Selling a manufacturing business doesn’t have to be complex. If you know what to do you can cut down on the time-consuming process of selling a business.
In this post, we present six steps to guide you on how to make the selling process smoother.
1. Engage a Business Broker
Wise sellers hire a business broker to facilitate the transaction. An experienced broker will
- assist you in securing potential buyers,
- negotiate the asking price and,
- manage all the legal aspects of the deal.
With a seasoned broker in your corner, you’ll avoid some of the common rookie selling mistakes. You also won’t leave money on the table when you walk away.
2. Prepare the Business for Sale
Before you even think of scouting buyers, it’s imperative that your manufacturing business is in the best possible shape. You want to make it an appealing investment to the buyer.
Therefore, take time to prepare the business. This may involve:
- Getting company financial records in order
- Ensure all client and vendor pricing is current and margins are maximized
- All equipment should be in good working order and any excess machinery should be liquidated if not needed for growth
- Clean up inventory and write-off and liquidate any excess inventory
- Minimize any client concentrations, if possible
- Secure non-solicits with key employees, if possible
Put simply, first impressions matter. Buyers may have a handful of potential businesses being presented to them for sale. So, you have a very short window to convince your buyer that your business is worth a second look.
3. Get a Business Valuation
Do you know what your business is actually worth in reality? It’s not uncommon for many sellers, especially those who’ve built their business from the ground up to have an inflated view of the value of their business.
In order to get the market price for your manufacturing business, you will need to engage an independent appraiser to look at your company.
The business valuation you get will give you an idea of an appropriate asking price. You can use this price to list your company and use it as a starting point during negotiations. Valuation is a complex process and involves gauging several aspects of your business, hence the need to hire a professional business valuation expert.
4. Market your Manufacturing Business
With an asking price in hand, you can now start to market your manufacturing business to prospective buyers. This can be done in one of several ways:
- You can place an advert in industry publications
- You can network with other manufacturing businesses
- You can list on online business selling platforms such as com, Businessesforsale.com, and Bizbuysell.com
If you’ve hired a business broker, they may even have a curated list of private equity or venture capital firms that they’ve worked with previously who might be good matches.
Ultimately what you want is to be able to reach as wide an audience as possible to increase your chances of closing quickly.
5. Assess Offers and Negotiate a Sale
If you’ve prepared your business well and strategically marketed it, you should start receiving offers from interested buyers. When this happens, it’s key to take a step back so you can carefully review each offer because not every offer will be a quality proposal.
That’s why having an experienced broker is so invaluable. They’ve dealt with hundreds of deals and so will not only help with scrutinizing buyers to see whether they’re a good fit and have the necessary finances to close, but they will aid you in negotiating the best deal.
When you get to this stage of business selling, you’ll also want to consult an M&A attorney. Again, your broker can give you a list of trusted lawyers who’ve handled cases similar to yours.
6. Closing the Sale
This is arguably the most exciting part of the entire transaction, but not necessarily the easiest. There’s a host of paperwork that needs to be carefully signed and filed to complete the deal.
A sales contract must be drafted and signed. Your attorney can draw one up. This contract will transfer ownership of the company from you the seller to the buyer.
In a nutshell, your broker will guide you through this part and coach you on what to expect.
The Bottom Line
When all is said and done, successfully selling a manufacturing business is possible with careful planning, relying on the help of trusted M&A advisors, and timing the sale correctly. By following the six steps highlighted above and working with an experienced business broker like the Sun Acquisitions team and an attorney, you can streamline the selling process. Get the best possible deal and don’t leave money on the table. Contact us for more information.
Looking for more insight on selling a business? Check out these links:
- Mitigating Post-Closing Risks Through The Rep and Warranty Insurance
- How to Navigate a Buyer or Seller’s Initial Meeting
- Are You Financially Ready to Sell?
- Buyer Motivation – How to Confirm?
- Sell NOW – The Crystal Ball is Pretty Clear
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.