Profiting from Manufacturing in 2008.
Good manufacturing opportunities exist, but you need to do your homework. It is true that the general economic downturn, weak global growth and the rising cost of raw materials have made things pretty tough for the sector overall. But that’s where the opportunities lie. “There are always some great business opportunities out there, no matter what the market,” states Richards O’Brien, Director of nzbizbuysell.co.nz “If you are a smart operator, have identified and understand your market and specialise in your niche, there’s no reason why you shouldn’t do well.” And despite the current economic climate many businesses are proving him right.
Machinery and equipment businesses, piggybacking on the thriving dairy and mining sectors for example, are in expansion mode. Perhaps more surprisingly, businesses in the textile, clothing, food and beverage manufacturing sector are also reflecting a reversal of fortune, bouncing back recently on previous contraction trends. And with opportunities in the food sector often being the most affordable, this is good news for potential buyers.
Buyers of manufacturing businesses tend to fall into two categories – those with long term aspirations and those that plan to buy, build and sell. The current market is just a normal part of the process for the former group, and an opportunity for the latter. Like checking out a house in the middle of winter, any prospective business for sale should already be reflecting the changes wrought by one of the tougher markets seen in recent years. If you, as a potential purchaser, can see areas for reducing raw input costs, improving process efficiency or increasing potential sales to export markets, the time may be right for seriously considering a business purchase. Export sales are on the increase overall and are doing their part to offset a sluggish domestic market. An expected softening of the exchange rate should only build on that.
Efficiency has been named as the key by some of those thriving manufacturing businesses. The rising input costs have forced a rethink on many processes and systems, giving rise to a better way of doing things. And as the economy turns around again these more streamlined processes stand the business in good stead to capitalise on reduced input costs. A recent survey in the United States found that a number of companies operating in the bottom 25% of the market actually rise to the top during times of recession, and a large percentage of those that manage to do so stay up there as the economy recovers.
Successful manufacturing in New Zealand often results from kiwi innovation and creativity. Smart choices and smart operators, with drive and passion for what they do, will continue to flourish in this all important sector.