Selling the manufacturing company in which you have invested so much effort, time, and money can be a difficult decision. However, trading your company at its exact worth to an entity that will sustain the company’s legacy can be quite rewarding.
Consequently, in order to ensure that you sell your company to the right entity, you will first have to determine the worth of your company and identify potential buyers. You will also need to decide what will happen to your employees and, most importantly, the best actions to take in the selling process.
If you are at the point of selling your manufacturing company, this article is for you. Here, we have included information that will guide you in the selling process, enabling you to subsequently sell your company for a good deal and ensure the successful transfer of ownership.
Furthermore, we will explain the areas in which you will need the assistance of professionals in the selling process. Then we’ll clarify how professional brokers like Zoom Business Brokers can help you make a sale that matches the sacrifices you’ve made for your business.
Guide to Preparing Your Manufacturing Business for Sale
The sale of companies through mergers and acquisitions (M&A) has become an everyday occurrence in the manufacturing industry. This is because of the benefit it offers for both buyers and sellers.
M&A creates room for synergies between companies, resulting in expansion and growth. Buyers also recoup the financial expenses that they have put into the company. Contact Zoom Business Brokers to assist you in the process of mergers and acquisitions.
Here is a step by step guide to help you prepare your manufacturing business for sale:
#1. Be Ready to Provide Documentation
Serious buyers will require that you provide some documents containing the information listed in the bullet points below. If a buyer does not receive this information on time, they may move on to the next seller.
In most cases, buyers acquire manufacturing companies through bank loans. They will need an underwriter to obtain these loans. However, an underwriter won’t stand in for a buyer who fails to obtain the required documents from the company they wish to acquire.
That is why, as the seller, you must have these documents ready before and during the selling process.
The documents must show the following information:
- Tax returns for the last three years
- Three years of financial statements, preferably prepared by an accountant
- The flow of capital to shareholders, including the areas that appear in profit and loss statements and tax returns
- A list of industries you have transacted with and the income you have made thus far in those transactions
- Your top customers and the amount made thus far from transacting with them
- Aging accounts receivable
- List of facilities
- Your company’s capital expenditure in the last five years
- A list of inventory (this can include raw materials and finished goods)
- A list of insurance policies and the cost
- All employee benefits
- Data of each employee
- Company’s property in terms of real estate
- The contracts your company is involved in
- Channels through which your company sells its products
- Certifications held by your company
- All intellectual property
- Software products used by your company
- Environmental testing carried out on your company’s premises
The above list gives you an idea of the documentation and information you need to have at hand when trying to sell your company. However, you may need to provide further information depending on your buyer.
#2. Train Your Staff to Take On Managerial Roles
Most buyers are often wary when it comes to acquiring a business that is over-dependent on the shareholders. That is why you must have a team trained to carry out functions typically attributed to shareholders.
These functions include sales, quoting, and the like. When you have staff trained to carry out these managerial functions, it will allow for an easier transition of ownership to a newcomer.
#3. Ensure You Have Staff Who Are Committed Long Term
Before selling your company, you should have a workforce in place with substantial remaining work life. If your entire team is ready to retire as soon as you transfer ownership, it may negatively affect the selling process.
If you discover that your workforce is full of aging people or those who plan to leave when you do, and you are on the verge of selling your company, you will have to recruit new young workers – and if you do that, you will need to train these new workers. This will ensure that after you transfer ownership, the workforce remains vibrant and productive.
#4. Create a Written System and Procedures
This step involves each of your employees documenting their major business activities according to their position. These documentations will generally serve as a manual for the way the company operates, which will in turn allow for the smooth transition of ownership.
#5. Get Your Facility in Order
This step entails cleaning up your facility to make sure that it looks enticing to prospective buyers. Allowing your facility to be in a messy state gives buyers the impression that they will need to invest a substantial amount of time and money to put the facility in order. This will likely turn buyers away.
#6. Clean Up Your Inventory
If you have products on your shelves that are unsellable, you should get rid of them before trying to sell your company. No potential acquirer wants to pay for products they cannot sell.
Keep in mind that if you try to convince the buyer to purchase certain products that won’t benefit them, it will negatively impact your relationship with the buyer in the long run.
#7. Set Your Records Straight
It is crucial that you make sure your records are accurate when preparing your company for sale. Your profit and loss account must match your tax return. Any discrepancy between these records will require a logical explanation. Your company might meet all the other requirements, but you can still lose the business deal if your records don’t add up.
#8. Become Current on Taxes
If there are any tax issues within your company, make sure you clear them up now. After the sale of your company, you will have to prove that you are current with your taxes, payroll, and other obligations.
If you cannot prove that you are current on your financial obligations, you won’t be able to access some of your sale proceeds.
#9. Understand the Consequence of Tax
Before putting up your company for sale, you should consult with your accountant to determine what the sales proceedings would have on your taxes. This will help you to determine the actual amount you would get from the sale of your company.
#10. Discuss the Post-closing Process
At this stage, you will have to discuss with the acquiring entity how long you will be present in the company to assist in the transitioning process.
#11. Contact a Specialist
During the period when your company is on the market, you’ll still need to focus on running your company to ensure that it doesn’t decline in productivity. After all, the best moment to sell your company is when your company’s productivity is at its highest.
At this point, you will need to employ the services of an M&A specialist to help you sell your company. This will allow you to properly focus your attention on your business.
Finding the right buyer for your company can be a complex process, demanding time and some level of confidentiality. With Zoom Business Brokers, you can focus on developing your business and leave the selling process to us.
We are capable of professionally and skillfully handling the marketing of your manufacturing company.
Determining the Net Worth of Your Manufacturing Company
The net worth of your company depends on several factors, including your company’s production capacity, supply, and effectiveness. Forecasting capabilities, the type of technology deployed in the production process, working capital management, and location are other elements that play an important role. Furthermore, your company’s customer base, competition, and market condition can also impact the net worth of your company.
Consult with Zoom Business Brokers today to help you accurately determine the monetary value of your manufacturing company.
Contact a Business Broker
Selling your manufacturing company involves careful planning and strategy. However, even after you have taken the necessary preparatory steps and fully understand your company’s net worth, you still need to look for potential buyers. And even after finding those buyers, you still have to negotiate with them. These negotiations often require some level of expertise, and that is where a business broker comes in.
A business broker stands between the buyer and the seller to ensure that both parties get the best possible result out of the business deal.
Zoom Business Brokers is a highly accomplished team of professionals who are skilled in pioneering, guiding, and facilitating seamless transactions.
Decades of experience and training have made our professionals fully equipped with the resources required to sell, buy or merge your business.