Buying a Manufacturing Business
You have decided to buy a business… but what type suits you?
There are 4 main types:
· Manufacturing
· Distribution
· Retail
· Services
Each has its own unique characteristics that may or may not suit your skills
and strengths. In this article we look at manufacturing.
This 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 go-out the door "sold" -
can any goodwill be linked to future sales?
(3) Cash reserves - manufacturing can be a cashflow roller coaster, machines breakdown,
technology changes, contracts lost, markets 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
latter.
Richard O'Brien (nzbizbuysell.co)
When purchasing any business always seek professional advice.
For further details, visit www.nzbizbuysell.co.nz
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