In this episode of Making Chips, Jim and I chat with Paul Van Metre—the Co-Founder of ProShop ERP—about the process of selling his machine shop. We dissect the process, including how to understand the valuation of your company and how to make your shop more attractive to potential buyers. If you're considering selling in the next few years, this episode is full of actionable tactics and strategies that will help you succeed.

BAM!

- Jason Zenger

Segments

• [0:07] Amper Technologies machine monitoring systems
• [3:10] How to sell your machine shop
• [5:11] Ozark Technical Community College offering a two-week manufacturing bootcamp
• [7:49] Jim shares what's new at Carr Machine
• [8:42] Paul Van Metre's experience selling his machine shop
• [13:42] Is this a big change in the manufacturing industry?
• [15:27] Why would a strategic buyer pay more?
• [16:40] Understanding the process of valuation
• [17:35] Check out ProShop ERP for more information on manufacturing software!
• [26:10] The experiences of Paul's customers buying shops
• [28:12] How to make your company more attractive for buyers
• [30:53] How buyers can make sure they're getting a fair valuation

Now is a great time to sell—or buy—a machine shop

I bought ZENGERS from my Dad in 2019, right before the pandemic hit. learned that there's a lot involved in buying/selling a machine shop. Not only that, but it takes multiple years to get to the point to learn how to run a shop by yourself. Running any business that employs a team of people takes a lot of work.

A lot of people are looking to retire and sell their machine shops. The youngest people of the Baby Boomer generation will be 65 by 2030. And of the 18,000 machine shops in America, the majority are owned by Baby Boomers. The vast majority will have some type of transition of ownership in the next 10–15 years.

Jim is getting calls from M&A companies all the time about buying his shop. He isn't even close to ready to sell. I'm on the buy side, and I think this is a great time to buy a machine shop. Whether you want to merge, participate in a roll-up, etc. now is the time. Even if you're not ready for several years, you need to start planning.

The experiences of Paul's customers buying shops

Paul notes that owning a business is one of the most significant financial decisions anyone can make in their lifetime. These shops are the baby of their owners. They've poured 10, 20, 30, 40+ years into them. Leaving that behind and passing it on to the next generation is a difficult and taxing process. Some shops may close their doors and sell off their machinery.

A client of Paul's, Mike, was deeply involved in the M&A and private equity space. He was trying to sell a shop where the owner wasn't interested in making her business attractive for sale. They couldn't sell the shop for years. So Mike decided to buy the shop himself. He knew it was a good business at the core and got it for a great deal. He also recently acquired another machine shop.

Paul worked with a small shop in Colorado—Focused on Machining—who was in banking before moving into manufacturing. He looked at 4–5 shops before landing on this one. Because he was in banking he understood the financial side and has done an incredible job growing the business.

Paul's experience selling his machine shop

Pro CNC was founded in 1997 when Paul was just 23—straight out of college. When they sold in 2014, they were a mature company with 17 years of experience under their belt (Paul shares his story in episode #98 of Making Chips).

In hindsight, Paul had been preparing the company for sale for many years. They started hiring people to replace the three partners so they weren't working in the business every day. They then hired an M&A company to take them to market (the whole process took around a year).

Sadly, Paul points out that 80% of businesses that get listed for sale never sell. Many businesses end up selling off their assets. Those people are likely making only a fraction of what their company could be worth. So how do you set your business up for success? What can you do now to make it more attractive to future buyers? Listen to the whole episode to learn the process!

Resources mentioned on this episode

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• Ozark Technical Community College offering a two-week manufacturing bootcamp
• Paul Van Metre's Story: Episode #98 of Making Chips
• Check out ProShop ERP for more information on manufacturing software!
• Modern Machine Shop magazine
• Focused on Machining
• The E Myth: Why Most Businesses Don't Work and What to Do About It
• Built to Sell: Creating a Business That Can Thrive Without You

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