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Show how production carries on after you leave
Preparing a New Zealand manufacturing business for sale means showing how its earnings, production knowledge, machinery, people and customer relationships can transfer to another owner. A profitable year matters, but a buyer also needs to understand how the next year will be delivered.
My background includes apparel and furniture manufacturing within businesses I have owned and sold. The questions below are a preparation framework for owners, not a valuation formula or a technical assessment of a particular factory. The right specialists still need to examine the financial, legal and operating evidence.
Begin with the work that depends on you. Who prices a non-standard job? Who approves a substitute material? Who resolves a quality complaint? If the answers all point to the owner, a buyer needs a credible plan for transferring those decisions.
Explain margins, stock and work in progress
Bring together monthly trading and the information used to understand product or job margins. A headline gross margin can hide loss-making work, under-recorded rework or unusually favourable product mix. Ask your accountant to reconcile the operating reports with the financial accounts and identify material assumptions.
- How is stock counted and how are slow-moving or obsolete items identified?
- How is unfinished work recorded, costed and distinguished from completed sales?
- Which customers, products or jobs account for most of the contribution?
- Do quoted prices reflect current materials, labour and subcontracting costs?
- Which owner costs and one-off items are proposed as earnings adjustments?
These are questions to investigate, not instructions to change the accounting treatment yourself. The add-backs guide covers the adjustment schedule. The NZ business valuation guide explains why the earnings basis and transaction assumptions matter.
Separate plant value from the production risk
An asset register is a starting point. A buyer may also want to understand maintenance records, utilisation, downtime, replacement needs, tooling and any finance arrangements. Distinguish assets owned by the business from leased, financed or customer-owned equipment.
A fully depreciated machine may still be useful; a recently purchased machine may not solve a production bottleneck. Explain what the equipment actually does, its condition and the evidence available. Obtain specialist advice where an engineering, valuation or safety assessment is needed.
Clarify whether the premises are included in the proposed transaction or leased to the purchaser. Ask your lawyer to check the relevant tenure, permissions and proposed terms. Do not fold property, plant, stock and operating-business value into one unexplained number.
Make production knowledge usable by another team
Gather the specifications, bills of materials, drawings, programmes, quality checks and operating instructions the business actually uses. Identify who owns or controls them and whether they are current. Keep confidential designs and access credentials in controlled systems.
Test an important process with someone other than its usual operator. Can they find the current specification, run the check and record an exception? A document that has never been used is weaker evidence than a repeatable process with a clear owner.
For a small manufacturer, the owner may be the estimator, production planner and product developer. Use the owner's diary test to identify those roles and establish which could be delegated or documented before a sale.
Understand the customers and supply chain
Separate recurring orders from a one-off project or an informal expectation of future work. Record customer concentration, agreed terms, product approvals and the people who hold the relationships. A strong order book is useful only when the buyer understands what it commits the business to deliver.
For important materials or components, identify alternative sources, lead times, minimum orders and reliance on a particular supplier or agency agreement. Ask your lawyer which contracts or permissions need attention on a change of ownership. The customer concentration guide and trades and distribution guide cover related issues.
A practical first set of actions
- Reconcile the current trading picture with your accountant, including stock and work in progress.
- List the production and commercial decisions only you make, then choose one to hand over and test.
- Index the asset, customer, supplier, premises and operating records and identify the specialist checks required.
The business sale checklist helps organise the records. For a prioritised view of the business and likely buyer questions, the Sale-Readiness Review examines your actual evidence. It is intended for businesses worth roughly NZD 1–10 million, with time to prepare before listing.
About the author
Oscar Rodwell runs Rodara Advisory, preparing New Zealand businesses worth NZD 1–10 million for sale. His experience owning, running and selling businesses in retail, manufacturing, hospitality and property informs his work on earnings, people, agreements and handovers. About Oscar.
