Buying a Manufacturing Business for Sale by Owner

What You Need to Know Before Buying a Manufacturing Business

Feb 23, 2016

Small manufacturers can offer specialized and personalized products that larger manufacturers cannot make profitably. Buying a niche manufacturing small business allow you to operate in areas that may have little or no competition from larger companies. When small businesses are involved in manufacturing, there are a number of manufacturing methods that are employed. These are flexible, continuous, intermittent and custom manufacturing. Look for a business for sale by owner that matches your experience or interest.

Small business owners should remember that they do not have to know every aspect of running a business and can use professional services such as accounting, marketing and technology companies to gain a competitive advantage.

Recent data shows that the U.S. has become an increasingly attractive place to be due to its cheap and plentiful natural gas supply. In 2016, it is expected that the greatest reshoring efforts will occur in industries like chemicals and metal, both primary manufacturing and fabrication due to their reliance on natural gas as a raw material.

Factories and plants that are connected to the Internet are more efficient, productive and smarter than their non-connected counterparts. Despite this fact, however, only 10 percent of industrial operations are currently using the connected enterprise model. Find a business for sale that could benefit from internet connection.

As a general rule, it makes sense to look for opportunities on a manufacturing business FSBO web site.  Once you find a listing that interests you, make sure the business isn’t vulnerable to overseas competition.

Here are some tips to help you choose the right manufacturing business for sale:

  • Look for a company that makes a patented or proprietary product that cannot be purchased overseas.
  • Businesses that are able to deliver their products “just in time” to customers with a short lead time will also be able to skirt the competition offshore.
  • Another factor that prevents overseas companies from competing with U.S. based manufacturers is shipping costs.  If the products they make are too heavy to be shipped economically from another country, then the U.S. based company has a distinct advantage.
  • If a manufacturing business is “for sale by owner”, you can usually learn a lot about the daily operations of the business by starting a conversation with the current owner.
  • The first thing you should learn about a manufacturing company is which industries drive their business, and then do a thorough investigation on the health of these industries.
  • Prior experience in manufacturing is the single most important quality that you should have before embarking on an ownership venture. Manufacturing is not the type of business you can “learn as you go”.  It requires a specific skill set that is not easily transferred from one owner to the next.
  • If you are ready to start searching for an existing industrial venture for a potential acquisition, the best way to begin is by searching under “Manufacturing for Sale by Owner” in a reputable business FSBO directory.