business for sale, get all financial statements audited. Have a professional accounting firm review this so that you can correct any issues that may cost you money.
  

Get an M&A Advisor On Your Side

Having an RBS M&A advisor is an added advantage for you when selling your manufacturing business since they help increase the business value. 

Some of the ways through which the manufacturing business broker helps increase business value are:

• Provide outside opinions- The M&A advisor gives you an external idea of your business which is unbiased. They tell you some of the business's possible mistakes, which could cost the business its good value.

• Give you a plan- A manufacturer broker is someone with expertise and experience in ways that can help boost the business value. Therefore, when you have an advisor, you are assured of expertise, plans, and advice on promoting the business.

• Add prestige to the business- Although a manufacturing business broker is such an important person in a business, not all businesses have one. If you have an advisor, this adds prestige to the business, thus adding the business value.
  

Final Thought

Selling a California manufacturing business is no easy task, especially for the business owner. Armed with 5 tips on increasing the value of your business, you can now kick-off your manufacturing business exit strategy without a hitch. With a manufacturing business broker at your side, you will sell at the highest value.

If you are a retiring business owner looking to exit your lower middle market manufacturer in California, here are six tips to get you started:

1. Don't wait until the last minute to start planning your exit. The process of selling a lower middle market manufacturing business can take a long time, so it's important to start early.

2. Have a clear idea of what you want to get out of the sale. Know your goals and what you're willing to negotiate.

3.  Know what's your company's worth. This is an essential step to take when planning to sell your manufacturing business in California.

4. Choose the right type of buyer. Not all buyers are created equal, so do your research and find the right one for your business.

5. Be prepared for a lot of due diligence. M&A buy-side due diligence is when buyers will want to know everything about your business, so be ready to provide documentation and answer questions.

6. Be flexible with the terms and conditions of the deal. It's important to be open to negotiation to get the best possible deal for your business.

Rogerson Business Services, also known as, California's lower middle market business broker is a sell-side M&A advisory firm that has closed hundreds of lower middle-market deals in California. We are dedicated to helping our clients maximize value and achieve their desired outcomes. 

We have a deep understanding of the Californian market and an extensive network of buyers, which allows us to get the best possible price for our clients. We also provide comprehensive support throughout the entire process, from initial valuation to post-closing integration. 

Our hands-on approach and commitment to our client's success set us apart from other firms in the industry. If you consider selling your lower middle market manufacturing business, we would be honored to help you navigate the process and realize your goals.

If you have decided to value and then sell your lower middle market manufacturing company or still not ready, get started here, or call toll-free 1-844-414-9600 and leave a voice message with your question and get it answered within 24 hours. The deal team is spearheaded by Andrew Rogerson, Certified M&A Advisor, he will personally review and understand your pain point/s and prioritize your inquiry with Rogerson Business Services, RBS Advisor.