Top Reasons to Sell Your Manufacturing Business

   1. Bankroll a new business or venture 

Sometimes, the opportunity to start a new goal using an idea or concept that has been brewing in an entrepreneur’s head arrives at the right moment, but not at the ideal financial situation. When this happens, that opportunity can close fairly quickly if a cosmetics manufacturer doesn’t have the right funding. Before this situation happens, selling a manufacturing business ahead of time, while the demand for it is high and you can make the most money out of your business, is the right way to go.

  2. Can’t grow it any further 

When a business hits a plateau for one reason or another, it can get stagnant and stay at a spot that can cause the lower middle market business owner to lose the drive and passion that made it possible to start and grow the business in the first place. There is nothing wrong when this happens and sometimes, all it needs is a fresh set of hands and minds to take it beyond where the manufacturing business is at that moment. 

  3. Loss of passion or interest 

Eventually, middle-market cosmetics manufacturers can get burned out, lose steam, or simply move on to other industry sectors. Whether the business started out as a hobby that grew to a profitable venture or a meticulously planned project with the goal of making money, manufacturers can come to a point where the industry sector is no longer of a motivational force to stay on..

All of these are often considered when creating exit strategies for business and are valid reasons to put up the lower mid-market manufacturing businesses for sale. But before you take this route, knowing the current value of your business is essential. To do that, business valuation is a must.

Business Valuation: Get the Best Selling Price for Your Company

Business valuation is the process of knowing the economic value of your business for the purposes of selling, taxation, and the like. By undergoing business valuation, a manufacturing business owner in California would know how much his/her business is worth and how to calculate the value of the business prior to selling it. There are several methods used for valuation, such as market capitalization, times revenue method, earnings multiplier, and so on, which are employed by professional business appraisal. 

Popular Questions to Ask During the Valuation Process

Some of the most popular questions asked during the valuation process are ones that you too could answer for yourself and can help you have an idea of your own business’ value to supplement the professional’s assessment. These include:

1. Does your company manufacture its own cosmetic products or do you produce them for other brands? 

2. Does your company sell only its own products, other makers’ products, or a combination of both?

3. Who are your suppliers? Do you know their standings and reputations in their respective industries?

4. What is your company’s current standing in terms of scale and popularity, and who are its customers?

5. How can the new owners grow the business even further?

Answering these, along with having the business properly valued, can help you determine not just the amount to sell a business for, but also when and to whom in order to maximize the selling price. And once you’ve done this, it is time to prepare to sell your business.

Tips to Ready Your Cosmetic Business for Sale

Here are some tips to ready your cosmetics manufacturing business for sale:

1) Get a business valuation and prepare all documentation 

Assuming the business has already been valued, the next step is to prepare all documentation, with financial information and legal paperwork being the top priority. Formal statements, tax returns, incorporation papers, business permits, licensing agreements, lease contracts, and other legal documents should be prepared and made ready

2) Know your buyer and make a good impression 

Whether it’s a small-medium business owner looking to grow or a large corporation looking to add your business to theirs, knowing fully well who your buyer is and how to make a good impression on them can work wonders when selling your business. For example, a serial acquirer often buys companies that help them try new things.

3) Get your deal team ready 

Do your due diligence and assemble your advisors, lawyers, and brokers in one deal team to help you go through the M&A selling process smoothly.

4) Keep the business going until selling time

Selling can take some time to happen, and you would not want your business to suffer while waiting as it gives the buyer more leverage when negotiating.

Final Take

Whether it is for retirement or to pursue other ventures and passions, selling your cosmetics manufacturing business can be the key to that next stage of your life. To ensure that you do so properly and smoothly, having a manufacturing business broker can greatly help ease many burdens and maximize your business’ potential so consider having one as part of your team when the time comes to exit and sell your business.

Get started with this selling a manufacturing business guide to learn more.

Reference and further reading

1.  Schaffer, Jessica, Beauty’s M&A boom to continue in 2020

https://www.voguebusiness.com/beauty/mergers-and-acquisitions-kylie-cosmetics-coty-estee-lauder-milk-makeup

2. Harris Atmar, Sara Hudson, Anish Koshy, Stefan Rickert, and Rodrigo Slelatt, The next normal in consumer: Implications for Consumer Goods M&A

https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-next-normal-in-consumer-implications-for-consumer-goods-m-and-a, 2020

3. Barb Renner, Pawan Kapoor, Shweta Joshi, Justin Cook, Serial and small: M&A strategies that work for consumer products companies

https://www2.deloitte.com/us/en/insights/industry/retail-distribution/cpg-m-and-a.html, 2020