This is an exciting time for many beauty professionals who are interested in owning a beauty products manufacturing company. This leads to excellent valuations for many owners already within the space. In this guide, we provide a detailed look at the valuation and sales processes for beauty products manufacturing company owners who are planning their exit strategy or considering selling.
About The Cosmetic & Beauty Products Manufacturing Company
The beauty products manufacturing industry primarily engages in the manufacturing of beauty products such as perfumes, shaving preparations, hair preparations, face creams, lotions (including sunscreens), and other cosmetic preparations (Business Reference Guide).
This industry is always evolving and consequently attracts many new competitors who are forward-thinking. Although this may create more competition, it does present an opportunity for beauty products manufacturing company owners to sell to an investor who is interested in entering the space but is not interested in starting a new company. Here are the most recent cosmetic & beauty products manufacturing industry numbers and projections:
- There are approximately 4,469 Beauty products manufacturing companies in the U.S.
- There was a -0.7% annual growth for the beauty products manufacturing industry from 2018 to 2023
- The beauty products manufacturing industry generates $47.7 billion in annual revenue
- The annual profit for the beauty products manufacturing industry is $2.9 billion
- Experts predict a slight increase in annual growth (0.8%) from 2023 to 2028
How to Determine The Value of Your Cosmetic & Beauty Products Manufacturing Company
Along with a deep consideration of your company’s non-financial factors and performance, you can determine your fair market value by receiving a market-based business valuation from a professional business broker who has experience within your industry. Here is the rule of thumb data, or acquisition multiples, for beauty products manufacturing companies.
- Beauty products manufacturing companies sold for approximately 2.95 times the Seller’s Discretionary Earnings (SDE)
- Beauty products manufacturing companies sold between 2.91 and 5.33 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Beauty products manufacturing companies sold between 0.55 and 1.29 times the annual net sales
You should also check: How to Sell a Flower Shop
A Guide to Selling Your Cosmetic & Beauty Products Manufacturing Company for Fair Market Value (FMV)
There are no cookie-cutter solutions for selling your beauty products manufacturing company. All companies are unique, and subsequently, the sales plan should be personalized. However, there are common steps and a general process you can follow. The ten steps you can expect when selling are as follows:
- Consider your company’s value
- Establish your exit strategy goals
- Map out your sales plan and timeline
- Collect your legal, financial, and operational documents
- Allow your broker to connect you with qualified buyers
- Negotiate the best deal (with your business broker)
- Secure a deal with a signed letter of intent (LOI)
- Provide documents, answer questions, and complete other due diligence tasks
- Attend closing and confirm the payment
1. Consider Your Company’s Value
Your valuation plays a crucial role in the sales process. A professional valuation can provide you with leverage as prospective buyers are more likely to see similar value and provide offers at or greater than fair market value (FMV). With that said, if your value is not where you desire, then it may be best to improve your value over time before you list for sale. In other cases, however, it is best to go to market right away.
2. Establish Your Exit Strategy Goals
Your valuation also plays a role in formulating your exit strategy goals. This, of course, includes your asking price. During this stage, you will also set your strategy for negotiations and contingencies. Additionally, you should what (if any) non-financial goals are important to you. For instance, you may find it important that your employees keep their jobs with the new ownership.
3. Map Out Your Sales Plan and Timeline
You then need to map out your sales plan and timeline. This helps ensure a smooth and fast process with as little setback or interruption as possible. Your broker can assist you with putting together your sales timeline.
4. Collect Your Legal, Financial, and Operational Documents
You then need to collect your paperwork; this is the last step before you list your company for sale on the private market (see below). Notably, you should collect the following documents:
- Federal tax returns
- Profit and loss (P&L) statements
- Balance sheets
- Cash flow statements
- List of your inventory
- List of your vendors
- List of your employees
- A copy of your lease (or a copy of your real estate appraise if you own your property and it will be included in the sale)
- A copy of your insurance policy
5. Allow Your Broker to Connect You With Qualified Buyers
This is where the magic happens. Your broker will leverage their contacts, connections, networks, and private databases to market your company in a confidential manner. The best brokers are able to get your beauty products manufacturing company’s sales memo in front of hundreds of prospective buyers.
6. Negotiate The Best Deal (With Your Business Broker)
Your broker will screen offers as they arrive to ensure the buyer is qualified. They also assist you with negotiations until you reach a final deal that works for you. This can be a strenuous process, and having a broker who can keep things professional and negotiate effectively is essential.
7. Secure a Deal With a Signed Letter of Intent (LOI)
Ultimately, you will lock in a buyer with a signed letter of intent (LOI) that establishes the terms to be included in the purchase agreement. This includes (but is not limited to) the purchase price, payment terms, and contingencies.
8. Provide Documents, Answer Questions, and Complete Other Due Diligence Tasks
In this stage, you will provide many of the documents you prepared earlier in the process. You may also need to answer a series of questions about your beauty products manufacturing company that the buyer provides for you, along with completing other due diligence tasks. For instance, the buyer may also request a walk-through of your manufacturing facilities and meetings with key employees.
9. Attend Closing and Confirm The Payment
Closing involves a final review of the purchase agreement and attaining the final signatures. The buyer also sends you the full payment according to the terms in the agreement. Once the payment is confirmed, you will transfer ownership of your company to the buyer.
Speak With an Experienced Business Broker Today
Are you looking to sell your beauty products manufacturing company at a fair market value? If so, then look no further than Sigma Mergers and Acquisitions. With years of experience and hundreds of businesses sold, you can trust us to get the job done. Contact us today and we will guide you through the process with our expertise and experience, along with providing a free, no-obligation business valuation.
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.
Feel free to reach out!