What Is My Manufacturing Business Worth?

Manufacturing businesses are among the most sought-after acquisitions in the lower middle market. PE firms, strategic acquirers, and individual buyers all compete for well-run manufacturers — especially those with proprietary products, specialized capabilities, or long-standing customer relationships.

Here's how manufacturing valuations work.

Typical Valuation Ranges

Most manufacturing businesses sell for 3x to 6x SDE or 4x to 7x EBITDA for larger operations.

Factors that push toward the higher end:

• Proprietary products or processes
• Long-term customer contracts or recurring orders
• Diversified customer base (no client over 10% of revenue)
• Modern, well-maintained equipment
• Revenue above $3M with consistent growth
• Skilled workforce with low turnover
• ISO certification or industry-specific quality standards
• Owned real estate

Factors that push toward the lower end:

• Job shop doing custom one-off work (no repeat business)
• Customer concentration (one buyer is 25%+ of revenue)
• Aging equipment needing significant capital investment
• Owner is the master machinist or production manager
• Declining revenue or margin compression
• Environmental liabilities
• Union issues or labor challenges

What Makes Manufacturing Attractive to Buyers

Barriers to entry. Manufacturing businesses require specialized equipment, skilled labor, facility space, and often regulatory certifications. Competitors can't spin up overnight.

Sticky customer relationships. Once a manufacturer is qualified and integrated into a customer's supply chain, switching costs are high. Approved vendor status is hard-earned and highly valuable.

PE roll-up activity. PE firms are actively consolidating niche manufacturing sectors — building platforms through acquisition. This creates premium pricing for quality manufacturers.

Tangible assets. Equipment, inventory, and real estate provide a floor value that service businesses don't have.

Key Metrics Buyers Evaluate

Revenue Concentration

This is the most scrutinized metric in manufacturing. If one customer represents more than 20% of revenue, buyers will discount heavily. Defense contractors or automotive tier suppliers with concentrated OEM relationships face this challenge frequently.

Gross Margin

Healthy manufacturers run 30–45% gross margins depending on the sector. Custom or proprietary work commands higher margins. Commodity manufacturing runs thinner.

Equipment Age and Condition

Buyers will inventory every piece of major equipment — age, condition, remaining useful life, and replacement cost. A $500K equipment replacement hanging over the business reduces the sale price.

Backlog

Current order backlog provides visibility into near-term revenue. A healthy backlog (3–6 months of revenue) gives buyers confidence.

Workforce

Skilled machinists, welders, fabricators, and engineers are scarce. A stable, experienced workforce is one of the most valuable assets in a manufacturing business.

Quality Systems

ISO 9001, AS9100, ITAR compliance, FDA registration — certifications matter. They take years to obtain and signal operational maturity.

The Real Estate Question

Many manufacturers own their facilities. This creates significant deal complexity and opportunity:

• Business + real estate together: Simplifies the deal but increases the total price and may limit the buyer pool.
• Sell business, lease the property: Owner retains real estate as an investment. This is common and often tax-advantaged.
• Separate transactions: May maximize total value but requires coordinating two deals.

Manufacturing real estate can be worth as much as the business itself. Have both valued independently.

How to Increase Your Manufacturing Business's Value

1. Diversify your customer base. Aggressively pursue new customers to reduce concentration. This is the single biggest risk factor buyers evaluate.
2. Invest in equipment. Modern CNC machines, automation, and quality control systems improve capability and signal a forward-looking operation.
3. Build a management team. Hire a production manager, quality manager, and/or sales manager. A business that runs on the owner's technical expertise faces steep valuation discounts.
4. Pursue certifications. ISO, AS9100, or industry-specific certifications open new customer segments and increase buyer confidence.
5. Document your processes. Work instructions, quality procedures, maintenance schedules, and training programs. Transferable knowledge is transferable value.
6. Secure long-term agreements. Multi-year supply agreements or blanket purchase orders from key customers significantly stabilize revenue.

Ready to Find Out What Your Manufacturing Business Is Worth?

Browse the valuation multiples guide for current industry data, or schedule a free call for a confidential valuation.