Manufacturing businesses are very different and more complex than most businesses. Manufacturing business financial statements are more complex with COGS (Cost of Goods Sold) that include inventory, and WIP (Work In Progress) which are constantly changing, both which have a significant impact on the company’s profitability. Likewise, manufacturing companies have far more complex operations than ordinary businesses.
When the time comes to develop an Exit Strategy or consider selling your manufacturing business it is critical to work with a Manufacturing Business Broker that understands manufacturing business operations, financial statements, and how to properly value your businesses. Likewise, it is crucial for your business broker to understand your business so they can prepare a comprehensive CIM (Confidential Information Memorandum – prospectus) and present the business to prospective buyers.
Determining the Value of a Manufacturing Business
The first step in both developing an Exit Strategy or selling your business is to establish the current market value of the business. This involves reviewing the financial statements, calculating the Discretionary Earnings (DE) and EBITDA, and then calculating the market value. At Pacific Business Sales we use professional business valuation software to calculate the market value based on comparable sales data from closed SBA financed transactions along with other valuation models. This results in a reliable company market value for both Exit Strategy planning and for establishing the value to put the business on the market at. Pacific Business Sales offers a comprehensive Free Market Value Analysis for our clients.
In this article, we will be looking at some of the benefits of working with a manufacturing business broker, along with what you should look for when selecting the right broker for your business.
Manufacturing Business Broker Services
An experienced manufacturing business broker will guide you through the process of of selling your business, from determining the market value, through working with the buyers, buyer-seller meetings, due diligence, SBA financing, escrow and most importantly closing.
In addition to customary business broker services, Pacific Business Sales has relationships with tax strategy advisors that offer a complimentary initial tax strategy meeting where they will outline several options to minimize and defer the taxes on the sale of your business.
Steps in Selling a Manufacturing Business
- Initial Meeting Broker & Owner
- Review of Financial Statements & Market Value Analysis
- Representation Agreement
- Create CIM (Confidential Information Memorandum) and Advertise Business
- Buyer Meetings
- Negotiations & Prepare Offer
- Due Diligence
- SBA Financing and Leases
- Escrow & Closing
Valuation and Pricing
Pacific Business Sales places a strong emphasis on precision when it comes to valuation and pricing. Our commitment to accuracy is underpinned by the utilization of cutting-edge business valuation software from PeerComps. This state-of-the-art software empowers us to discern the true market worth of the businesses we represent, an essential element in our endeavors to bring them to market successfully.
PeerComps’s software, our trusted ally in the valuation process, employs a multifaceted approach to deliver a comprehensive market value analysis. One of the key methodologies it leverages involves scrutinizing closed SBA financed transactions of similar businesses. By drawing upon the rich appraisal data from these transactions, PeerComps can draw parallels, highlighting key indicators and trends that directly influence our pricing strategy.
However, PeerComps doesn’t stop there; it complements its analysis with the Income Method, another valuable tool in determining the market value of a business. This multifaceted approach ensures that we have a well-rounded perspective on the business’s true worth, allowing us to provide our clients with the most accurate and competitive pricing strategies.
In summary, Pacific Business Sales leaves no stone unturned in the pursuit of precision in valuation and pricing. Our investment in state-of-the-art valuation tools, coupled with the use of advanced software and diverse valuation methods, equips us with the tools needed to accurately assess a business’s market value and enable a successful journey to market.
Confidentiality
Confidentiality is undeniably a top priority for both business owners and potential sellers in today’s competitive marketplace. The fear of information leaking to employees, vendors, and customers can be a daunting prospect for owners looking to sell their businesses. However, at Pacific Business Sales, we’ve developed a strategic approach to safeguarding your confidentiality while still effectively marketing your business.
Our first line of defense is in the way we advertise businesses for sale. We maintain a deliberately discreet approach, focusing on generic descriptions that avoid revealing the precise location and specific services offered by the business. This strategy aims to pique the curiosity of potential buyers without divulging sensitive details prematurely.
Prospective buyers who come across our carefully crafted advertisements are encouraged to take the next step by clicking the “inquire” button, initiating the process of learning more about the business. To access further information, they must first sign a Non-Disclosure Agreement (NDA), which legally binds them to confidentiality.
Once the NDA is signed and a Buyer Profile with a Personal Financial Statement is completed, buyers gain access to the Confidential Information Memorandum (CIM). This comprehensive document provides a deep dive into the inner workings of the business, allowing potential buyers to make informed decisions without compromising your confidentiality.
Our commitment to maintaining the utmost confidentiality throughout the selling process is a testament to our dedication to our clients. You can trust Pacific Business Sales to safeguard your business’s sensitive information while connecting you with qualified, interested buyers who are serious about making a purchase. Your peace of mind and the security of your business are our top priorities.
Tax Strategies
Many business owners considering selling their business assume they will pay close to 50% of their proceeds in taxes and this could be true if no tax planning is done. An experienced tax and financial advisor can offer a number of tax strategies to minimize and even defer the taxes on the sale of your business. Pacific Business Sales works with several experienced tax advisors that will meet with our clients to prepare a tax strategy best suited for their particular needs.
Marketing and Exposure
Sellers frequently raise the crucial question: “How will you find a buyer for my business?” At Pacific Business Sales, we understand the significance of this query, and we’ve honed a comprehensive strategy to ensure your business gets the attention it deserves. We leverage a multi-faceted approach to maximize exposure and generate interest.
