The best way to maximize the value of your injection molding business is to start at least 3-5 years before you want to sell.
The following nine steps will make a big difference in how many buyers will be interested in your molding operation and how much they will be willing to pay you for it.
Focus on Profits, Not Revenue
Focus on increasing profits, not revenue. The value of your business is a function of how much profit it generates, not on its revenue. So do whatever you can to focus on adding profits to the bottom line. That could mean turning away low-margin business and making time on your equipment for more profitable work. You might also take a look at the equipment that isn’t being fully utilized to take on some low-margin work to keep that equipment working. If your fixed costs are covered, that incremental revenue will fall straight to the bottom line. Finally, do whatever you can to eliminate unnecessary expenses. This takes time and effort, which is why it’s important to start 3 to 5 years before you want to exit.
Work With a Good CPA
Having accurate financial statements is crucial. It’s not necessary to have audited financial statements, but you should have them reviewed, not simply compiled, by a reputable accounting firm. This will cost extra money, but it will pay off during the sale process.
Buyers are buying the future performance of your business. As a result, it is important to have a clear vision of what the future of your business looks like and to be able to share that with potential buyers. This means understanding, to the extent possible, the future needs of your customers, any major new projects in your pipeline, as well as any capital expenditures that may be required.
Eliminate Any Unneeded “Stuff”
If you have obsolete or non-operating assets in your business, get rid of them. Sell or dispose of any old, unusable raw materials, or damaged finished goods inventory. This includes old, broken-down molds, old equipment, etc. Getting rid of this stuff will clean up your production area and make it look more spacious and efficient. Once you’ve disposed of unneeded inventory and equipment, be sure to remove it from your balance sheet as well. The cleaner and more accurate your financial statements are, the better.
Make the Place Look Good
If you want to sell your home, you fix it up and keep it clean. Do the same with your injection molding operation. Look at your business through the eyes of a buyer. Are the windows clean and all the lights working? Are your office and production areas clean and well organized? What do the floors look like in your plant? Are they clean or are they covered in oil, solvents, and stains? If there are any deferred maintenance issues, take care of them before buyers tour your operations.
You only get one chance to make a good first impression, so anticipate what buyers will ask for and have all the information ready for them when they ask for it. Work with an experienced mergers & acquisitions advisor to help you prepare an offering memorandum that provides an overview of your company. Work with your M&A advisor to set up and maintain a secure, online data room where you can upload all the information a buyer will need to review. This will save you a lot of time and minimize your stress when you decide it’s time to sell.
Make Yourself Obsolete
The more your injection molding business can operate without your direct involvement, the better. Buyers will discount the value of your business if it is heavily reliant on you. If you are heavily involved in day-to-day operations, put together a plan to develop your second layer of management and begin delegating some of your responsibilities to them. If you can take a two-week vacation without the business suffering, you will have succeeded in developing a business that is not reliant on you.
Talk with Multiple Buyers at the Same Time
It is very important to be talking to more than one buyer when you finally decide to sell your injection molding operation. It significantly increases your bargaining position and will motivate interested parties to submit strong offers. Work with an experienced M&A advisor to run a competitive process for you. A good M&A advisor will be able to generate multiple simultaneous offers and provide you with the negotiating leverage you need to get the best combination of price and terms.
Get Professional Advice
Selling your injection molding business may be one of the most important transactions in your lifetime. It is definitely not a “do it yourself” project, particularly if you have never bought or sold a business before. Build a team including a good attorney with M&A experience, your accountant, and an M&A advisor with experience in the injection molding sector.
If you follow these nine steps, you will be able to maximize the value of your injection molding business when you decide to sell.
If you’re interested in getting a ballpark idea of what your injection molding business is worth, check out the article entitled What’s My Injection Molding Business Worth? – Simple Rules of Thumb
If you’d like some help valuing your injection molding business, or would like to explore your options, I would welcome an opportunity to talk with you.
Jackim Woods & Co. is a leading mergers & acquisitions advisor focused on providing senior-level attention and flawless execution to clients in the injection molding industry.
Rich Jackim is an experienced mergers and acquisitions advisor and a retired mergers and acquisitions attorney. Rich has over 20 years of experience advising owners of middle-market companies and their boards of directors on mergers, acquisitions, and divestitures. During his career, Rich has been involved in over 70 mergers or acquisitions of middle-market companies worth over $2 billion. Rich is also the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners.
To arrange a confidential conversation to explore your options, please contact Rich Jackim at (224) 513-5142 or email@example.com.Read More
Thinking of selling your court reporting or litigation support firm? The first question most business owners ask is “what’s my business worth?”
Most businesses, including court reporting agencies and litigation support firms, are valued based on a multiple of the cash flow they generate. This cash flow is often referred to as earnings before interest, taxes, depreciation, and amortization or “EBITDA”.
The following multiples are used by business brokers, buyers and lenders to get a ballpark idea of the value of a business.
EBITDA SELLING PRICE MULTIPLE
$0 – $50,000 1.0-1.5 times EBITDA
$50,000 – $150,000 1.5-3.0 times EBITDA
$150,000 – $250,000 3.0 times EBITDA
$250,000 – $500,000 3.0-4.0 times EBITDA
$500,000 – $1,000,000 4.0-5.0 times EBITDA
Over $1,000,000 5.0-6.0 times EBITDA
The multiple can vary widely depending on a number of factors including size of the business, historic trends in revenues and profits, risks related to sales reps or reporters that have their own books of business, customer concentration, or other factors that might impact the future cash flow of the business.
How to Calculate the EBITDA of Your Court Reporting Firm
To calculate your court reporting company’s EBITDA, or earnings before interest, taxes, depreciation, and amortization, start with the profit shown on your P&L statement or tax return, then and add back interest, depreciation, and amortization. EBITDA is the starting point for any business valuation so it’s a good number to track on an annual basis.
In addition, it is important to calculate your EBITDA correctly. EBITDA should reflect a market-based salary for the firm’s owner. However, if you own your own firm you can pay yourself an above market salary and offer yourself perks that a buyer will not incur. These “excess” expenses can often be added back to your EBITDA resulting in a higher valuation. As a result, it is important to work with an objective third party to evaluate what adjustments can be made to your EBITDA to truly reflect the operating cash flow of your business.
Don’t Leave Money on the Table When Selling Your Court Reporting Firm
While rules of thumb and valuation multiples are easy to use, they are notoriously inaccurate because they don’t consider the unique value drivers or value detractors of your business. Using valuation rules of thumb will give you a rough idea of what your business is worth, but to get a more accurate idea, the valuation should account for things like your agency’s past trends in performance, type of clients, recurring revenue, use of technology, management depth, projected growth, and other things.
To get an accurate valuation talk with a business broker or M&A advisor who specializes in representing professional services companies, including court reporting and litigation support firms. They will work with you to make the appropriate adjustments to your EBITDA, evaluate your business and client base, and value your firm properly so you don’t leave any money on the table when you sell.
At Jackim Woods & Co. we use the discounted cash flow and comparable transactions valuation methods to provide clients with an accurate, market based, idea of what their court reporting and litigation support firms are worth.
Get a Free, No Obligation Market Assessment of your Court Reporting Firm
If you’d like to begin exploring your options, contact Rich Jackim, Managing Partner at Jackim Woods & Co. (224-513-5142 or firstname.lastname@example.org) to get a FREE Valuation and Market Assessment. There is no cost or obligation and all conversations are strictly confidential.Read More