For many machinists, the dream of one day owning their shop burns bright. But the hard realities of entrepreneurship – the risks, the challenges, the sheer complexity – keep most from ever making the leap.
On the flip side, countless manufacturing business owners don’t understand their options when the time comes to step away and transition their life’s work into someone else’s hands. Too often, they shut the doors and auction off the assets, leaving a void in the market and their community.
Mike Payne has seen this saga play out from both angles. As the owner of Hill Manufacturing and Fabrication in Oklahoma, host of the By the Numbers podcast, and co-host of Making Chips, Mike has made it his mission to educate machinists and manufacturing leaders on how to navigate the business buying and selling process.
“Somewhere between 60 and 75% of machinists want to own their own business someday,” Mike told Manufacturing Executive host Joe Sullivan. But owning and buying a business, if you’ve never done it before, can seem overwhelming. The key is to find trusted advisors and educate yourself to demystify the process.
Finding a good trusted advisor that can help guide you through that process, the good trusted advisor, is probably the hard part. So that’s probably the hardest part. If you have a network of bankers and accountants and attorneys and stuff around you that can help you guide through that process, that’s great.
For the manufacturing business owner contemplating an exit, Mike recommends planning early by always running your business as if you were preparing to sell it. That means focusing on growing earnings and making the business less dependent on the owner.
“If selling your business is on your two, three, five, ten-year horizon, what should you grow? Grow your EBITDA. Right? Like, grow that number. I don’t care if you have a two-year-old machine or a ten-year-old machine. What I care is how much money is the business making.”
According to Mike, one of the biggest mistakes outgoing owners make is thinking they need to invest heavily in new equipment to make the business attractive to buyers. Instead, buyers are looking for a business that can flourish without the owner – with strong processes and a capable team in place. A self-sufficient business that hums along without the owner will command a much higher multiple than one the buyer will have to babysit.
The key for the owner is to hire people who can take over pieces of the business and run them even better than the owner can. Then get out of their way and let them drive new growth.
With a decade and a half in private equity and investment banking before acquiring Hill Manufacturing, Mike approaches his acquisitions with a goal of doubling the business within 5 years through a combination of organic growth and an infusion of strong processes and best practices to drive profitability. When the owner is ready to depart, the business doesn’t miss a beat.
For both machinists dreaming of ownership and long-time owners contemplating their next chapter, Mike Payne’s mission is to shine a light on the process – and to extend a helping hand to any who need it. Because in manufacturing, we’re all in this together.
