Despite the pessimistic outlook among many economists, the bottled water production industry remains strong and is projected to sustain its recent growth (2.0%). This leads to excellent valuations and successful sales for bottled water production company owners who are planning their exit strategy. In this review, we discuss how to value and sell a bottled water production company.
About The Bottled Water Production Industry
Bottled water production companies purify and bottle water before selling them to retailers and directly to consumers. This includes the sale of many types of bottled water products, including but not limited to spring water, mineral water, sparkling water, and flavored water. Here are the statistics and projections for the bottled water production industry:
- There are approximately 715 bottled water production companies in the U.S.
- There was a 2.0% annual growth for the bottled water production industry from 2018 to 2023
- The bottled water production industry generates $7.8 billion in annual revenue
- The annual profit for the bottled water production industry is $312 million
- Experts predict a sizable increase in annual growth (1.5%) from 2023 to 2028
How to Value a Bottled Water Production Company
You can determine the value of your bottled water production company by receiving a market-based valuation from a qualified and experienced business broker. To determine your value, they may consider your EBITDA, SDE, and rule of thumb data. Here is the rule of thumb data (also known as industry multiples) for bottled water production companies:
- Bottled water production companies sold for approximately 4.48 times the Seller’s Discretionary Earnings (SDE)
- Bottled water production companies sold for approximately 3.89 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bottled water production companies sold between 0.90 and 1.08 times the annual net sales
You also want to choose a broker who is able to see the intrinsic worth of your company, which may not directly show up in financial reports. This includes factors such as your growth potential, the quality of your work processes (and subsequently the quality of your water), and your reason for selling.
The Sales Process for a Bottled Water Production Company
Selling a bottled water production company is a scary experience. That is why we recommend working with a business broker who you can trust and breaking the sales process into smaller, more organized steps. These steps notably include:
- Conduct market research
- Develop a marketing strategy (confidentiality is key)
- Set a realistic valuation of the company
- Find potential buyers and approach them
- Negotiate and finalize the sale agreement
- Close the transaction and transfer ownership.
In the review below we dive deeper into each of the six steps of the sales process. However, we strongly urge you to speak with a qualified business broker for more precise and specific sales information for your bottled water production company.
1. Conduct Market Research
Market research is a great place to start the sales process. However, before starting your market research, we strongly recommend choosing a business broker to assist you with this step. Market research reveals the current demand for businesses such as your bottled water production company. This helps you establish the value of companies such as yours, helps you plan when to sell your company, and may allow you to identify potential buyers.
2. Develop a Marketing Strategy (Confidentiality is Key)
Your broker can assist you with developing a marketing strategy that further identifies potential buyers and ensures you are able to maintain confidentiality throughout the sales process. For example, your market strategy may involve planning your sales timeline and determining your sales channels (i.e. private databases, connections, contacts, etc.).
3. Set a Realistic Valuation of The Company
As discussed, your valuation is a part of the pre-planning stages once you decide to sell your bottled water production company (or are considering selling). Therefore, you should already have an understanding of your fair market value (FMV). This step more specifically involves the identification of your asking price and allows a chance to establish your additional exit strategy goals, some of which may be non-financial considerations (i.e. ensuring certain employees stay on board).
4. Find Potential Buyers and Approach Them
Finding buyers is more complex than you might imagine. Unlike most sales techniques which involve maximizing your exposure and reaching the broadest audience possible via public channels, you are only utilizing discrete and confidential channels when you sell your bottled water production company. Although it may sound challenging, experienced and qualified business brokers understand how to utilize private channels (networks, databases, connections, etc.) and can get your sales memorandum in front of hundreds of potential buyers who are in a position to make a fair market offer (or higher) for your company.
5. Negotiate and Finalize The Sale Agreement
Negotiations are a key part of the sales process. By choosing a broker who has experience handling negotiations in a responsible and successful manner, you can feel comfortable knowing that you are able to secure the best deal possible with as little drama throughout the process as possible. Ultimately, the buyer you select will sign a letter of intent (LOI), which launches the due diligence stage (see below).
6. Close The Transaction and Transfer Ownership
Due diligence comes before the closing of the sale. During due diligence, the buyer may review your financial and legal documents to verify certain business information, along with meeting with your partners and high-level employees and providing a series of questions for you to answer. After due diligence, you can close the sale by attaining the final signatures, confirming the payment has been sent and successfully transferring ownership of your bottled water production company to the buyer.
Speak With a Qualified Business Broker About The Sales Process
Schedule a consultation with Sigma Mergers and Acquisitions today if you have questions or would like a free, no-obligation business valuation. With over a decade of experience and more than 600 businesses successfully sold, you can trust our selling experts to guide you successfully through the sales process.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
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