Machine Shop For Sale

Post category:Business of Machining
Reading time:6 mins read
Post last modified:August 1, 2023

selling-your-machine-shop

Is Now the Right Time to Sell Your Machine Shop?

Selling a machine shop is a major decision that requires thoughtful planning and preparation to maximize your valuation and find the right buyer. Here are some tips if you’re considering putting your shop on the market:

Evaluate Your Readiness to Sell Your Machine Shop

Before listing your shop for sale, take time to honestly assess if the timing is right both personally and for the business. Factors to weigh include:

Your Personal Goals

What are your reasons for considering a sale? Retirement, burnout, new ventures, family needs?
Are you emotionally ready to exit the business you built?
Do you have a solid post-sale plan aligned with your personal goals?

Business Health and Value of Your Machine Shop

Is your shop profitable, stable, and in growth mode? Or struggling through a down cycle?
Have you addressed any urgent equipment needs, facility issues, or staffing problems?
Has revenue and profit been consistent and predictable over the past 2-3 years?

Market Conditions

Is M&A activity strong in the current economic climate?
Does the demand outlook for your shop’s services seem solid?
Will risks like rising interest rates or recession impact your valuation?

If the timing aligns with your personal, business, and market factors, then it may be the right time to pursue a sale.

Know Your Numbers and Assets

Before marketing your shop for sale, compile thorough documentation of its financials and equipment including:

Recent financial statements showing revenue, profitability, cash flow
Fixed asset inventories detailing machinery like CNCs
Employee information such as organization charts and salaries
Customer and supplier lists and existing contracts

Work with a Machine Shop Business Valuator

Hiring an independent, certified valuator to appraise your machine shop business is highly recommended. A valuator will assess hard assets as well as goodwill, growth potential and market comps to estimate a fair asking price. Their valuation report also helps justify your asking price to potential buyers.

Prepare Due Diligence Documentation

During the vetting process, buyers will conduct extensive due diligence. Make this smoother by compiling info ahead of time such as:

All legal registrations, licenses, permits
Tax returns for past 3 years
Insurance policies
Intellectual property documentation
Leases, titles, liability information

Thorough due diligence materials signals professionalism and transparency.

Evaluate Different Sale Options

Traditionally, business sales involve the outright purchase of 100% ownership. But there are creative alternatives such as:

Selling a majority stake but retaining a minority interest
Seller financing with installment payments over time
Remaining involved for an interim period to transition

Consider what combination of economics, involvement, and timelines would best suit your needs beyond an outright sale.

Market Your Machine Shop to Strategic Buyers

With preparation and research, you can directly target the most likely buyers for a machine shop. Potential targets include:

Large manufacturers looking to bring production in-house
Private equity firms seeking platform companies or add-ons for their portfolio
Competitor shops looking to expand into a new geographic area
The shop’s own management team exploring a buyout

Time the Sale Strategically

Ideally, market your business when performance is solid and steady. Avoid listing during:

A temporary revenue dip or just after a major financial setback
Before renewing significant customer contracts
Right before major capital investments come due
Seasonal slow periods or temporary reductions in workflow

Maximize Curb Appeal

First impressions matter greatly during tours of your facility. Wise investments to boost aesthetics include:

Deep cleaning and freshening up interiors
Flooring repairs or new epoxy coatings
New exterior signage or lighting
Landscaping and parking lot maintenance
A fresh coat of paint where needed

Work With a Reputable Broker or M&A Advisor to sell your Machine Shop

Selling a mid-sized machine shop is complex. An experienced M&A advisor or business broker adds immense value navigating the process successfully. Their services include: