How to Sell a Sanitary Service and Sanitary Product Manufacturing Company
Sanitary product manufacturing company owners are in a unique position. On one hand, there is rising demand for their products which has led to an increased number of investors looking to enter the industry (or acquire more within the industry). On the other hand, the U.S. has become a net importer of sanitary products. For many owners, this creates an opportunity to sell now, especially if they are nearing retirement or ready to start a new business venture. In this review, we take a close look at how you can value and sell your sanitary product manufacturing company.
About The Sanitary Product Manufacturing Industry
As you might expect, sanitary product manufacturing companies have grown substantially since the pandemic. Not only did sales numbers spike during the COVID pandemic, but they continue to remain much higher than they did before as more people are valuing cleanliness. The industry is also powered by a growing number of individuals reaching the age of 65. However, some fear a decrease in the number of births causing a hindrance to growth.
Specifically, the sanctuary product manufacturing industry engages in the manufacturing of sanitary paper products, such as facial tissues, handkerchiefs, table napkins, toilet paper, towels, disposable diapers, sanitary napkins, and tampons (source: Business Reference Guide). Here are the most recent industry numbers and projections:
- There are approximately 119 sanitary product manufacturing companies in the U.S.
- There was a 1.6% annual growth for the sanitary product manufacturing industry from 2018 to 2023
- The sanitary product manufacturing industry generates $14.1 billion in annual revenue
- The annual profit for the sanitary product manufacturing industry is $802.7 million
- Experts predict a slight increase in annual growth (0.9%) from 2023 to 2028
How to Value a Sanitary Services Company
Types of companies can vary here from Trash Can sanitation to water sanitation. The valuation process is one of the most crucial when you are selling a sanitary service company. Especially since some of these companies are new part of the industry. Due to the limited number of sales with similar companies, along with the unique nature of each one, rule of thumb data (acquisition multiples) are less reliable for this industry. However, your financial performance and acquisition multiples still play a crucial role.
Your growth potential, subsector, location, customer concentration, workforce quality, unique advantage (i.e. patents), and reason for selling may also play a role in how much you can expect potential buyers to offer to acquire your company. Your broker should take all of these factors (and more) under consideration when providing you with a professional valuation.
About
Sanitary Services Company Industry
As you might expect, sanitary service companies have grown substantially since the pandemic. Not only did sales numbers spike during the COVID pandemic, but they continue to remain much higher than they did before as more people are valuing cleanliness. The industry is also powered by a growing number of individuals reaching the age of 65. However, some fear a decrease in the number of births causing a hindrance to growth.
Specifically, the sanctuary product manufacturing industry engages in the manufacturing of sanitary paper products, such as facial tissues, handkerchiefs, table napkins, toilet paper, towels, disposable diapers, sanitary napkins, and tampons (source: Business Reference Guide). Here are the most recent industry numbers and projections:
- There was a 3.6% annual growth for the sanitary servicer industry from 2018 to 2023
How to Value a Sanitary Service Company
The valuation process is one of the most crucial when you are selling a sanitary company. Due to the low number of sales with similar companies, along with the unique nature of each one, rule of thumb data (acquisition multiples) are less reliable for this industry. However, your financial performance and acquisition multiples still play a crucial role.
Your growth potential, subsector, location, customer concentration, workforce quality, unique advantage (i.e. patents), and reason for selling may also play a role in how much you can expect potential buyers to offer to acquire your company. Your broker should take all of these factors (and more) under consideration when providing you with a professional valuation.
An 8-Stage Process for Selling Your Sanitary Company
You can sell your sanitary company by following the eight-stage process laid out below. Although this comprehensive guide covers most (if not all) steps involved with the sales process, it is important to remember that no two business sales are the same. For this reason, we recommend consulting with a business broker who can personalize your strategy.
- Valuation
- Planning
- Preparing
- Offers
- Negotiations
- Due diligence
- Closing
- Training
Stage One: Valuation
As discussed, your valuation provides you with a professional assessment of your company and a general idea of how much a fair and reasonable buyer is willing to pay. If you are happy with your value, then you can proceed to market right away. If you are not satisfied with your value, then you can take steps to improve your company’s worth before you seek a buyer.
Stage Two: Planning
You will then need to plan your sale strategy. In doing so, you should establish what your initial asking price is and how much negotiation room you allow for yourself. You should also establish the hope you have for your company long-term s well as your long-term vision for yourself.
Stage Three: Preparing
Next, you will prepare all that you will need for the sale. This is the last thing you should do before you seek a buyer. Notably, you should collect your legal, financial, and operational documents for your sanitary product manufacturing company. You should also prepare your non-disclosure agreement(s), confidential information memorandum (or another form of sales memo), and a video interview of yourself and a guided tour of your facilities.
Stage Four: Offers
Your broker will handle the offers stage for you. This involves utilizing private marketing channels, such as databases and personal contacts and connections. Your broker may field offers from potential buyers within the sanitary product manufacturing space, screen the offers, and begin negotiations.
Stage Five: Negotiations
Negotiations are often the hardest part of the sales process, particularly for owners who have an inexperienced business broker (or no broker at all). The fact is both sides may start far apart after the initial offers. Your broker should professionally negotiate a deal that is fair, reasonable, and with terms upon which you are willing to agree. After you secure a buyer, they will sign a letter of intent (LOI).
Stage Six: Due Diligence
The LOI sets into motion due diligence. This is the stage in the sale when the buyer has the opportunity to conduct a deep investigation of your company. At this point, you trust them enough to maintain confidentiality, and you will need to provide them with your tax returns, internal financial statements, legal information, and operational procedures. They may also request a walk-through of your facilities and meetings with important members of your manufacturing team.
Stage Seven: Closing
You can schedule a time and place to close the sale after due diligence. The buyer may place the payment in escrow ahead of time, which is released during closing. The primary purpose of the closing visit, however, is for both sides to review the purchase agreement final time and to attain the final signatures. You will also need to start the ownership transfer immediately upon closing the sale. The employees, suppliers, and customers, should be notified of the ownership change as well.
Stage Eight: Training
Lastly, you will need to fulfill your training requirements, which should have been discussed prior to closing the sale. If the buyer has experience with sanitary product manufacturing, then they may not need much (if any) assistance. However, a less experienced buyer may need substantial training from the previous owner.
Start Your Sales Journey with an Accurate Business Valuation
Selling your sanitary service or sanitary product manufacturing business can be both a daunting and rewarding journey. Navigating today’s complex market can feel almost impossible. At Sigma Mergers and Acquisitions, we can help you take the first step with a comprehensive business valuation. And if you choose to list with us, the valuation is completely free.
Our Dallas business brokers serve a wide range of industries and provide accurate valuations to businesses across all 50 states. If your sanitary service or sanitary product manufacturing business generates at least $1 million in revenue and is located in one of the states we serve, our experienced team is ready to discuss how we can support you as your trusted business broker.
With our proven Sigma DealMap™ process, we confidently guide you through every step of the sale and work to sell your sanitary service or sanitary product manufacturing business for maximum value. When you’re ready to sell, trust Sigma Mergers and Acquisitions to deliver results that meet your goals and exceed your expectations.
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!
