How Owners Can Position Their Business for a High-Value Sale

Successfully selling a manufacturing business is more than just listing it on the market. Even for companies generating £1 million to £20 million in revenue, like yours, it’s about positioning your business to maximise its value. Whether you are planning to sell now or years from now, adjusting your approach today can make a dramatic difference when the time finally comes. In this blog post, we will explore key strategies that manufacturing business owners can implement to prepare their companies for a high-value sale, focusing on maintaining financial health, buffing up operational efficiency, and keeping an eye on future market prospects.

Why Good Preparation Matters

According to a study by the British Business Bank, approximately 55% of business owners in the UK admit they aren’t fully prepared when it comes time to sell their business. Lack of preparation leads to missed opportunities and can easily result in not achieving the best market price. In the manufacturing sector, competition is fierce, but it’s also a sector in high demand, contributing roughly £192 billion annually to the UK economy. Strategic prepping can enhance your chances of selling your business at its maximum potential value.

1. Keep Your Financials in Order

Your company's financial health is the first thing prospective buyers will scrutinise. Clean, well-organised financial statements can make or break a sale. Buyers are typically looking for stable, consistent cash flow, a healthy profit margin, and clear growth potential.

Keep accurate and well-documented accounts: Ensure that all figures are easily accessible and adhere to UK accounting standards.
Regular audits: Ideally, external auditors should check your financials annually to reassure future buyers of their accuracy and transparency.
Control overheads: High overheads can reduce profitability. Periodically look for efficient ways to reduce costs without compromising the quality of your products.

2. Demonstrate Consistent Revenue Growth

Buyers want to see a steadily growing revenue stream or, at the very least, a well-established plan for future growth. A stagnant or declining turnover will lower your business’s value. Highlight your past performance while demonstrating the success of your current business strategy and long-term vision.

Showcase trackable growth: Be prepared to show longer-term financial trends, highlighting consistent growth over three to five years.
Diversify revenue streams: Establish diverse customer bases or invest in product innovation to demonstrate that the business is not overly reliant on one sector or client.
Identify new opportunities: Show potential buyers how the business can enter new markets, tap into new customer bases, or embrace new technology.

3. Build a Strong Management Team

One of the most frequently cited factors for maximising business value is having a well-rounded and capable management team in place. When buyers look at your manufacturing business, they want assurance that the operation can run smoothly without you.

Develop leadership layers: Ensure there is strong managerial depth and that every critical operational role is handled by competent and well-trained professionals.
Simplify decision making: When essential business functions are dependent solely on the owner, it can be risky for buyers. Delegation is key.
Document processes: Buyers prefer businesses with easy-to-follow and transparent processes. Ensure that your SOPs (Standard Operating Procedures) are well-documented and up to date.

4. Optimise Operational Efficiency

Efficiency boosts profitability, which directly impacts business valuation. Many manufacturing businesses suffer from inefficiencies such as outdated machinery, excessive waste, or poor resource management. Streamlining your operations before selling will make the company more attractive.

Invest in technology: Automation and modernisation in manufacturing can significantly increase output and reduce operating costs.
Lean manufacturing: Adopt lean manufacturing principles, which minimise waste and improve production efficiency. According to McKinsey, companies implementing lean manufacturing techniques increase productivity by an average of 25% within the first year.
Energy efficiency: Enhancing energy efficiency can attract eco-conscious buyers and reduce operational costs, improving profitability over time.

5. Diversify Supplier and Customer Base

A business overly reliant on a single customer or supplier can be a red flag to potential buyers. While it is natural to have key relationships, too much dependence on a handful of clients or suppliers can pose risks if those relationships sour.

Mitigate supplier risks: Show buyers you have multiple reliable suppliers to avoid disruptions and price volatility in your product chain.
Grow your customer base: Diversify your customer portfolio to prevent your company getting severely impacted if one major customer leaves.

6. Update Your Machinery and Equipment

Old or unreliable equipment can scare off buyers due to the anticipated costs of getting operations up to speed. Make sure that your machinery is not only functional but also efficient enough to handle future demands. If replacing outdated equipment isn’t feasible before a sale, consider documenting how newer investments could benefit production.

Upgrade as needed: Ensure crucial pieces of machinery are updated, serviced, or replaced if needed.
Highlight efficiency improvements: If you've recently upgraded to energy-efficient or higher-capacity machinery, be sure to document the operational benefits and ROI.

7. Manage Liabilities and Debt Wisely

Every business will have some degree of liabilities and debt, but managing them intelligently is essential. Buyers shy away from businesses that are heavily leveraged, as the risk of future costs and reduced profitability looms large.

Reduce unnecessary debt: Prioritise paying down higher interest debt and swap out short-term liabilities for longer-term, more manageable financing if possible.
Nail down contracts: Make sure there are clear terms on all contracts. Whether it’s customer, supplier, or lease agreements, buyers will see value in stability.

Bonus Tip: Understand the Manufacturing Market Trend

The UK manufacturing sector has seen great resilience over recent years. While demand for traditional manufacturing remains strong, many companies are seeing added value in aligning with tech and green initiatives. Increasingly, buyers are interested in companies modernising their production methods to become more digitally integrated and eco-friendly. According to a report by EEF, manufacturers who are looking towards digitisation have seen 3x the growth of those sticking with traditional methods.

Stay informed about these trends, especially if you’re positioning your business as an attractive investment. Demonstrating adaptability and a long-term vision in a changing market landscape can significantly impact your business valuation.

Conclusion

Getting your manufacturing business sale-ready is no quick task, but strategic planning and thoughtful preparation can achieve a higher value and generate interest from quality buyers. Remember, keep your financials strong, streamline operations, build a capable management team, and keep an eye on market trends to appeal to prospective buyers. If you're interested in learning more or considering selling your manufacturing business with a turnover of £1 million to £20 million, feel free to reach out to us at Venture Britannia Group for a consultation. Even if you're not ready to sell today, preparation can set you up for success in the future.