A Manufacturer’s Wisest Long-term Investment

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It’s quite simple, really. Most small- to medium-size businesses in the M&D industry are challenged with the demands of owning and operating a business, leaving little time to plan for the future. What nearly two-thirds of business owners fail to see, as they’re knee-deep in daily operations and project management, is that these companies are their retirement plans, the inheritances for their children, and possibly the legacy they will leave for their community. In fact, many people rely on the success of your business – from the employees and family members to your customers, and so on. It’s wise to step back from time to time to consider the big picture and contemplate the future. There are some key questions you should consider regarding your business as an investment in your future.

Key Questions for Business Owners

  • What are your longer-term goals for yourself and your business?
  • Do you aspire to scale your business to include new products or geographies? Do you see opportunities to take your business to the next level?
  • Are you thinking of scaling back your involvement in your business in the next three to five years?
  • Do you want to transition completely out of your business and retire or move on to a different type of challenge?

Setting Realistic Growth Goals.

If your goal is to grow your business, there are essentially two pathways: organic growth or growth by acquisition. Your pathway will depend upon many factors specific to your particular industry, but here are a few areas to consider when determining which path may be more feasible:

  • Is there capacity for expansion in your current facility and do you have access to capital to expand? Is there a sufficient talent pool near your current geography? Does your existing employee base have the skillset required to take the company to the next level?

If the answer to any of these questions is “no,” it may be worth considering growing through acquisition. Acquisition can be a pathway to achieve growth and, if done well, can diversify a company in important ways to create more stability or enable deeper penetration into higher-margin areas. For example, if your existing business is reliant upon one or two customers for more than 40% of its revenues or profits, that may leave the company vulnerable should those customers’ needs change. If you are having difficulty attracting the right type of talent in your area, an acquisition could give you access to different skill sets in addition to greater cash flow.

Scaling Back for Success.

Whether your plan is to scale back your involvement in the business over the coming three to five years, or even five to ten years, it’s wise to begin thinking about how best to make that transition now. Even if you have a strong management team that is ready to take on the challenge and fill your shoes, there may be some specific steps you want to take to put everything in place for success.

An Investment Choice: Sikich worked with a client that was in his eighties and had built a successful business that spanned multiple geographies, and had weathered good times and bad. The company approached us to find an investor for the company. The owner was open to selling the company, but only to a limited number of potential strategic buyers since he was very concerned about how his 325+ employees would be treated after he left. He also was hoping to find a way to reward his outstanding management team and give them an opportunity to own a piece of the company they had helped to build.

In this situation, we were able to find an investor that honored the owner’s legacy and agreed to maintain all the culture, values and benefits that the owner had put in place over his long tenure. In addition, the management team was given a meaningful stake in the company alongside the new owners which ensured long-term alignment to enable the company to reach their growth goals.

Seeking an investor for your business may also be the right solution for you if you are looking to diversify your personal wealth. If a substantial portion of your wealth is tied into your business, it may make sense to consider diversifying to protect some of that wealth for you and your family. The right investor can bring in more than just capital to enable you to take some “chips off the table.” Many investors specialize in specific industries and can support you and your broader management team in growing the business for your long-term retirement.

Succession Planning for Maximum Value.

Planning for Now:

If your goal is to fully retire within five years, planning appropriately can help you maximize the value of your business when the time comes to either hand over the business to the next generation or sell to a third party. The first step is to understand the value of the business today and consider potential actions that you can take now to improve the value of the company.

Planning for What If:

Even if you do not have a goal of retiring within five years, if your particular industry is facing consolidation, you may be the recipient of an unsolicited offer, and having a solid appreciation for the value of your business will be helpful in navigating such an offer. Ideally, when the time comes to present your company to potential acquirers, the business will have a steady track record of growth with limited challenges that may concern a potential buyer such as customer concentration or compressing margins.

In summary, no matter the age of your business or what your goals are, it’s important to take time to plan for the longer term. This planning can result in positioning your business well to meet your goals.

Interested in getting started? For more details, or assistance with determining an investment strategy to meet your long-term goals, contact a Sikich Investment Banking advisor today.

*Securities are offered through Sikich Corporate Finance LLC, a registered broker/dealer with the Securities and Exchange Commission and a member of FINRA and SIPC.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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