This guide is designed to help bread production company owners sell their business for fair market value. We discuss how to determine the value of your bread production company and how to sell to a qualified buyer.
About The Bread Production Industry
Brad production companies in the United States primarily manufacture bread and other bakery products (both fresh and frozen). The industry is one of the more stable industries in the U.S. with predictable sustainability regardless of the economic state. The most recent bread manufacturing industry numbers are:
- There are approximately 34,400 bread production companies in the U.S.
- There was a 0.5% annual growth for the Bread production industry from 2018 to 2023
- The bread production industry generates $50.2 billion in annual revenue
- The annual profit for the bread production industry is $2.2 billion
- Experts predict a slight increase in annual growth (0.4%) from 2023 to 2028
How to Value a Bread Manufacturing Company With a Market Approach
There are different types of marketing approaches, including market-based, asset-based, and income-based approaches. We recommend a market approach for your business valuation, which involves a detailed review of recent sales data, the use of rule of thumbs (acquisition multiples), the calculation of your seller’s discretionary earnings (SDE), and a broader consideration of all factors (both financial and non-financial) That may influence your value on the market. The rule of thumb data for the brad production industry is as follows:
- Bread production companies sold between 2.05 and 3.86 times the Seller’s Discretionary Earnings (SDE)
- Bread production companies sold between 2.83 and 5.90 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bread production companies sold between 0.37 and 0.83 times the annual net sales
How to Sell a Bread Manufacturing Company
The intricacies of every sale are never the same because every company (especially within the bread production industry) are incredibly different in the way they operate. Additionally, every owner has their own exit strategy goals that may influence the sales process. Nevertheless, there are common steps you can expect, which are:
- Prepare the business for sale
- Determine the value of the business
- Identify potential buyers
- Market the business for sale
- Negotiate the terms of the sale
- Complete the due diligence process
- Close the deal
Prepare The Business for Sale
There are several actions you can take before you sell your bread production company to help ensure the sale is successful. First, you can take steps to improve your value. This may involve improving your marketing approach, focusing more effort on organized and detailed bookkeeping, and improving the quality of your business operations. It also helps to prepare your documents (i.e. tax returns, profit and loss statements, etc.). Additionally, it is never too early to choose a business consultant and broker to help you with the valuation and sales process.
Determine The Value of The Business
One of the first things your broker will do is conduct a professional valuation of your company. As discussed above, this is most often in the form of a market-based valuation. This helps provide leverage during your negotiations with potential buyers as you can justify your asking price. It also helps determine the best time to list your bread production company. For instance, in some cases, it is best to improve value before listing, especially if the current market conditions are not favorable for sellers.
Identify Potential Buyers
This may be the most challenging part of the sale process for many owners. The good news is your business broker handles much (if not all) of the process for you. Beforehand, your broker will help you establish your strategy for identifying and getting in contact with potential buyers. This usually involves leveraging private channels that the broker has worked to develop over the years, including their personal connections and private databases. Ultimately, the goal is to identify qualified buyers who are able to make fair offers and allow you to reach your exit strategy goals.
Market The Business for Sale
The next step is to sell your company. This involves showing your sales memo to the potential buyers you have identified. Keep in mind, it is essential to maintain confidentiality. In addition to only utilizing private channels, your broker may also use blind listings and/or non-disclosure agreements (NDAs) as a way to ensure news of your sale is not made public before a deal is in place.
Negotiate The Terms of The Sale
Negotiations are also an integral part of the process of finding the right buyer. The buyer’s job is to secure the best possible terms for them, and your job is to ensure you receive fair market value (or higher) for your company. To ensure you are able to reach your goal, a strong negotiation strategy must be implemented. Additionally, contingencies, which are provisions if unforeseen obstacles occur that cause the deal to fall through or delay, are discussed and established. The final step after negotiations is to select a buyer and have them sign a letter of intent (LOI).
Complete The Due Diligence Process
The first step for due diligence is usually to provide the buyer with the documents they need to verify the financial data for your bread production company. The most notable documents they may request include:
- Tax returns
- Profit and loss (P&L) statements
- Balance sheets
- Insurance policy (copy)
- Lease information (for your factory and other facilities)
- List of employees
A walk-through and/or meeting with certain employees may occur as well. Your job as the seller is to remain in constant contact and ensure the due diligence process moves along smoothly and with efficiency so both parties can close the sale sooner rather than later.
Close The Deal
This is the final step. During closing, you review and sign the purchase agreement, the buyer sends the payment or the company, you notify your employees and vendors, and lastly, you transfer ownership of the company to the buyer.
Considering Selling? Contact The Business Brokerage at Sigma Mergers and Acquisitions
Schedule a consultation with Sigma Mergers and Acquisitions today to get the sales process for your bread manufacturing company started. With hundreds of businesses sold, we understand the process and know how to sell for fair market value.
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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