The process of selling when it comes to a machine shop business is pretty much the same of selling a grocery store or a bakery, for example.
The very first thing you have to do is prepare the entire documentation potential buyers will probably require. Than, after the correct valuation process, you may set your asking price and finally negotiate the best price.
But pay attention: depending on the type of machine shop you own and in the current market conditions, the selling process can take several months. So the earlier you start, the better for you.
Usually larger business takes more time to be sold, but it’s not a rule, as it has a lot of paper to be gathered and more specific documentation to be compiled.
What is your Machine Shop business worth?
Begin by preparing financial and legal documents you will need for the sale and compiling all finance statements from the past three to five years, depending on your business size.
Than, calculate a fair market value for your business, based on the documents you have gathered. Smaller businesses are usually easier to be valued.
Make sure you have all the following topics answered correctly:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Machine Shop worth more?
But these are not enough, you will not be ready to set your asking price before you put additional factors into consideration. But which factors?
If your machine shop has a large number of expensive assets, such as heavy machinery, welding supplies and a large stock of expensive metals, you should add it to the price you calculated.
If there’s any questions, follow the topics below:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average Machine Shop sell for?
Since 2005, there has been only 89 machine shop sales in the United States. That’s a very short number, but if you take a look at the total transaction value for this same period, you’ll see that, despite the fact machine shop businesses are not that popular, at least they are quite profitable.
The average sales price is huge: over $1,2 million, while in ten years more than $114 million were negotiated.
Now look at the average multiple: 3.03, which means average asking price is three times higher the total gross incomes.
What is the most frequent deal size?
Most frequent deal size is the impressive amount of $1,6 million, higher even than average sales price. The average sales price tends to be higher than the most frequent deal size, but in this case, it’s exactly the opposite.
It happens because the majority of machine shop business are large, and usually are better valued than smaller ones. But as you can see in the chart, there has been almost the same number of sales for each deal sizes.
Is the Machine Shop market getting bigger?
It’s very hard to say, once it depends a lot on the number of machine shops that were sold. But in 2015 and 2014 performances were below expectations compared to 2013’s numbers, which was the second best in the past decade, behind 2008.
It’s not possible to say if 2016 is going to be better, but as 2015 had a little drop from the previous year, it would not be a surprise if this year’s numbers were even smaller.
Are bigger businesses worth more?
Yes. The bigger the business the higher the multiple, therefore the higher the profit as well.
In 2015, for example, machine shops sold for less than $250k had an average multiple of only 0.83, while $250k-500k and $500k-1 million deal sizes had 1.99 and 3.56 multiples, respectively.
What states have the most Machine Shop deals?
California, Florida, Illinois and Wisconsin are the states where you are more likely to find the best offer for your business.
Sometimes, however, you can overcome the low number of deals with investors or competitors looking to enter a specific new area, and get lucky with an offer.
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Machine Shop?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Machine Shop?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your Machine Shop, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the fashion industry it may likely be a person who already had a store in the field.
Machine shop market is not very popular in the United States, but it’s a very valuable one for sure. It’s not possible to say if 2016 is going to be a better year than 2015, especially because there has been a drop compared to 2014 numbers.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!