To kickstart the process, we utilize top-notch advertising platforms specializing in business listings. These platforms are frequented by serious buyers actively seeking opportunities, ensuring your business reaches a relevant audience. What sets us apart is our commitment to elevating your listing. We feature all our ads, ensuring they take precedence over standard listings. This prominent placement guarantees that potential buyers notice your business first.
Our dedication extends to leveraging our extensive buyer database. We initiate targeted email blasts, reaching out to potential buyers both through the business for sale website and our own database. This dual-channel approach broadens the reach and increases the likelihood of finding a qualified buyer quickly.
Furthermore, our expertise in crafting compelling ad copy plays a pivotal role. We’ve developed a proven format that grabs the attention of potential buyers and encourages them to take action. Our well-crafted listings not only provide essential information but also generate a higher volume of leads, ensuring a steady stream of inquiries.
In summary, at Pacific Business Sales, we go the extra mile to ensure your business stands out in a competitive market. Our multi-pronged approach, including strategic advertising, targeted email marketing, and effective ad copy, is designed to find the right buyer for your business efficiently and effectively. Trust us to navigate the complexities of the business sale process and bring you the results you seek.
SBA Financing
When it comes to selling businesses, transparency and accessibility to potential buyers are paramount. That’s why at our firm, we go the extra mile to prequalify all the businesses we have for sale through the SBA PLP (Preferred Lending Program) lenders. This process not only ensures that the businesses we represent are financially sound and viable but also provides a concrete demonstration of their potential to prospective buyers.
One of the key benefits of including a pre-qualification letter in the Confidential Information Memorandum (CIM) is the boost it gives to a potential buyer’s confidence. Knowing that a trusted financial institution has already assessed and approved the business for SBA financing instills trust and reduces uncertainty for buyers.
Furthermore, the inclusion of SBA financing as part of our ad headlines and ad copy has proven to be an incredibly effective strategy. It serves as a beacon to attract more inquiries from serious buyers. The promise of SBA financing, especially with the option of a mere 10% down payment, makes our listings all the more appealing.
This strategy not only widens the pool of potential buyers but also ensures that those who inquire are more likely to be financially qualified, saving both parties valuable time and resources.
Our commitment to utilizing the SBA PLP program and emphasizing SBA financing in our marketing materials is a win-win strategy for both sellers and buyers. It enhances buyer confidence, expands the buyer pool, and ultimately contributes to smoother, more successful transactions in the world of business sales.
Negotiations and Preparing an Offer
In the intricate world of business sales, negotiations and offer preparations play an integral role, and this holds especially true for manufacturing enterprises. Unlike many other industries, manufacturing businesses involve a dynamic interplay of factors such as inventory, Work In Process (WIP), and Accounts Receivable (A/R), all of which contribute significantly to the business’s overall value. These figures are in a constant state of flux, which adds an extra layer of complexity to the process.
At Pacific Business Sales, we take pride in our expertise in crafting meticulously detailed Purchase Agreements tailored to the unique needs of manufacturing businesses. Our team understands the ever-shifting nature of these industries and is well-versed in navigating the complexities involved in closing such transactions.
What sets us apart is our proven track record of securing Small Business Administration (SBA) financing for these deals. SBA financing can be a game-changer for both buyers and sellers, providing favorable terms and opening up opportunities that might otherwise be challenging to access. Our extensive experience in this field means we know how to navigate the intricacies of SBA loans, ensuring a smoother, more efficient transaction process.
When it comes to selling or buying a manufacturing business, trust in the experts at Pacific Business Sales to guide you through the complexities, from negotiations and offer preparations to securing the financing needed to close the deal successfully. With our knowledge and experience, we make the journey toward your business goals a seamless one.
Due Diligence
Due Diligence is the most complicated and time-consuming part of the transaction. This is where the buyer reviews the company financial statements and other records to confirm the revenue, earnings, and overall viability of the company. Our team will guide you and the buyer through this process and keep it on track.
Additionally, during due diligence, it’s essential to assess not only the financials but also legal, operational, and environmental aspects. This comprehensive analysis ensures that there are no hidden risks or liabilities that might affect the deal’s success. Transparency and open communication between all parties are key to a successful due diligence process. We’ll help you navigate this intricate phase to ensure a smooth and informed transition.
Escrow and Closing
With Due Diligence complete, we move on to Escrow and Closing. While Due Diligence is the most complicated step, escrow and closing involves a great deal of documents for the SBA lender and escrow. Our team is in constant contact with the buyer, you, escrow, and the bank closer to keep the transaction on track.
In summary, selling a manufacturing business is complex. A skilled Manufacturing Business Broker is essential for precise valuation and navigating intricate financials. We determine market value accurately and offer tax strategy advice to minimize tax liabilities.
Our confidentiality measures protect sensitive information, ensuring only signed NDAs grant access. Our multifaceted marketing strategy efficiently attracts buyers.
We excel in negotiation and offer preparation, specializing in securing SBA financing. Diligent due diligence and streamlined escrow and closing processes ensure a smooth transition.
Pacific Business Sales offers specialized knowledge, precision, and comprehensive services for your business’s successful sale or exit strategy. Your business’s successful sale is our top priority.
Conact us to find out more about how we can help you sell your manufacturing business!
