Question 1

What is my machine shop worth?

Accepted Answer

A Carolinas machining company is valued on a multiple of adjusted EBITDA, not revenue. At $5M to $20M of enterprise value, the multiple is set by customer concentration, quality registration, equipment age, and whether the business runs without the owner. Adjusted EBITDA starts with reported profit and adds back items a new owner would not incur: an above-market or below-market owner salary, personal expenses run through the company, non-working family payroll, one-time costs, and rent paid to the owner's own property company at other than market rate. Every add-back has to be documented to survive a quality-of-earnings review. The multiple applied to that number moves with risk: a shop with a top customer under 20 percent of revenue, ISO or AS9100 registration, a plant manager in place, and a modern machine fleet sits at the top of the range for its size, while a shop with one dominant customer and an owner who does all the quoting sits well below it. Enterprise value also assumes a normal level of working capital is delivered at closing, which is negotiated separately and frequently changes the final wire.

Question 2

What EBITDA multiple do manufacturing companies sell for in the Carolinas?

Accepted Answer

Multiples vary by sector, size, and risk rather than by geography. Larger and cleaner companies earn higher multiples, and the gap between a $1M EBITDA company and a $3M EBITDA company in the same sector is real and consistent. Three things move a multiple more than the industry does. Size is first: buyers pay more per dollar of earnings as earnings grow, because larger companies carry less key-person risk and attract more competing buyers, including funds that have a minimum check size. Quality of earnings is second: numbers that tie to tax returns and survive third-party review support the headline multiple, while numbers that do not get repriced mid-process. Risk profile is third, and it is mostly customer concentration, owner dependence, and certification. Published multiple ranges from national deal databases are a starting reference, not a quote, and any number stated without seeing the financials is a guess. A real range comes from an advisor who has read the statements and knows what has traded recently in the sector.

Question 3

Do I have to sell my building with the business?

Accepted Answer

No. Most owners in this region hold the real estate in a separate entity and choose at exit: sell the property with the company, or keep it and lease it back to the buyer at a market rate. Buyers generally prefer flexibility and many will do either. Keeping the building turns it into an income asset with a creditworthy tenant, which many sellers find attractive in retirement, and it can defer tax on that portion. Selling it together simplifies the transaction and can be preferable where the property is specialized enough that another tenant would be hard to find. The decision needs two numbers first: an independent appraisal of the property and a market-rate rent estimate. Where the business has been paying above-market or below-market rent to the owner's property company, the operating results have to be normalized to market rent before the business is valued, or the earnings are simply wrong.

Question 4

How long does it take to sell a manufacturing company?

Accepted Answer

A prepared company typically runs six to nine months from engagement to closing, and preparation before that commonly takes another six to twelve. Unprepared companies take longer or do not close. The phases are reasonably predictable. Preparation and financial clean-up comes first, and it is the phase owners are most tempted to skip. Then materials and buyer outreach, usually four to eight weeks. Then management meetings and indications of interest, then a letter of intent, which typically grants the buyer 60 to 90 days of exclusivity. Diligence and documentation run in parallel during that window: quality of earnings, environmental, legal, insurance, customer calls where permitted, and negotiation of the purchase agreement. Deals slow down for predictable reasons: financials that will not reconcile, a surprise in the environmental report, a customer contract nobody could find, or a seller who is not emotionally ready to sign. The first three are solvable in advance.

Question 5

How much does customer concentration reduce my valuation?

Accepted Answer

There is no fixed formula, but concentration above roughly 25 percent in a single customer draws attention, and above 40 percent it materially changes both the multiple and the deal structure. Buyers respond to concentration in three ways, often at once: a lower multiple, a larger portion of the price in an earnout or seller note, and a longer transition commitment from the seller. What moves the analysis is the quality of the relationship rather than the percentage alone. A customer relationship that is 35 percent of revenue, twenty years old, sole-sourced on parts the customer has qualified, and held at multiple levels of both organizations is a different risk from a 35 percent customer won last year on price. Documentation helps: contracts, order history by part, qualification records, and relationship maps showing more than one point of contact. Reducing concentration takes years, so for most owners the realistic path is documenting durability rather than fixing the number.

CNC Machining & Precision Parts in Charlotte, NC

CNC Machining & Precision Parts in Charlotte

CNC Machining & Precision Parts in Charlotte: what a Mecklenburg County company sells for, and who buys one

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CNC Machining & Precision Parts in Charlotte, NC

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CNC Machining & Precision Parts in Charlotte

CNC Machining & Precision Parts in Charlotte: what a Mecklenburg County company sells for, and who buys one

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