Chris Fagnant joins Nana Bonsu on this episode of Build Value By Choice to discuss making your business more sellable, specifically in the manufacturing industry. As a broker and ex-business owner in the manufacturing industry, he’s the perfect person to advise and guide you through making your business more attractive to buyers.

KEY TAKEAWAYS

• The key factors that determine the value of a manufacturing business are people, productivity, execution, and cashflow. Much like any other business, potential buyers will want to see proof of healthy and sustainable cash flow. They will also want to see that the supply chain you’re a part of works and if you control your own product lines.
• It can take at least 3 years to correctly prepare your business for sale, even from the day you buy or start the company, you should be working out your exit strategy. If you run your business in a way where it can operate without you, then you’re on the right path to preparing your business for sale.
• There are personal expenses for business owners that get wrapped up in the company books. These minor expenses should be worked out of our books because when your business is being appraised they want the true business expenses, they want to see how it will look when they run it and not have to work out what it looks like without you.
• The number one mistake business owners have when selling their business is understanding how their business is valued. Top line revenue is not the main driver and when it comes to your specific IP, 99% of the time is not the reason someone wants to buy you.
• If you’re looking at building the value of your business for the next 3 to 5 years, look at the suppliers you have, are they the right suppliers or are there better ones out there. You need to foster those relationships with regular lines of communication and even paying a day early will put you top of their list of people they like to work with.
• SDE = Seller's Discretionary Earnings.
• EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization.

BEST MOMENTS

‘It was an opportunity to put a lifetime's worth of experience in manufacturing to work for others’

‘The outcome of that was a 95% reduction in demand from our largest customer, so we had to pivot’

‘We leveraged relationships with the right people to ensure we had advocates for our business’

‘You don’t sell a business and get a check the next week’

‘Only 30% of businesses successfully transfer for the 1st generation to the next’

EPISODE RESOURCES

https://www.fbb.com/

chris@fbb.com

https://www.linkedin.com/in/christopherfagnant/

VALUABLE RESOURCES

Productize ebook

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ABOUT THE GUEST

Chris’ role as a business broker is born out of a lifetime of experience living and working in family-owned businesses. He grew up in the heat seal lidding business. Initially, Chris pursued more corporate opportunities and...