It is impossible to predict exactly how long it will take to sell your Austin manufacturing business. A number of factors will contribute to the speed (or lack thereof) of the transaction, including market conditions, your preparedness, the attractiveness of your business, and the qualifications and motivation of the buyer.

As a rule of thumb, manufacturing businesses tend to take a little longer to sell, since there are often facilities and equipment to inspect, as well as regulatory compliance to validate. In general, it tends to take nine to fourteen months for the sale to close, from start to finish.

Of course, there’s no one-size-fits-all answer. In fact, size is a big factor — the bigger the business, the greater the value it tends to command. To understand why, you must first understand revenue multipliers.

Most manufacturing businesses sell based on the value of the assets and contracts conveyed, its future earnings potential, and/or a multiple of its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Business sale multiples tend to range from 1x-6x, with larger businesses tending to command higher multiples. 

Other factors include the point in the market cycle and the available supply of qualified buyers, as well as the demand for manufacturing in your specific industry or niche. 

A manufacturing business, like many businesses, starts its valuation process with a cash flow analysis, as its value largely depends on its ability to produce revenue and profit. The most relevant figure for most manufacturing businesses is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Another factor in business valuation is an asset-based valuation. Most manufacturing businesses have equipment, inventory, materials on hand, and even real estate. The asset value of all of these tangibles will contribute to the value, as will intangibles like patents and other intellectual property. 

Yet another factor in valuation is future earnings potential — the analysis of current factors to extrapolate into the future how earnings for your business will grow or retract, including industry growth and the scalability of your business model.

There is much to consider when selling your Austin-based manufacturing business. Factors include:

• Market conditions in Austin and the manufacturing sector at large.

• National appetite and demand for manufacturing companies in your industry or niche. 

• The readiness of your business to sell, including operational efficiency and financial health.

• Issues of legal and regulatory compliance.

• Potential buyer types — whether your best buyer is a strategic buyer, a financial buyer, etc. 

Consult the experienced business brokers at IBEX for a more complete list of considerations for the sale of your specific business. 

There is no specific time of the year when it is best to sell a manufacturing business. Generally speaking, some signs that the time might be right to sell your business include:

• When your business is showing consistent profitability.

• When the business has achieved specific milestones of health and longevity. 

• When the market is at a high point.

• When there are signs of a seller’s market, with significant demand for business acquisitions. 

• When your industry or niche is showing signs of strength and growth.

• When you have personal reasons, like the desire to retire or move on to new entrepreneurial endeavors. 

If you are in a hurry to be done with your business and have it out of your hands, there are things you can do to set yourself up for a speedy transaction. Measures to consider include:

• Spruce up your business. If possible, upgrade your facilities, streamline operations, cut costs, and push forward with any initiatives you have at your disposal to secure new business or open up new revenue streams. The more attractive your business, the more likely you are to find a motivated buyer interested in closing quickly. 

• Hire an excellent broker. A broker can help you get documents in order, prepare marketing materials, do much of the busy work, cast a wide marketing net, and even personally connect you to interested buyers within their network and the business community. 

• Set the right price. You don’t want to shortchange yourself, but the best way to achieve a quick sale is to price your business to move. Buyers are always motivated by a fair price to move quickly, since there is always someone else waiting in the wings to snap up a good deal. 

• Market aggressively. Use all channels available to you, including online marketing, traditional marketing, and your warm network.

• Prepare to expedite the due diligence. Gather everything your buyer could conceivably want for due diligence, be transparent and flexible, and expedite the due diligence process in every way possible.

As you can imagine, there will be many documents to pull together as you prepare to sell your Austin-based manufacturing business. Some documentation to start pulling together will include:

• Financial statements, including your current balance sheet as well as profit and loss statements.

• Tax returns and records, usually covering the last several years.

• A complete list of assets and inventory on hand. 

• Employee records, management information, and accountability structures.

• All legal documents, including leases, deeds, contracts, patents, and anything else that your buyer would need to know about. 

• Any written business plans, SOPs, and/or operational manuals.

How much you can sell your manufacturing business for depends on a great many factors. One of the best indicators of your correct valuation is Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The higher the EBITDA, the more a manufacturing business will sell for.

Businesses usually sell for a multiple of a specific revenue metric (like EBITDA). This multiple can be anywhere from 1x to 6x. Online businesses tend to sell for a high multiple; restaurants and retail stores for a low multiple. 

Manufacturing businesses usually fall somewhere in the middle — around 2x-4x. It depends on the industry, as well as other factors specific to your business — location, existing customer base, whether real estate, equipment, personal property, contracts, etc. will transfer with the sale, and so on.

As always, consult a broker or valuation expert to arrive at the best estimate of the value of your business. 

Obviously, you want the highest possible value for your business when you bring it to market, but overpricing it can cause your business to sit on the market for weeks, months, or even years, looking more unattractive with every passing day. So what’s the right way to maximize the value of your manufacturing business at the time of sale? Consider:

• Improving operations and profit margins as much as possible. Make your business attractive. Cut costs, run promotions, identify new revenue sources, and optimize for efficiency so your business is as attractive a commodity as possible. 

• Think about curb appeal. If you can afford or finance them, consider any facility upgrades and beautification efforts you might have had in mind so your potential buyers feel good about what they’re buying. 

