Are you considering selling your plastic and resin manufacturing company? In this guide, we discuss the sales process for owners who are planning the exit from their company. We also discuss the valuation process and how to make informed decisions about your sales strategy.
About The Plastic and Resin Manufacturing Industry
According to Business Reference Guide, businesses within the plastic and resin manufacturing industry engage in one (or all) of the following
- Manufacturing resins, plastics materials, and thermoplastic elastomers
- Mixing and blending resins on a custom basis
- Manufacturing non-customized synthetic resins
In previous years, the industry has experienced volatility due to varying demand for plastic and resin products. However, the industry has grown overall. Some experts expect continued growth moving forward. Here are the most recent industry numbers and projections:
- There are approximately 1,434 plastic and resin manufacturing companies in the U.S.
- There was a 0.4% annual growth for the plastic and resin manufacturing industry from 2018 to 2023
- The plastic and resin manufacturing industry generates $112.3 billion in annual revenue
- The annual profit for the plastic and resin manufacturing industry is $5.1 billion
- Experts predict a slight decrease in annual growth (-0.2%) from 2023 to 2028
The Valuation Process for a Plastic and Resin Manufacturing Company
You should always begin with a valuation before you plan your sales strategy. In fact, all business owners should have a full understanding of their company’s value regardless of their long-term plans. More specifically, you should use a market approach to determine your plastic and resin manufacturing company’s worth on the market. This involves the calculation of your seller’s discretionary earnings (SDE) and the application of your SDE to the following acquisition multiples:
- Plastic and resin manufacturing companies sold for approximately 3.66 times the Seller’s Discretionary Earnings (SDE)
- Plastic and resin manufacturing companies sold for approximately 5.79 times the gross profit
- Plastic and resin manufacturing companies sold for approximately 1.27 times the annual net sales
Of course, your valuation should not end here. You should also apply adjustments based on other factors that may not show up in financial reports but are still strongly considered by prospective buyers, such as your location, growth potential, and reason for selling.
How to Sell a Plastic and Resin Manufacturing Company for Fair Market Value (FMV)
We recommend a personalized process. You should not attempt any cookie-cutter approaches as they are almost certain to prove unreliable. Instead, trust an experienced broker to help personalize your sales strategy. With that said, the five phases of the sales journey that are typical for plastic and resin manufacturing company owners are as follows:
- Due Diligence
Phase 1: Valuation
This may be the most crucial phase to get right. Due to this, choosing the right business broker is essential. You want to find a business broker who has the experience and is able to look past the financial numbers alone to calculate your company’s value. Otherwise, you may be surprised by the offers once you list your company, risking not selling or selling for well below what your company is worth.
Phase 2: Preparation
The preparation process may seem tedious for some sellers, but it is an important step to ensure a smooth sales journey. Notably, you will need to collect your financial and legal documents. The list of documents you may need to collect for your plastic and resin manufacturing company includes but may not be limited to:
- Federal tax returns (3+ years)
- Profit and loss (P&L) statements
- Balance sheets
- Cash flow statements
- Insurance policy information
- List of inventory
- Lease information or real estate appraisal
You will also need to establish your sales goals. This may include maximizing the sale price along with meeting non-financial goals, such as finding a buyer who will keep your current employees on staff.
Phase 3: Marketing
Once you are prepared, then your broker will bring your plastic and resin manufacturing company to market. In doing so, they may utilize private channels such as databases, networks, and connections. They will also ensure the sale remains confidential, which may involve the use of non-disclosure agreements (NDAs) and blind listings. Ultimately, they will secure a deal with a qualified buyer after negotiations and contingency planning.
Phase 4: Due Diligence
After the buyer signs a letter of intent (LOI), they can begin due diligence. This involves a review of your financial and legal information and documents, a request for more information (via Q&A format), and other actions that allow them to learn more about your business.
Phase 5: Closing
Ultimately, you will close the sale. This involves attaining final signatures and confirming that you (the seller) has received payment for the business. At this point, you will start the company transfer and complete your exit strategy.
Sigma Mergers and Acquisitions Has Helped 600+ Companies Sell Successfully
Here at Sigma Mergers and Acquisition, we take pride in helping business owners sell their company with confidence. If you are planning your exit strategy and want to learn more about the sales process, contact us today. We are glad to schedule a time for an initial consultation and provide you with a no-cost and no-obligation business valuation.