While preparing to sell their businesses to interested buyers, owners of smaller to lower mid-market manufacturing and distribution companies will sometimes ask whether they should consider automating much of their operations and/or upgrading labor-intensive processes with robots that can sharply improve efficiency and productivity. Our typical answer: maybe, yes -- but most likely, no. You should definitely consult with your accountants and your financial advisors to determine:
- How much will it cost you to automate or upgrade?
- When will the new improvements begin to make a positive impact on financial results?
- What will these capital expenditures do, in dollar terms, to the enterprise value of your business at the time it becomes acquired by the new owner(s)?
As savvy potential buyers look at your financials for the previous 3-5 years, and also as they attempt to calculate your company’s financial forecasts for the years ahead, they will start with the EBITDA numbers and then subtract dollar amounts equal to their best estimate of required future capital expenditures for your business. Naturally, anything that significantly boosts your EBITDA will produce a dramatically increased enterprise value as well.
No matter what you and your financial advisors may decide about possibly making capex improvements prior to selling your business, when it comes to turning expenses into earnings -- you’ll discover that we can help, and perhaps in a very big way.
If you would like to explore partnering with us on gainsharing basis (which means no upfront fees, no retainers, only a success fee paid out of the dollars we save for you), reach out and engage with our expense2earnings, LLC experts Richard Montellano or Peter Thusat.