• Strategically time your sale. Certain times of year or periods in market cycles may produce better value. Your business broker or valuation expert can help you identify the right time to strike. 

• Secure key contracts and relationships. These may be new clients, vendors, suppliers, or anyone who will make operations more streamlined and/or profitable.

When you close the transaction for your manufacturing businesses in Austin, TX, cash gets distributed as stipulated in the closing documents. Much of the proceeds will go to you as the seller, of course, or to other shareholders in proportion to their ownership interest if such shareholders exist.

Funds may be routed directly to any lenders or taxing authorities to settle outstanding debts and tax liabilities. Some funds will go to pay brokerage and service fees.

Usually, the buyer puts cash in an escrow account, just as with the sale of real estate, to be held by a neutral third party as security for the fulfillment of all terms of the deal.

If the business has liquid cash accounts that will transfer to the buyer with the sale, that cash may be included in escrow and distributed to the buyer, or the buyer may receive access to bank accounts held in the name of the business. In that case, money doesn’t change hands, only access to existing accounts. 

The standard time to arrange financing is 30 to 90 days, but as usual, results will vary. Different approaches to financing for the sale of a manufacturing business can require very different time horizons to fund. As such, understanding the type of financing your buyer intends to pursue can and should make a big difference in which offer you select and how you prepare for the closing process. 

Conventional lending sources, such as banks, tend to take longer to underwrite, process, and fund their loans. Online or asset-based loans tend to be quicker, and seller financing (of course) can be the quickest option of all.

Of course, the length of the financing period depends on the complexity of the business, the underwriting process of the lender, negotiation periods, and external factors like changes in regulation. Gathering together documents can be time-consuming, as can be the due diligence period for both the buyer and the lender. 

There are many ways in which working with a business broker can be favorable to the sale of your manufacturing business. Some of the key reasons include:

• Setting the right price. The single most important factor in a quick and favorable sale is setting the right price. A business broker can provide expertise in setting that price. 

• Knowing the key players. Business brokers are often well-connected in the business community. They probably already know the most qualified and eager buyers for your manufacturing business and can make connections.

• Experience and knowledge. A business broker experienced with manufacturing transactions knows many “dos” and “don’ts,” shortcuts to take, and pitfalls to avoid — worth its weight in gold when dealing with a regulation-heavy industry like manufacturing.

• Lightening the load. A lot of busy work goes into selling a manufacturing business. Your business broker and administrative team can take much of that busy work — which you can ill afford to devote time to — off your plate and do it with a professional touch.

• Confidentiality. Business brokers can help you preserve the confidentiality of the sale — first and foremost by acting as a buffer between you and your potential buyers. 

• Negotiation and structuring. Negotiating and deal structuring may not be your strong suit. Your business broker can draw upon a breadth of experience and industry knowledge to negotiate the best terms and identify the most attractive deal structure to yield you the best possible outcome. 

• Neutrality. Business owners tend to be close to their business, to the point of losing objectivity. A business broker can provide a neutral, professional opinion as to the best course of action when the going gets tough.

Our fees usually take the form of a commission against the final sale price. This motivates us to get you the best deal possible in the shortest time possible, since that maximizes our revenue per hour and aligns our goals with your own goals. 

The percentage commission depends on a number of factors, including the size of the business, industry, complexity of the transaction, and the scope of work or range of services we provide. For example, if we get very hands-on with the due diligence and take a lot of the busy work off your plate, our agreement will probably be for a higher commission. This helps set you up for a speedy sale without the up-front costs.

Generally speaking, our commission usually ranges from 2% to 8%. Broadly speaking, we only get paid in the event of a successful transaction, and the bigger the transaction we obtain for you, the greater the return we enjoy on our own investment of time and resources.

You may be understandably hesitant to broadcast private business details to the world — may even prefer to let it go unnoticed by the public that your business is for sale at all. Should that be the case, you have several recourses at your disposal to keep the details of the transaction or even the existence of the transaction private. Measures to consider include: 

• Consider an anonymous listing. There are ways for you to publicize your sale without identifying your business by name. You can simply indicate the industry, size, and other general characteristics that will get potential buyers interested.

• Use a business broker. A business broker adds an extra layer of confidentiality. Your prospective buyers won’t be talking directly to you, but with a professional representative engaged for your interests — one of which may be privacy.

• NDAs are your friend. Non-disclosure agreements can serve as an important benchmark of privacy. At the very least, they establish the expectation of confidentiality and put your prospective buyers on notice that there could be consequences for indiscretion. 

• Vet your potential buyers. Do some basic homework on the people who express interest in buying your business. If you do not trust them, you don’t have to entertain their inquiries.

As always, the exact amount of taxes you will pay upon the sale of your business depends on the industry, your tax bracket, and the specifics of the business. As a rule of thumb, you can usually expect the overall tax liability to fall into the range of 15-30%. Of course, that is a big range, and you should consult a tax professional to better understand what taxes you may face.

The sale of a business for a profit is almost always a taxable event, and those taxes will necessarily eat into the proceeds. Taxes business owners usually face upon cashing out include Federal capital gains taxes, possible state income taxes or franchise taxes, sales tax on any personal property or equipment conveyed with the sale, transfer taxes on any real estate, and possibly other taxes.