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Preparing to Sell Your Screen Printing Business

Selling a business today is more strategic, costly, and time-consuming.

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PRIOR TO MARCH 2020, the thought of selling your business probably rarely entered your mind. Sure, you knew you would need an exit strategy at some point, but your shop was busy and growing. Who had time to think about leaving? The abrupt COVID-19 shutdowns in mid-March jolted everyone. Your customers were scared and hurting. So were your suppliers, employees, and family.

Surviving the crisis from March through July required tough decisions just to stay afloat. Then, in August, September, and October, a new wave of uncertainties arose about COVID-19 restrictions, government relief packages, and the availability of safe vaccines. Questions about changes in our country’s leadership and future tax policies further complicated decision making.

Some printing company owners now regret turning down opportunities and legitimate sell-side offers they received in 2019. They thought they might get a higher price in 2020. When shop owners call me, my first step is to ask about the nature of their business and readiness to retire.

Are they primarily involved in apparel decoration, pad printing, high-tech printed electronics, or promotional products? Each of these fields is in a different phase of the transformation from analog to digital printing. And each business employs people with different design, engineering, or materials expertise.

Owners who started screen printing businesses in the ’70s and ’80s are definitely in the retirement planning stage. Some Millennials or Gen-Xers who started screen printing enterprises over the past 10 years have discovered that owning and growing a business may not be nearly as personally fulfilling as their artistic, creative work. Some want to return to a simpler, more independent lifestyle, without the burdens of loan payments, payroll commitments, strong competition,narrow margins, and health concerns.

No matter what type of screen printing firm you run, I caution owners that simply leaving the business is never a good solution. The “I quit” walk-away plan will haunt your reputation for years. Here are some steps I recommend instead:

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1. Choose your course of action: Buy, sell, or grow. If selling your business is your preferred path, you probably will need to grow it for a few years in order to get a reasonable deal. In today’s risky investing climate, buyers are seeking larger companies that are less affected by economic turmoil.

2. If bankers have already started calling to see how your business is going, it may be too late. You should have an exit strategy in mind before creditors start serious discussions about your next few months of sales, revenues, and profits. Companies that succeed in landing good deals stay ahead of the game – both in profit levels and expansion into growth markets.

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3. Understand that attracting any buyer takes time. It won’t be a three to six-month process because the sellers’ market of 2019 has become a buyers’ market in 2020. In an environment with so much volatility and so many financially distressed companies, most buyers simply want customer lists or to gain access to the profitable relationships, knowledge, and experience of your talented workforce.

A lot of used equipment is being sold through auctions, bank workouts, word of mouth, and inventory sales. And skilled, furloughed workers are eager to escape non-compete clauses so they can look for brighter futures elsewhere.

Realistically, it might take at least three to five years after 2021 for the post-COVID-19 economy to stabilize. Analysts are still struggling to figure out which trends were temporary and which have permanently altered our economy. When a new sense of normalcy does return, all businesses are likely to be much more digital and automated, with a reduced need for skilled labor. Online ordering of smaller quantities of both business and consumer products will be routine.

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4. Get an objective valuation of your business. Hire a professional to tell you how much he thinks your business is worth and what it will take to grow it over the next 36 months. Before buyers will even consider making an offer, they will expect an objective and reliable business appraisal and predictions that support your growth strategy.

Regarding commercial real estate, your 50,000-square-foot printing facility in a high-tax Northeast state might not sell for as much as it would have in 2019. Many of your competitors and workforces are expanding businesses in Florida, Arizona, or Texas to take advantage of the lower cost-of living, warmer weather, and favorable state tax incentives.

Use the independent valuation to identify areas of your business that must be improved. Understand your numbers and what drivers you will need to grow and remain competitive. How much investment in resources will you need to be sustainable? Do you have the risk tolerance, the energy, the health, the money, the growth markets, and the talent to really grow over the next five years?

5. Articulate a long-term vision for your company. Think and act like a start-up again. Sketch out a roadmap that takes into account some of the COVID-19 changes that have affected how people work, learn, play, and order products. Then, take actions to achieve that vision.

Private-equity firms with the financial resources to buy businesses have specific objectives for growth. They are less interested in how fast your shop grew in 2019, and more interested in these two things:

  • if your business has the potential to more than double its revenues and profits within five years; and
  • the ability to execute their successful investment exit strategy within five to seven years.

The long-term vision for your company should include a management or family succession plan. Potential buyers like knowing that talented operational personnel are trained to succeed you after you transition the business.

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6. Boost your company’s reputation, brand awareness, and sales efforts. Improve your online presence and customer experience, digital marketing, and social media capabilities to build awareness and revenues in niche markets. If your company pivoted to new products during COVID-19, what steps were most effective? What could you have done better? If you work in the printed electronics field, publicize your shop’s R&D and prototyping capabilities.

Selling a business today is more strategic, costly, and time-consuming than when you started or joined. Because of ongoing changes in economic conditions, regulations, and taxes, the mergers and acquisition (M&A) process is complex and professionally regulated. No short cuts. Integrity matters from concept to completion of the deal.

If you feel discouraged or overwhelmed, call me at 561-543-2323. Having sold printing and converting businesses that I founded and grew, I know firsthand that the process of selling your business is an emotional roller coaster. Our team will give you real-world advice about all possible exit options. If you still envision selling to a third party, we can help develop a roadmap to meet your objectives, connect you to potential buyers, and overcome challenges related to people, strategy, execution, and cash. We want you to be fully prepared for selling opportunities in the future.

Rock LaManna, the Deal Flow Guy, is CEO of the LaManna Consulting Group. A 45-year veteran of the printing business, he leads a team of legal, financial, marketing, and retirement experts that can help business owners achieve the future they want for their company and their life. Visit TheDealFlowGuy.com to obtain a customized, reliable VBS (The Value Builder System) business valuation and to expand your understanding of how to prepare your business for today’s buyers and investors. On LaMannaConsultingGroup.com, you will find expert insights on how to grow your business, prepare for a sale, and make a smooth transition to the next phase of your life. (Photo: Jaime Kujala Photography.)

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