In this quarter’s Industry Pulse Survey, manufacturing and distribution leaders reflected on the challenges they faced in 2020 and their industry outlook for the remainder of 2021. The survey found that 70% of executives’ succession plans remain the same (compared to this time last year). We met with Lampner to discuss what this means for the industry and considerations for manufacturers with or without a solid succession plan.
Q: Why do you think the majority of surveyed leaders did not change their succession plans from early 2020 to now?
A: There are multiple factors impacting why a manufacturing executive would not change their succession plan this year. While the pandemic significantly affected many businesses and the economy as a whole, as we know, leaders across the board took advantage of PPP loans and other available government aid. This financial support was key to helping eligible companies stay open or recover from the first few detrimental months of the pandemic. With this assistance, a business’ outlook wouldn’t significantly change, so their succession plan would not, as well.
Another major factor impacting these results is that leaders were focused on greater concerns – they didn’t have time to dedicate to revamping or even revisiting their succession plans. They were preoccupied with interrupted supply chains and adjusting their business plans to accommodate changes.
Q: Are those businesses that see growth through acquisitions still actively seeking companies to purchase as part of their succession plans then?
A: Absolutely. We’ve seen countless business leaders, who were very close to retirement age prior to the pandemic, decide to sell and avoid pandemic-related challenges and instead enjoy an early retirement. As a result, it’s a good time to acquire other businesses and find ways to expand your reach geographically or diversify your products if you have the means to do so. Many companies’ growth strategies include acquisitions, and with so many leaders ready to retire, you’d be hard-pressed not to look into deal strategies right now.
Q: To that point, what advice would you give to business leaders considering selling their business now?
A: In order to maximize your sale price and minimize your tax impact, work with a professional to perform a valuation and a Quality of Earnings Report of your business. You don’t want to bring your company to a sale and have the purchasers see a business that was hard hit during the unique year of 2020 (if that’s the case for your company). Instead, impress buyers with data-backed numbers that prove your performance over the past few years. Conversely, if your business had a great year despite COVID-19’s presence, you’ll want data to represent the future your company could have and the earnings that go along with it. The bottom line – if you take anything away from this – is that the best time to sell is when you don’t have to. Make sure your business’ performance is evident by performing your due diligence.
Sikich surveys manufacturers and distributors multiple times throughout the year on a range of business topics to create industry benchmark data. For the first Industry Pulse report of 2021, Sikich surveyed more than 120 executives from manufacturing and distribution companies across sectors including industrial equipment, wholesale and distribution, metal fabrication, food and beverage, apparel, footwear and textiles and transportation.
To learn more about succession planning or our manufacturing solutions, please contact our team.