About buying a manufacturing business
You have decided to buy a business - but what type suits you?
There are 4 main types:
Each has its own unique characteristics that may or may not suit your skills and strengths. In this article we look at buying a manufacturing business.
Manufacturing is all about coordinating resources (mostly people) to make things. While manufacturing has many risks from its complexities of being capital intense, a poor provider of cashflow, and high in people management - it can also be very rewarding from the creating and making of things by working with, and getting the most from people. Done well this can be very successful. Good opportunities are generally harder to come by, with the most affordable being in the food sector.
Are you proactive and people orientated? You'll need to work with customers securing orders, source suppliers and ensure they deliver, motivate staff, and keep everybody happy - including the bank manager. At the same time ensure you are continually controlling your costs and productivity.
Some key points to consider when buying a manufacturing business;
(1) Do you understand the business and the market? Is it something you would like to do and would enjoy doing? This is important for when times get tough.
(2) The money thing? Plant and stock can be costly - is what's on offer needed for the business? What about the intangibles like; patents, recipes, customer lists etc. These are only of value when products are "sold" - can any goodwill be linked to future sales?
(3) Cash reserves - manufacturing can be a cashflow roller coaster; machines break down, technology changes, contracts can be lost, markets may slow (or even dry-up). Can you cover it?
(4) Minimise the risks; Use sub-contractors where possible. Employees must be paid on payday, and still paid even if there's no production. Determine your cash-out position if things don't work out (prior to purchase). When moving-in renegotiate new terms with key customers and suppliers to better your cashflow position, this will be easier now than later.
By Richard O'Brien - nzbizbuysell
· Manufacturing Businesses for Sale
· Distribution Businesses for Sale
· Retail Businesses for Sale
· Service Businesses for Sale
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