Various kinds of businesses fall under the construction industry, from HVAC and plumbing businesses to general contractors, woodworking businesses, and millwork businesses. Today’s article is about the millwork business and how you can go about selling, buying, or valuating a woodworking business.
Wood manufacturing refers to woodwork done in homes and other buildings. Millwork traditionally meant building materials and woodwork that were produced and manufactured in mills, but nowadays, it is no longer restricted to actual mills. With modern-day technological advancements, a lot of millwork or woodwork is produced and manufactured in contemporary factories and workshops.
Many woodwork manufacturing businesses are involved in creating more decorative woodwork rather than simply doors and trims in houses and other buildings. This means that millwork includes different kinds of woodwork like molding, framing, shelving, and more.
Millwork is different from other construction businesses like general contractors or HVAC and plumbing businesses in the sense that millwork is often left until the end of a construction project and is by no means a necessary part of the construction. Instead, millwork is more of an addition or a design element used to transform regular construction into something more elevated.
Most customers that hire a millwork business tend to look for customized and beautifully crafted millwork and other kinds of woodwork for their homes and buildings. Woodworking or carpentry business is typically seen as a very high-quality and original addition to a property that can greatly increase property value.
What to Consider When Selling a Woodworking Business?
If you are the owner of a millwork business and are thinking of selling the business, there are certain things you should keep in mind when making that decision. The construction industry as a whole is highly competitive, with hundreds of businesses being bought and sold every single year. As such, you should not rush into a sale and really think it through before you move forward with any kind of transaction
Here is a quick outline of some things to consider when selling a millwork business:
The Right Time to Sell
Selling your business is a major decision that cannot be taken lightly. One of the biggest things to consider when selling a business is whether or not it is the right time to sell. Planning an exit from a business takes time and can take up to a couple of years typically. You also want to keep in mind whether your business is experiencing significant enough growth, as well as the state of the general market for buyers. Finding the right time to sell can be tricky but can ultimately impact the success of your sale. As such, it would be in your best interest to get in touch with an experienced and industry-specific advisory firm. If you’re looking for business advisors that work with businesses in the construction industry, consider reaching out to N3 Business Advisors.
The Equipment Owned by the Business
Woodworking and millwork – like most businesses in the construction industry – require special tools and equipment. The equipment owned by a business plays a huge role in the value of the business and, as such, can help determine the sale price for the business. If you are planning on selling your millwork business, you should take a look at all of the equipment and inventory owned and ensure that you are on top of your equipment maintenance schedules. All of your equipment should be well-maintained and correctly functioning.
The Workers and Staff Employed by the Business
Other than having all the right equipment, it is also important to have trained workers and technicians that can use the equipment and are skilled in millwork. For most construction businesses, clients usually interact with the workers and technicians and only really see the finished product. This is the same case for a millwork business, and as such, the workers you hire play a huge role in your business’s success. Having well-trained and certified workers ensures that your business sells quickly and at a good price.
Additionally, you also need to consider the staff employed by your business, including managerial staff, and how your management is structured. With well-structured management, selling the business becomes easier, and you can ensure that the business continues to succeed after the sale is closed and also during the transition period. Before putting up your millwork business for sale, consider whether the management needs to be restructured or better organized.
How Diverse the Client List Is
When looking to sell a business, it is important to consider how diverse your client list or customer base is. Having just a handful of big projects can be a red flag for potential buyers since the business’s revenue might fall significantly if some of those projects close or are canceled. Instead, before a business sale, try to diversify your client list and expand your customer base.
The Sale Price and Other Expectations for the Sale
Lastly, you must consider the sale price you want to sell your millwork business at. This is where the importance of a thorough business valuation comes in. There are various factors that need to be taken into account when determining a sale price. Additionally, the sale price should not be set too low or too high, in which case you might face a loss, or potential buyers might drop out of the sale. We’ll talk more about business valuation later on in the article. You also should consider how much of a role you – as the owner – wish to play in the business once it has been sold. Would you want to stay in a managerial or advisory role, or would you be completely removed from the business?
What to Consider When Buying a Woodworking Business?
Like with selling a business, buying a business is also a very big decision, and there are certain things you should keep in mind when making that decision. You want to ensure that the business you buy does not fail once the transaction is completed and that it will continue to be profitable in the future. There are various factors that go into the decision to buy a business, especially one in the construction industry.
