Selling a Plastic Manufacturing Business
The plastic manufacturing industry is a crucial segment of the global economy owing to the widespread use of plastic in a multitude of sectors. If you’re contemplating selling a plastic manufacturing business, this comprehensive guide will offer insights into the process, industry facts, valuation, and how to ensure you get fair market value for your business.
What to Know About The Plastic Manufacturing Industry
The plastic and resin manufacturing industry, with its numerous sub-sectors, including plastic molding, plastic design, and customized plastic engineering, generates billions annually. Despite occasional volatility, the industry has managed consistent growth, with experts predicting further expansion.
The industry encompasses businesses that specialize in:
- Manufacturing resins, plastic materials, and thermoplastic elastomers
- Custom-based resin mixing and blending
- Non-customized synthetic resin manufacturing
Given the positive trends, selling a plastic manufacturing business can be a profitable venture if executed correctly.
Getting a Valuation for a Plastic Manufacturing Business
Determining the value of your business is the first step when planning to sell. A market-based approach is commonly used to calculate the value of a plastic and resin manufacturing business. This involves determining your seller’s discretionary earnings (SDE) and applying specific acquisition multiples.
Typically, plastic and resin manufacturing businesses are sold for approximately 3.66 times the SDE, 5.79 times the gross profit, and 1.27 times the annual net sales. However, other factors, such as location, growth potential, and reason for selling, may influence the overall valuation. Engaging a business broker with industry-specific knowledge can offer a more accurate valuation.
The Roadmap For Selling A Plastic Manufacturing Business
Selling a plastic manufacturing business involves several phases, each crucial to the successful sale of the business:
Phase 1: Business Valuation
Selling your business begins with a comprehensive, third-party valuation, and an experienced business broker can guide you through this process, ensuring an accurate market value for your company.
Phase 2: Preparation
The preparation phase entails gathering all necessary financial and legal documents, including federal tax returns, profit and loss statements, balance sheets, insurance policies, inventory lists, lease agreements, or real estate appraisals. It’s also crucial to establish your sales goals during this phase.
Phase 3: Marketing
After preparation, your broker will market your business to potential buyers while ensuring confidentiality. They might utilize private channels such as databases, networks, and connections, and use non-disclosure agreements (NDAs) and blind listings to maintain discretion.
Phase 4: Due Diligence
Once a buyer signs a letter of intent (LOI), they can begin due diligence. This involves a thorough review of your financial and legal documents, and other procedures to learn more about your business.
Phase 5: Closing
The final phase involves closing the sale, which includes final signatures and confirming the receipt of payment for the business. At this point, the company transfer begins, and you effectively exit the business.
Engaging a Plastic Manufacturing Business Broker
A business broker can be instrumental in guiding you through the process of selling your plastic manufacturing business. They can provide a comprehensive valuation, help prepare and market your business, and guide you through the due diligence and closing processes.
Selling a plastic manufacturing business can be a complex process, but with proper planning and the right guidance, it can be a profitable venture. Engaging a knowledgeable business broker can provide invaluable assistance, ensuring a smooth process and maximizing the sale price for your business. A. Neumann & Associates has decades of experience selling manufacturing businesses. Reach out to us today for a Free Consultation!