Private equity firms are targeting small manufacturing in increasing numbers, often motivated by portfolio diversification and the bullish outlook on market demands. Recent trends have been towards vertical integration, buying up original equipment manufacturers along with their supply chains to leverage financial resources, mitigate risk, and stay competitive.
Whether shopkeepers are ready to sell, want an exit strategy in place for the future, or hope to stay competitive in a landscape of consolidations, improving the health and efficiency of the enterprise will keep it attractive to both customers and potential investors.
Key Factors to Focus On
- Invest in leadership. The people who monitor and set financial goals, oversee production, and drive market strategy must have the capability to align their departments with company goals and long-term objectives.
- Keep strategic planning at the forefront of management roundtables.
- Update/embrace the use of technology to improve production efficiencies. Have the ability to gather data to enable reliable analysis of past performance to improve future outcomes.
- Document and implement employee training programs that ensure knowledge is passed on from retiring operators to new hires.
- Analyze your customer base and ensure the company is adequately diversified. Would the loss of a few key customers cripple business?
- Understand your financial picture, past and present. Ensure that financial information is current and accurate. GAAP compliant financial statements is a baseline request for all stakeholders in evaluating your business – whether it be internal management, bankers, valuation specialists, or investors.
- Be well versed on what makes your company valuable – shop equipment, plant processes, the customer base, intellectual property, access to suppliers.
- Gain an understanding of alternatives, if considering a sale – would it be a sale of assets or a stock sale? The decision will likely be heavily linked to tax implications and outcomes.
- Surround yourself with the right consultants. Trusted advisors specializing in accounting, tax, valuation, and law are key partners in navigating your business in the direction you choose to take it.
DiSanto, Priest & Co. has advisory teams in tax, financial reporting, and business valuation that can answer questions on how to add value to your enterprise, whether you are motivated to sell or stay competitive. Please call us at (401) 921-2000 or contact us here.