Signage Manufacturer Business Evaluation
Written by Jon Lyon
Client Overview
The client is an established signage manufacturer in Central and Western New York. The client served the community for twenty years through designing, manufacturing, and installing signs for high traffic professional settings.
The Opportunity
The client was looking to sell the business but felt like the purchase offer they received was too low. The client already had a working relationship with RDG, so they asked RDG to perform a calculation of value. The client hoped that the valuation would substantiate a higher value that they could subsequently use to counteroffer.
However, RDG found that the business did not operate efficiently in the review. The client had trouble collecting receivables in a timely fashion, which put considerable strain on their cash flow. The lack of cash flow, paired with other inefficiencies, required the client to finance most projects with credit. RDG ultimately found that the calculated value of the business was lower than the initial sales offer.
They were able to use RDG’s valuation to understand why a buyer might make a low offer and what steps they could take to increase the company’s value.
The Solution
RDG set up a meeting with the client to discuss the operating inefficiencies and value constraints found in the review. While the client still felt that the business could be worth more than the original offer, they were able to use RDG’s valuation to understand why a buyer might make a low offer and what steps they could take to increase the company’s value.
The Outcome
In the end, the client decided not to accept the purchase offer. They agreed with our assessment that the business needed to overhaul its operations to be worth more than the offer. Working with RDG helped the client navigate their internal struggles and they have since progressed significantly towards their goal.