Reflections on the Machine Shop Ownership Change Conference

October 5, 2021

We recently completed our Machine Shop Ownership Change Conference. I had a great time putting it together and hosting the event along with Peter Zelinski of Modern Machine Shop Magazine.  The speakers and panelists were astonishing and brought fantastic insights about the ownership transitions they have gone through or been involved with. The attendees were very engaged and we had great questions which revealed the fact that they were genuinely curious about ownership change in general, and as it relates to their own companies.

As I reflect back on all the things the speakers shared and distill the most common and important takeaways that we heard time and time again, a few things come to the top.

    1. Get rid of skeletons in the closet!  We heard this exact phrase from several speakers underscoring how common this is, and how it negatively affects companies being sold. Now is the time to start getting rid of the worst of those skeletons. Make sure you disclose the rest of them upfront when you go to sell your shop. There are fewer things that will implode a deal than last-minute skeletons that WILL come out during due diligence!  It breaks trust from the buyer’s perspective and will leave them wondering what else they will find later in the closet.
    2. Have systems! There are so many machine shops out there that are run out of the head of the owner and maybe a few other people. They’re maybe barely using a bad ERP, have lots of paper, dozens of spreadsheets, files scattered all over their network, and lots of tribal knowledge. Fire fighting, overnight shipping, and last-minute scrambles are a stressful part of daily life. These types of companies are much harder to sell because nobody wants to buy a shop like that, and if they do, you’ll get pennies on the dollar.  The fix?  Start implementing systems today and become more process-driven.  It’ll dramatically improve the value of your business, and the ease of selling to other kinds of buyers, plus you’ll have a lot more fun in the meantime, and maybe start making so much money that selling may take a back burner. With the proper systems, you can realistically improve the value of your shop by 2x in just a couple of years.
    3. Be sales driven! Having a good year or two of consistent growth, profitable operations, and a well-diversified client base is key.  If you have too many eggs in one basket and have big swings in your revenue and profitability, those are all red flags for a buyer. This means investing in marketing and sales on a consistent basis. And the most effective plan for marketing and sales is to make it into a system.  See #2.
    4. Don’t go it alone! Just because you’ve run a machine shop for years, and you’re used to people coming to you for answers, doesn’t mean that you know how to sell a business. Get trusted advisors and listen to their advice! Lawyers, Tax Professionals, and M&A firms are part of an important lineup of people on your side who can make sure you get the best outcome possible.  Yes, you’ll spend some money on them, but the chance of success will be much higher!
    5. Stay cool! As Dave Capkovitz said, selling your shop is like putting one of your children up for adoption. It’s one of the most emotionally wrenching, and financially significant processes you’ll ever go through. So be clear about your intentions, what numbers are important to you, and try to remove the emotion as much as possible from the process. By keeping a level head, trusting your advisors, and taking lots of deep breaths, you’re much more likely to come out of the whole deal much better off.
    6. Communicate! Especially if you’re transitioning from one family generation to the next, don’t be afraid to talk about it. Clear and open communication about all the issues you can think of is really important! Don’t keep everything to yourself and wait until the last minute to bring it up. Even if it turns into an uncomfortable conversation, that’s a good thing and everyone will be better off having worked through the issues in advance and having a cohesive plan about how everything should be handled.
    7. Sell when times are good! Don’t wait to sell when you’re having a down year and just can’t take it anymore.  The time to sell is when everything is going great! You’ll get the highest multiple of your EBITDA when you’ve got a good year of consistent profits behind you.

Even if you’re not expecting to go through an ownership change in the near future, it’s never too soon to be thinking about all the topics above, and all the other great wisdom that the speakers shared.  With a small amount of advanced planning, you can dramatically improve the chances of successfully selling your shop or transitioning it to the next generation. I know how hard you’ve worked to build your business to the place it is today! It’s a monumental achievement, so finish it out strong and ensure an amazing outcome with some intentional planning, great systems, and no skeletons in the closet!!

If you missed the live conference, the recording will be available to buy until the end of 2021.  Registrants will also receive the entire slide deck, other handouts, as well as optionally have the opportunity to be connected with companies who are interested in buying machine shops, selling machine shops, or coaching or facilitating those transactions. 

Buy access to the conference here:

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