Business Valuation Blog | Understanding Buying / Selling a Company

How Valuing a Manufacturing Company Reveals Hidden Value

Posted by Business Valuation Specialists LLC on Jul 20, 2016 11:30:00 AM


When you run a manufacturing company, there are many areas where you can make improvements or tap into additional value. Some of these involve taking risks in entering new markets, doing extensive mapping of your strategy or planning your actions in the market when you're not sure what the future may hold. But one of the most under utilized tools used for finding hidden value in your business is the business appraisal. Business appraisals look at a wide range of factors to determine a business' true value. It also makes it easier to find where your business has potential for significant growth. Here's how having a business appraisal performed helps you find that hidden value.

How valuing a manufacturing company reveals hidden value

The first area you'll find value is where your business is not performing up to standards. How is that adding value? Because it helps you ensure your company is as strong as possible. This allows you to improve your business, building its value. Are your assets overvalued because they receive more wear and tear than your competitors? Is your overhead too high because you haven't replaced the old, power-hungry light fixtures in your plant? Is there disruption happening in your industry that may lead to a downturn for more traditionally-modeled businesses? By knowing where your business is weak, you know where to improve it to ensure it will do better in the future.

But how do you compare to your competition? Because business valuation specialists spend their days working with a number of businesses in your industry or related industries. This gives them the insight to what a healthy manufacturing business looks like. They can compare your business to others that are similar or to similar businesses in other industries that are going through the same type of conditions and issues your business is facing. Is it a good time to diversify your production line? Should you look at digitizing your operation to reduce overhead? Having a business appraisal means you can learn from other business' mistakes and successes.

When you're considering expanding your business by merging with another company, do you know the condition that company is already in compared to your own? A company valuation of that business provides the same level of insight. If that company is strong where yours is weak and vice versa, they may be able to compensate across the board and make the merger a success. If, on the other hand, you're looking at a business that has similar weak points, you could simply be taking on unnecessary risk that could cost you your existing manufacturing company. By having a business appraiser take a solid look at both companies, you know what you're getting into from the start or can avoid making a bad investment all together. 

As you can see, there are many areas where your manufacturing company has real value that may be hidden. By taking advantage of the information provided in business valuations, you can improve your business' position in the market and take smart opportunities. If you need help getting the valuation of a company, it's important that you work with a business appraiser who has the necessary training and experience to give you the information you need.

Topics: Business Valuation, valuing a manufacturing company, appraiser