The custom architectural millwork manufacturing industry is incredibly focused, and potential buyers must have experience and/or extensive knowledge to succeed. Consequently, finding a buyer can become a tough process for sellers. This guide discusses how you can more effectively sell your custom architectural woodwork/millwork manufacturing company for fair market value.
About The Custom Architectural Woodwork/Millwork Manufacturing Industry
This industry is primarily engaged in custom designed interiors consisting of architectural woodwork and fixtures utilizing wood, wood products, and plastics laminates (Business Reference Guide). For instance, a job may involve the manufacturing of display fixtures and wall shelf units. Success within the industry requires either personal skill with woodwork/millwork or the employment of highly skilled woodworkers and mill workers.
How to Value Your Custom Architectural Woodwork/Millwork Manufacturing Company
Rule of thumb data (acquisition multiples), which use calculated averages of the recent sale of custom architectural woodwork and millwork manufacturing companies, is a great starting point for determining your company’s value. Here is the industry’s data:
- Custom architectural woodwork/millwork manufacturing companies sold for approximately 2.53 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Custom architectural woodwork/millwork manufacturing companies sold for approximately 0.88 times the gross profit
- Custom architectural woodwork/millwork manufacturing companies sold for approximately 0.32 times the annual net sales
However, determining the value of a custom architectural woodwork/millwork manufacturing company is not as simple as applying rule of thumb data to your EBITDA or SDE. Your business broker should also look at other factors that may impact value, particularly those that do not show up on financial reports. These factors include your growth potential, the quality of your workforce, and your reason for selling. More specifically, if you have highly skilled woodworkers, then you may see a much higher valuation than your SDE indicates.
You should also check: How to Sell an Electrical Company
A 4-Step Process for Selling Your Custom Architectural Woodwork/Millwork Manufacturing
You can best sell your custom architectural woodwork/millwork manufacturing company by following the four steps below. Although, it is important to still work closely with a business broker, who can personalize your sales plan.
- Plan your strategy
- Prepare for the sale
- Market your company
- Close the sale
The sale of a custom architectural woodwork/millwork manufacturing company can be quite complex, which may seem overwhelming. Nevertheless, you can increase your chances of a successful experience by planning properly.
During the planning stage, it is important to determine the value of your business, establish your financial and non-financial goals for the sale, plan all aspects of your exit strategy, discuss your plans with your business partners, and begin gathering all the necessary documents for due diligence (see below). Your broker, along with other members of your sales team such as your attorney and CPA, can assist you with properly planning your strategy.
In addition to preparing for the sale of your custom architectural woodwork/millwork manufacturing company, you will also need to prepare your legal and financial documents. If you have operational and procedural documents, you will need to collect those as well. This can take some time and may require a bit of work, but preparing beforehand can significantly help reduce the risk of setbacks, deals that fall-through, and/or frustration during the sale. Of course, some (if not most or all) of these documents you already have prepared and ready to go.
Unfortunately, too many business owners jump straight to the marketing stage. In doing so, they are not able to justify their value and subsequently have less negotiating power. This often leads to sales below what their business is worth. Also, the risk of news leaks that you are selling could occur and compromise the sale.
The good news is you are in a great position to procure a deal quickly if you have done the legwork beforehand and have a reputable business broker in your corner who understands how to find prospective buyers interested in purchasing an architectural woodwork/millwork manufacturing company. The marketing process typically involves actively searching buyers databases, communicating through private networks, leveraging local connections within the industry, and utilizing other confidential methods. Once a deal is in place, the buyer can then move to due diligence by signing a letter of intent (LOI).
The final stage of the sale process for your custom architectural woodwork/millwork manufacturing company is attending closing. At the closing table, the purchase agreement is signed, and ownership of the business is transferred to the buyer. Of course, you (the seller) also receives payment for the sale during this stage. Your attorney typically attends the closing to ensure that everything goes smoothly.
In some cases, the seller’s business broker may also be present (if necessary). The buyer’s attorney reviews all documents (including the purchase agreement) and a representative of the buyer’s financial institution may also be in attendance, particularly if financing is involved. Ultimately, the sale is finalized, the payment is sent, and the seller transfers ownership entirely over to the buyer.
Sigma Mergers and Acquisitions Has Helped 600+ Business Owners Sell
Not only do we have extensive experience overall, but we have helped many manufacturing and construction companies sell for fair market value or higher. If you are considering selling your custom architectural woodwork and millwork manufacturing company, then contact our team today. We are glad to provide you with 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!