Manufacturers & Distributors ARTICLE -
Selling your manufacturing company is possible in a down economy
Target Audience: Manufacturing and Distributing Companies, M&D Industry Employees, Manufacturing Distributors
“We’re just going to wait it out.” In an uncertain economy, this seems to be a business owner’s mantra for everything from hiring freezes to putting off large expenditures. Prudence may be preferable when it comes to some business decisions, but if you’re considering selling your manufacturing company, you don’t have to wait until things pick up. Although some flexibility is necessary, an acceptable price is within reach if you position yourself as a discerning and prepared seller.
Look For the Silver Lining when selling your business
Whether you’re ready to retire or want to move on to new pursuits, a down economy presents unique incentives and benefits when it comes to selling a business. Manufacturers looking to grow aren’t going to pass up the chance to acquire a profitable business, regardless of the economic climate. And because your wary peers may be waiting until the economy improves, fewer profitable businesses are for sale, making those that are more appealing.
Additionally, the recession has produced a new crop of downsized executives who may be looking for businesses to buy.
hire a business Broker or Bust
Regardless of your business’ size, getting it ready to put on the market and completing a successful sale can be daunting. So don’t try it on your own. Instead, hire a business broker to help guide you through the selling process from start to finish. A broker is paid only if a sale occurs, which is incentive for helping the sale succeed — and solace for you if it doesn’t.
Your broker can help you set the stage for a successful sale. In most cases, a desirable business will attract desirable buyers. Aesthetically, you’ll want to review any necessary renovations, additions and cleanup. Ask your CPA to help you gather needed financial information, tax returns, bank statements, inventory lists and employee compensation information for prospective buyers’ due diligence.
Get Real About the Asking Price
While you can set your sights on a buyer with a high offer, a down economy calls for flexibility in setting a selling price — especially because potential buyers will likely be hesitant to pay top dollar for a business when its revenue isn’t at its best.
To avoid having your business sit on the market for a prolonged period, start with a realistic view of the price you can command. Your broker and a valuation professional can aid in the valuation process, providing a price that’s palatable to you and will attract the right buyer.
Offering seller Financing May Help
As bank financing becomes harder for buyers to secure, you can encourage a potential buyer’s decision by offering seller financing. If, after evaluating the buyer’s net worth and credit history, seller financing seems like a mutually beneficial option, it could be just what it takes to close the deal.
By financing part or all of the transaction, you’ll be showing the buyer that you have confidence he or she will be able to pay you back, with interest, via the revenue from their newly acquired business. One caveat: You’ll maintain a financial tie to the business until the buyer has paid off your loan. Your CPA can help you further weigh the pros and cons of this option and suggest financing alternatives as well.
No Time Like The Present
The economy may be far from its peak, but savvy business owners are continuing to buy and sell manufacturing companies. If you’re interested in selling your business, there’s a lot to be said for defying conventional “wait-it-out” wisdom and moving forward with a knowledgeable team of advisors, a realistic perspective and a business-as-usual attitude.
Find out how our M&D accountants can add value to your business. Email us or call us at 1 (888) 875-9770.
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