Here is a quick outline of some things to consider when buying a millwork business:
What Do the Millwork Business’s Finances Look Like?
No matter what business you consider buying, the first thing you need to do is take a look at its finances. Not only do you need to see revenue and cash flows, but a thorough financial history, as well. This will give you a good idea about how financially secure the business is and can help you avoid any problems down the line. In the sale process, financial due diligence can be carried out down the line.
Is There Sufficient Business Growth?
When buying a millwork business, be sure to consider whether the business has the potential for future growth and if there is a strong growth plan outlined. If it seems as though there is limited potential for future growth and there is very strong market competition, you might have to reconsider your decision to buy the business.
Does the Business Have a Strong Customer Base and Good Reputation?
Like most businesses in the manufacturing industry, a millwork business’s success relies mainly on its customer base. Consider whether the business has a strong customer base with a diverse client list that can help ensure steady revenue. You should also pay close attention to the reputation of the business as this can help with finding more customers in the future.
What is The Seller’s Purpose for Selling?
Understanding the seller’s thought process behind the sale can help you make the decision to buy a business. Is the seller selling because they are retiring? Do they want to move on to other business avenues? Or are they worried about the future of the business and want to cut their losses? The seller’s reason for selling can also give you an idea of the kind of role they might want to play in the business once the sale is completed. So, before making the decision to buy, be sure that the reason the seller is selling the millwork business is not one that will negatively impact the business’s success after the sale. You need to know the real reason seller wants to sell business.
Does the Business Have Sufficient Equipment, Inventory, and Workers?
And finally, consider the assets the business has. When it comes to millwork, not only is it very important that the business owns all of the latest and well-maintained equipment, but it also helps if there is a strong woodwork inventory to work off of. Additionally, you want to see if the business has workers and technicians that can actually do the millwork and operate the equipment. All of this determines how much you would need to invest in buying new equipment and hiring new workers should you choose to buy the business.
Business Valuation: What It Is, Why It Is Important, and Common Valuation Methods
The price that a business will be sold and bought for cannot be decided arbitrarily. It has to accurately represent the value of the business and be an amount that feels fair to both the seller and the buyer. A business valuation is a process by which the value of a business is determined. Business valuations are carried out by valuation experts, and there are a number of different methods by which a business can be valued.
For woodworking businesses and/or another manufacturing businesses in the construction industry, the income approach, the asset approach, and the market approach are common valuation methods. As you can gauge by their names, these methods calculate the value of the millwork business based on either the income generation potential of the business, the net adjusted assets owned by the business, or by comparing the market value of other similar businesses in the area.
Business valuation is essential in helping both the seller and the buyer reach a selling price that they both can agree on and that represents both of their best interests. Typically, a business valuation is carried out by the seller right when they decide to sell the business and list it on the market. The potential buyers might wish to carry out their own valuation as well as a part of their due diligence process.
The Bottom Line
No matter what kind of a business you might be thinking of selling or buying, these decisions cannot be made without taking all possible things into consideration. When it comes to millwork businesses, they are highly competitive, and there are many factors that need to be considered when selling or buying them. We have discussed some of these factors, such as the right time to buy or sell, the equipment owned by the business, the workers and staff employed, the business’s growth, and so on.
Remember, before making a decision, it would be in your best interest to find the right business advisors and valuation experts to work with.
N3 Business Advisors – Construction Industry Mergers & Acquisition Advisors
If you are looking for a team of experienced and professional business advisors to help you buy or sell a company in the construction industry or any other things relating to mergers and acquisitions, N3 Business Advisors is the best company to help you.
No matter what goal you are hoping to achieve, be it company growth, merging or acquiring, preparing your business for sale, valuating your construction company, carrying out due diligence, or meeting any other company goals, we have a qualified and diverse team that can help you out.
N3 Business Advisors has over 30 years of experience working with companies in the construction industry. Our team is made up of lawyers, due diligence experts, valuation experts, business advisors, accounts and financial advisers, and other professionals who can help you achieve your company’s goals.
If you would like to set up a confidential consultation with N3 Business Advisors, visit our website, or call us at 647 967 4222. N3 Business Advisors is based in Ontario, and our office is at 55 Village Centre Place, Suite 200, Mississauga, ON L4Z 1V9.