This well-established apparel accessory manufacturer is an incumbent player in a niche segment of the functional work-wear and fashion markets. It's the largest U.S. producer in its category and despite offshore competition significant upside potential exists to maximize its returns. They are able to draw from over 400 of their proprietary designs and patterns. The enterprise is set up to be semi-remotely managed with only 3 office staff and 1 production manager onsite. Their wholesale, retail and ecommerce customers include the industry's leading brands.
The business operates from a 13,000 square foot facility that will lease for $9,000 plus $1,000 in monthly common area maintenance expense. The Seller will provide a flexible new one year lease with the anticipation that the buyer will relocate the enterprise to capitalize on the extraordinary wage savings potential. While largely depreciated the company's highly specialized equipment would cost an estimated $900k to replace. It has been specifically engineered to efficiently create the fashion accessory products with a minimum of training necessary. As a result, the owner feels there are few key employees. All of the business's necessary furniture, fixtures and equipment will be included in the sale with the only exceptions being the owner's personal items. The company's 42 years of goodwill and work in process will transfer in the sale. Cash and approximately $500k in Accounts receivable will not be included. An estimated $1.8 million in raw material and component inventory will be sold at cost at close in addition to asking price.
Though difficult to determine, this firm estimates that it is the largest domestic producer in its ever popular product category. The firm has the capacity and equipment necessary to tremendously grow revenues. In fact, they once had 35% more workforce. Management feels that diminishing returns sets in from a tax, management and operational standpoint. If the company were to relocate to a lower cost environment, it would make sense to add a layer of management and sales resources and to bolster production. As an industry veteran with artisan style workmanship practices, they are poised to gain market share.
Significant opportunity for growth exists on several fronts. As the company is located in one of the most costly cities to do business in in the country, a buyer may realistically realize a near $500k annual savings in wage expense by moving the business to a state with a lower wage and tax expense such as Nevada or Texas. The owner devoted an estimated from 20 to 30 hours per week to the firm, and it no longer attends trade shows or heavily engaged in marketing and promotion.
A customer service oriented full-time working owner, or one with management expertise managing a sales team or appointing sales representatives nationwide may boost top line sales. While a burgeoning direct to consumer marketplace exists for this ever popular product, the business has maintained a wholesale focus to avoid any potential channel conflict, but also due to the lack of in-house B2C marketing and ecommerce experience.
Finally, the company is a long-standing producer for several well-known brands. These relationships may be capitalized on and expanded into complementary product categories such as web belts, ties, hats, socks, tee shirts, camp shirts or novelty clothing accessory products where opportunity exists. Similarly, the company may target additional well-known brands or artists in the automotive, sport, music or beverage industries to produce for. They may also aggressively pursue the corporate or the event private label market, do a deeper dive into work wear (which represents about 30% of their revenues), further develop customized products for the first responder or Department of Defense markets or pursue becoming a military supplier.