Small manufacturers, many of whom have been in business for decades and consistently generate $2 million (€1.8 million) to $20 million (€18.1 million) in annual revenue, are seeking an exit strategy. The founders of these companies are often critical suppliers in the industry sector supply chain including aerospace, aviation, automation, machining, and food production.
The founders of these firms are pushing 65 years of age or have already crossed that threshold. They are very good at what they manufacture, yet often have no clue what steps they should NOW take to prepare their company for sale, says Frances Brunelle, founder of Accelerated Manufacturing Brokers, Inc. There are specific factors that can make these small companies much for attractive to someone seeking to acquire the company.
It is not unusual for the larger company to acquire one of their suppliers; conversely a Tier 2 supplier may simply want to expand the product offering with a stable revenue generating existing company. These acquiring buyers are younger, business savvy, and monitor trends constantly (often online on their phones).
While the phrase IIoT (Industrial Internet of Things) is not yet a decade old, business buyers are looking to see to what extent a small manufacturer has an Industry 4.0 IIoT implementation. Without the rudimentary elements of IIoT activated, it represents a cost that will be required upon purchase. It usually translates to a lower offering price for the business.
IIoT – Higher sales price for small manufacturers
While all the media coverage of IIoT is focused on the enterprise-wide application in Fortune 1000 companies, it is naive to ignore the fact that 94.7% of all manufacturing companies identify as small businesses, and 91% have fewer than 500 employees. Of course, the multi-million dollar investment by Fortune 1000 companies in IIoT will not resemble the applications for those $2 million (€1.8 million) – $20 million (€18.1 million) small manufacturers.
Strategic IIoT is applicable and beneficial to small companies and has a direct impact on the attractiveness and sales price when being acquired. IIoT is brilliant at efficiencies by providing access to information. This is particularly true in a 50-person machine shop where searching for information to produce and fulfill orders is translated into late deliveries, dissatisfied customers, higher return rates, and the list goes on.
Sadly, most small manufacturers are still overwhelmed with data across spreadsheets, various software tools, and yes, paper. IIoT for small manufacturers allows them to leverage technology improving efficiency and demonstrate to a buyer the progressive forward-thinking organisation they are considering.
If IIoT did nothing more for small manufacturers than aligning the decision-making process via an accessible source of accurate data, it would be worth the investment. However, when selling a small manufacturing firm, it is a crucial and critical differentiator. The seller can easily recoup the technology investment in IIoT by asking and getting top dollar for the business.
The author is Frances Brunelle, founder, Accelerated Manufacturing Brokers, Inc
About the author
Frances Brunelle is the founder of Accelerated Manufacturing Brokers, Inc., specialising in the sale of lower middle market manufacturing companies nationally. Additionally, she hosts the WAM Podcast (Woman and Manufacturing), which highlights and profiles the opportunities for women in senior management and ownership positions. Fran and her team help to ensure the continuity of U.S. Manufacturing by transitioning ownership to the next generation of entrepreneurs. Fran writes on topics that help manufacturing business owners prepare their companies for sale and navigate the sale process to ensure a positive financial result in support of their retirement.