How to Sell a Leather Goods and Luggage Manufacturing Company

How to Sell a Leather Goods and Luggage

With some experts predicting an increase in domestic production of leather goods and luggage, many investors are seeking to purchase an established company. In this review, we discuss the valuation method owners can use to determine the worth of their letter goods and luggage manufacturing company. We also break down the sales process, so you can make informed decisions and properly prepare for the sale. 

About The Leather Goods and Luggage Manufacturing IndustryAdobeStock 322633632

Companies within this industry produce leather products from leather, plastic, and fabric materials (Business Reference Guide). In previous years, many investors have been skeptical of entering the industry out of fear of importing leather products. However, domestic production demand is expected to increase which should help provide more reliable profits. Here are the most recent industry numbers and projections: 

 

  • There are approximately 7,525 leather goods and luggage manufacturing companies in the U.S. 
  • There was a -0.8% annual growth for the leather goods and luggage manufacturing industry from 2018 to 2023
  • The leather goods and luggage manufacturing industry generates $3.1 billion in annual revenue
  • The annual profit for the leather goods and luggage manufacturing industry is $154.8 million
  • Experts predict a decline in annual growth (-0.5%) from 2023 to 2028

 

How to Value a Leather Goods and Luggage Manufacturing Company

There is not enough reliable rule of thumb data for the leather goods and luggage manufacturing industry. Therefore, the broker you choose should not rely upon rule of thumb data to determine your company’s value. Instead, your broker should look deeper and consider additional factors, some of which may not show up in your financial reports. These factors include: 

 

  • Growth potential
  • Quality of your workforce
  • The quality of your leather products
  • Factory location
  • Reason for selling
  • Value of your materials and inventory
  • The diversity of your customers 

 

Of course, your financial information is still critical. Potential buyers will want to review your financial information (including your SDE and EBITDA) to determine the company’s earning potential moving forward. 

What are The Different Stages of The Sales Process?AdobeStock 190515692

So, it is time to follow through with your exit strategy. We encourage discussing the specifics of your sale with a qualified business broker. However, the general stages of the sales process for leather goods and luggage manufacturing company owners are as follows: 

  1. The valuation stage
  2. The planning stage
  3. The marketing stage
  4. The due diligence stage
  5. The closing stage

 

The Valuation Stage

You receive a professional valuation from a business broker you choose during the valuation stage. As discussed, this tells you your leather goods and luggage manufacturing company’s worth on the market. In other words, you will know how much you can likely get in a sale, which allows you to make informed decisions.

The Planning Stage

The planning (and preparation) stage involves making difficult and strategic decisions about when (and for how much) you list your company on the private market. Of course, your broker can provide their professional recommendation and guide you through these early decisions. You will also need to prepare, which may involve notifying your business partners and collecting documents that may be needed later in the sales process (see below). 

The Marketing Stage

This stage involves finding a qualified buyer for your leather goods and luggage manufacturing company. In doing so, your broker will put together a sales memorandum, a confidential document that gives financial details about your company, highlight your experience and the history of your company, and more. In many cases, this document does not specifically list your company’s name and a non-disclosure agreement (NDA) must be signed before viewing the memo. 

You and your broker will screen offers as they arrive, make counter offers, and negotiate terms until a deal is reached. Once a deal is in place, the buyer signs a letter of intent (LOI) and starts the due diligence process (see below). 

The Due Diligence Stage

The buyer needs a chance to confirm the details that you have provided — the details that enticed them to make an offer. Although this primarily benefits the buyer, it should not drag on to the extent it pushes the closing date back. To avoid this, your broker may monitor the process and implement a due diligence map. Specifically, the due diligence process may include the following: 

 

  • Review your company documents – The buyer will request legal and financial information, in addition to copies of your lease information, insurance policy, and more
  • A request for more information (via Q&A) – The buyer may also request more information by providing a list of questions for you to answer. This is often done in a written format. 
  •  Request to tour your manufacturing operations- The buyer may also want to see business operations in person. They may walk-through the facility, speak with business partners and employees, and ask a series of questions about normal daily business operations

 

The Closing Stage

Lastly, you can close the sale once due diligence is complete. Your attorney, the buyer, the buyer’s attorney, and a representative of the buyer’s financial institution may attend closing; the broker may attend as well if necessary. 

During closing, you will review the purchase agreement, attain the final signatures, and confirm the payment. You will also start the transition of ownership. The terms of transition are agreed upon beforehand. It could involve simply passing the torch to the new owner and getting out of the way, or it could involve active involvement for a year or more to help ensure a smooth transition of ownership. 

Sigma Mergers Has Helped Sell 600+ Businesses

Not only have we helped hundreds of business owners sell for fair market value or greater, but we have direct experience with companies within the manufacturing space. We understand the unique challenges your company may face throughout the sales process, and we are here to help ensure you receive full value. Contact us today to learn more and get started. 

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Scot Cockroft Business Broker
Hi, I’m Scot Cockroft.

When I founded Sigma Mergers and Acquisitions back in 2003, I had sold my business the year prior.

Now, that can sound good, but let me tell you, back in 2003, it was not easy to sell a business. Not that I’m saying in modern day times it’s easy to sell a business, but back then I interviewed broker after broker after broker, and no one was interested in actually seeing the value that my business brought to the table.

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Sigma is a the leading business broker in with Corporate offices in Dallas/Fort Worth with roots from 1984. Over 600 businesses sold in Dallas, Fort Worth, Texas, Oklahoma and across the South. Sigma provides full business brokerage services with NO upfront fees. We provide Market approach business valuations for business sales. Sigma is passionate about helping business owners achieve their goal of financial security. Contact us today for a free no obligation business valuation. We are here to help you achieve your goals.

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