Selling a manufacturing business is a major decision that requires careful planning and execution. With the new year approaching, owners who want to maximize value and ensure a smooth transition should start preparing now. Below are key steps to help you sell a manufacturing business successfully in 2026.
Don’t Delay Getting Started
If your goal is to sell in 2026, start early in the year. Consider steps you can take to prepare for a sale that will take a relatively short amount of time (i.e., 30–90 days). These could include cleaning up your financial statements, discussing your financial reporting with your CPA to make sure your financials are GAAP-compliant, cleaning up your facility so it will show well to prospective acquirers, etc. Marketing to prospective buyers can span several months, so you have some time to think about and address any issues that could affect value before they become deal-breakers.
Work with the Right Advisor
Choosing the right advisor is critical. Look for an M&A advisor with strong financial expertise and ideally some previous experience representing manufacturing companies. Manufacturing businesses have unique cost structures, and valuation often hinges on understanding cost of goods sold (COGS) and gross profit margins. Your advisor should know how these metrics are calculated and what makes your margins unique. A knowledgeable advisor can also help position your business to attract the right buyers. Learn more about Shoreline Partners to find out how our experienced advisors can guide you through the process.
Emphasize Gross Profit Margin
Gross profit margin is often the most important metric for manufacturing acquirers. Potential buyers want to know not just your overall margin but also margins by product type, customer, and other segments. Make sure your financial reporting can generate this level of detail. Check out Eight Key Questions to Ask When Buying a Business for additional insight into what buyers look for.
Ensure Compliance with California Labor Laws
If your business operates in California, compliance with labor laws, especially wage and hour requirements, is critical. Non-compliance can derail a transaction or reduce your valuation. Conduct a thorough review and address any issues as labor compliance will be an important due diligence issue for buyers.
Keep Inventory Accurate and Saleable
Physical inventory should be current, accurate, and in good condition. Buyers will expect an accurate inventory listing that will be verified as of the closing date. Obsolete or unsellable inventory can reflect negatively on the business and impact your sale price, so consider clearing out old stock and documenting inventory processes to build buyer confidence.
Maintain Equipment and Facilities
Ensure your manufacturing equipment is operable and well maintained. A buyer doesn’t want to inherit costly repairs. Likewise, keep your facility clean and presentable. First impressions matter, and a messy plant can raise concerns about operational discipline. A well-maintained environment reflects professionalism and pride in your operations.
Plan for Owner Transition
One of the most overlooked aspects of selling a manufacturing business is planning for your own transition. Buyers will want to know if you have a plan for your eventual replacement. The best way to get a deal done at the highest value is to be flexible on how long you will commit to remaining with the business after closing. Being able to stay for 2–3 years is ideal. But if you want to exit sooner, have a clear plan on how you will replace yourself—promote someone internally? Hire externally? Use a recruiter? Having a well thought out plan is more important than replacing yourself before the sale, and it reassures buyers that management continuity and leadership will be maintained.
Diversify Your Supplier Base
Supplier concentration is a risk factor for buyers. If your business relies heavily on a single supplier and you don’t have time before going to market to add a second or backup supplier, consider how you could diversify. A broader supplier base reduces risk and makes your company more attractive to acquirers, as it signals stability and resilience against supply chain disruptions. Buyers often view supplier diversification as a sign of strong risk management, which can positively influence valuation.
Operational Enhancements
Operational efficiency is a major driver of profitability and valuation. Consider if there are process improvements you can implement in a few months that would reduce waste, improve throughput, and/or enhance quality control. Adopting lean principles or upgrading technology can strengthen margins and show buyers that your business is well managed. Document these improvements and discuss them with your advisor to make sure the margin and profitability improvements are communicated to prospective buyers.
Address Customer Concentration
Customer concentration is one of the largest factors that can reduce value. If you have individual customers that each represent 20% or more of your revenue, consider how to assure buyers that those customers will continue under new ownership. Ultimately, it’s up to the buyer to make sure your key customers have no reason to stop buying from your company. Any way that you can ensure a new owner will have time to prove they will continue providing quality products can help to mitigate risk and a reduction in your value.
Final Thoughts
Selling a manufacturing business in 2026 requires foresight, preparation, and the right team. Start early, focus on financial clarity, ensure compliance, maintain inventory/facilities, and (if possible) make operational improvements that enhance value. By following these steps, you’ll position your business for a successful sale and a smooth transition to new ownership. Ready to take the first step? Contact our team today to discuss your goals and learn how we can help you sell your manufacturing business successfully.