B2B, Industrial & Distribution · Seller readiness
Selling a Manufacturing business
Published · Reviewed by The Diligence Standard Team · Updated
A manufacturer should prepare customer and product profitability, inventory aging, equipment maintenance, capacity and labor data and address deferred CapEx before the market prices it.
How the business works
Customer/product margins, machine utilization, labor skill, inventory, supplier concentration and deferred CapEx determine earnings quality.
Issues to resolve
- Inventory is valued without aging
- Machine condition is underdocumented
- Product/customer margin is unavailable
- Owner or one engineer holds process knowledge
- Maintenance has been deferred to improve cash flow
Evidence to request and reconcile
- Customer/product profitability
- Inventory aging
- Machine/fixed-asset schedule
- Maintenance history
- Supplier spend
- Scrap/rework and quality data
Decision questions
- Which customers/products actually create gross profit?
- How much inventory is slow or obsolete?
- What machinery must be replaced or rebuilt?
- Where is tribal knowledge concentrated?
- How much capacity exists without additional CapEx?