Valuation Case Study: Central States Marketing & Manufacturing
Understand and Optimize your Company’s Value
Are you interested in learning about the business transition process? Are you curious about how to understand your company’s value and take steps to enhance it before a sale?
This case study explores the valuation and succession planning process for Central States Marketing and Manufacturing, a family-owned business in the custom plastic extrusion industry located in McPherson, KS. As the founder, Chuck Singleton, approaches retirement, the need to transition the business to his sons, Zack and Tyler, becomes imminent. Facing the challenge of lacking a formal business valuation to guide the transition, the company engaged Adams Brown to perform an analysis.
Download the case study or continue reading to learn more about how Central States Marketing and Manufacturing are navigating their business transition.
- Industry: Manufacturing / Custom Plastic Extrusion
- Location: McPherson
- Ownership: Chuck Singleton and family
- Challenge: Preparing for business transition and determining an accurate value for succession planning
- Solution: Calculation of Value
- Results: Defined company valuation aiding in strategic succession planning and facilitating a smooth transition to the next generation.
The Challenge
“The transition has been a topic of discussion but needed a concrete starting point,” said Chad French, Controller at Central States Marketing and Manufacturing. “The family knew the intrinsic value of the business but lacked a formal valuation to guide the process.”
The absence of a valuation complicated the succession planning, raising questions about the best approach to transfer ownership.
The Solution: A Strategic Roadmap for the Future
“The importance of the transition process extended beyond the financial valuation; it’s about ensuring the future of the family business,” said French. “We are focused on a plan that sets up a strategic roadmap for the future. This involved identifying key value drivers, potential growth areas and strategies to mitigate risks.”
The starting point for the larger succession and transition planning initiative was a calculation of value conducted by Adams Brown. This solution included the calculation plus ongoing consultation about risk factors and growth strategies to provide a solid baseline for the company’s worth. This exercise enables Chuck, Zack and Tyler to contemplate various transition mechanisms, such as direct sale, gifting or a combination of both, with a clear understanding of the financial implications.
Timeframe & Cost
The valuation process typically spans four to six weeks, commencing upon receipt of all necessary documentation and a signed engagement letter.
“Initially, pinpointing the starting point for the transition was a challenge,” French acknowledged. “However, the process turned out to be straightforward and efficient. I provided some essential documents, and that set everything in motion. Considering the insights and clarity we gained, the investment was worthwhile.”
The Impact
The calculation of value report marked the first step in the succession plan. It clarified the company’s worth, enabling the leadership team to formulate a strategic plan for transferring ownership to Zack and Tyler.
“The valuation didn’t just give us numbers; it showed us a path forward, offering confidence in our strategic decisions,” said French.
Additionally, the valuation process revealed the company’s key value drivers, allowing for more informed decision-making to enhance business value.
Looking Ahead
“Now that we know what the company is worth, we are equipped to continue moving forward with our succession plan,” said French. “The next steps involve diving into the details and ensuring each part of the plan fits with what Chuck, Zack, Tyler and the rest of the family wants and where the company aims to go.”
Central State Marketing and Manufacturing will continue to work closely with Adams Brown’s team of advisors to create a solid succession plan, figure out the estate details and decide on the best ways to handle gifting. This plan is all about making sure the transition goes smoothly and setting the company up for continued long-term success.