just documented. While you start cleaning up your production floor, don’t forget about your digital presence. Just as you will clean up the floor, paint the front door, and ensure your BOMS are easily located, you need to make sure your web is current, mobile pages are responsive, and that your address is ranked well in the search engines. Ensure that there are no broken links, old photos, or pictures of employees that are no longer there. If your email administration is outsourced, ensure your IT department understands the DNS settings and email structure, and where the web is hosted along with domain credentials, as these will be passed onto the new buyer. Once you’ve tackled the punch list, the big question is, what’s it worth? The simple valuation formula is: Value = (SDE-Replacement Salaries)*Multiple + Inventory + Other Assets + Real Estate – Liabilities. Multiples are highly subjective, and they are the subject of seller fantasies in all industries. High growth companies with a chance at IPO may have multiples of 10 or higher, but most healthy businesses will have a multiple between 1-3. Multiples are higher for businesses with predictable recurring revenue, increasing revenue, and those with solid long term customer contracts. Being good at using new technology in house, and being and industry leader, will also increase the value. If you are planning to transition from owner-operator or family held business to a state where you can sell the business to another owner, you’ll get the highest value by putting in some work upfront. Getting the financials in order is step one. Hiring and training a team to keep the business running after it is sold is a solid step two. Putting that team to work on the 5S process, eliminating waste and disorder to increase profitability and safety is a great step three. Take a hard look at the real estate and decide if it will be worth more to sell separately or lease to the buyer. Deal with all environmental hang-ups that may be lurking in the history. And if you’re one of the many foundries who has an inhouse product catalog business, consider isolating that as a P&L or even incorporating that business separately. While you’re at it, make sure that the online face of the company is adding value instead of detracting from it. Once you think you have your organization in good shape, it would be time to seek out a business broker that can help market and negotiate on your behalf. I suggest seeking a professional with experience specific to metal casting or heavy- duty manufacturing and can provide references. Don’t just show up dead to work one day only to leave your family and the industry hanging in the lurch. A business that nobody knows how to run or value, tons of WIP inventory without clear routing, and customers clamoring for castings and tooling is not an attractive inheritance. Who knows, once you’ve done all the prep, you might decide that you want to keep running the business for a while longer yourself! The end game is to allow you to exit on your terms. Getting your house in order and keeping it that way is not only good for business – most importantly it will allow you to exit with the highest payout. to defray upfront costs and can be good for both parties. Some buyers will use this kind of seller financing to be more flexible on the price. Housekeeping measures elsewhere in the business will also help to increase the price a buyer will pay. Taking time to “5S” the facility, workflows, and company procedures not only increases the curb appeal when a buyer does a walk through, but the investment in organization will make it easier for a buyer to understand what he is buying and what future investments will be necessary. The five main principles of 5S are Sort, Set in order, Shine, Standardize, and Sustain. The goal of “5S’ing” is to eliminate the seven wastes of manufacturing (Overproduction, Inventory, Time/Waiting, Transportation, Processing, Motion, Defects). Also make sure that your processes are clear, concise, and have up- to-date documentation for all aspects of the business, not just manufacturing. Don’t neglect maintenance, safety, HR, cost estimating, sales logs, marketing logs, etc. From the moment a foundry owner decides to sell the entity, they should immediately start the 5S process, if they haven’t already adopted it. Eliminating the clutter of old patterns, piles of WIP castings, mountains of waste sand and organizing the workflow in the foundry won’t just increase the value to a seller, it will increase profitability and safety of the business while you still own it. Safety, in some circles, is the “6th S” - a safe clean operation will have a higher value than a sketchy apocalyptic building full of items of unknown origin or destination. Make sure that your safety plans and procedures are practiced, not Contact: WILL SHAMBLEY
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