Just like the very nature of the industry, itself, the matter of selling your construction business can be an exciting and rewarding experience, but it also requires careful planning and preparation.
Whether you are looking to retire or move on to other ventures, selling a construction business is no small task. From understanding the market value of your business to finding the right buyer, there are many steps involved in successfully selling a construction business. With the right knowledge and guidance, you can make sure that all aspects of your sale go smoothly.
In this article, we’ll provide an overview of how to sell your construction business so that you get maximum value for your hard work.
What are The Reasons You Would Want to Sell Your Construction Business?
There are many reasons why you may want to sell your construction business. Whether you are looking for a big payday, have reached retirement age, or just want to shift focus to a new venture, selling your construction business can be the best way forward. Here are some common reasons:
Selling your construction business can provide you with substantial financial rewards for all of your hard work, as well as a sense of completion and closure. Many construction business owners opt to sell their business when they are ready to move onto new challenges or make their retirement official.
Funds for your next adventure
Other times, selling your construction business can be the best way to obtain necessary capital in order to fund other business ventures. In this case, the sale of your construction business can be seen as an investment in your future and the future of your organization.
Know The Factors That Can Make a Construction Business Attractive to Sell.
The factors that make a construction business attractive to sell depend on a variety of factors. Generally, the most attractive aspects of a construction business include:
- Financial Performance – Construction businesses with strong financial performance, demonstrated longevity and strong backlog of projects are highly appealing. Buyers are often looking for businesses that have established themselves and have work to sustain the business going forward.
- Location – The location of a construction business has an impact on its attractiveness to buyers. Businesses located in areas that are growing are more attractive than those with stagnant commercial or residential areas.
- Customer Base – Buyers will be interested in a construction business’s existing customer base. A well-established customer base that frequently comes back to you for new projects, maintenance or service demonstrate the stability of the business and provide potential for growth.
- Name Recognition – Businesses that have built up a recognizable brand name or reputation are more attractive to buyers, as it is often easier to market and grow a business with an established brand.
- Growth Potential – Buyers may be interested in the potential for growth that comes along with buying a construction business. Businesses with room to expand can often attract more buyers due to their expanded opportunities.
Reduce Risk Before Selling Your Construction Business
One way to reduce risk before selling your construction business is to ensure you have the right structure in place. The ideal corporate structure should be created by an experienced professional who can assess the nature of your company and how it fits with current regulations. Structuring a company correctly will help protect shareholders and make sure that taxes are paid appropriately.
Additionally, you should also create a transition strategy. This should include a plan for what will happen to your business after the sale is complete. How will you communicate the change to your employees and customers? How will your suppliers and trades handle the transition? Creating a detailed transition strategy can help ensure that everyone involved with the sale gain the most benefit from it.
Do your homework
Finally, it’s important to be sure your potential buyers are well-vetted. How will their ownership affect your business? How will they contribute to the success of your company post-sale? Have they acquired other businesses like yours in the past? Do they understand the many decisions required to run a successful construction company? Find the right buyer means they will be successful too, just as you have been for so many years.
By taking these steps, you can reduce the risk associated with selling your construction business and ensure that all parties involved benefit from the sale. With proper planning and preparation, we can help you make sure that the transition goes as smoothly as possible.
Selling a construction business is no easy task. It requires knowledge of the process, market trends, and an understanding of customer psychology. And Destined is here to help you find the right strategic path. Let’s connect.
Preparing to Sell Your Construction Business – Finding Buyers
Once you’re ready to sell your company, the next step is to hire a M&A advisor to find potential buyers for you. It can be difficult to make sure that your construction business will attract the right buyers, so it’s important to have the assistance of a firm that can conduct thorough research before beginning the process. Here are some tips to engage potential buyers:
- Identify your target audience: Determine who would be interested in buying your business, such as a private investor or another construction company. Considering their financial capabilities, history of buying companies in your industry and any relevant experience they may have will be important elements to evaluate for each potential buyer.
- Next you will need a Confidential Information Memorandum: Presenting the information about your construction business in an organized, professional manner can help you attract buyers. This is a detailed summary, including detailed financials and supporting documents about the history of your business, the types of construction you perform, the markets you serve and an overview of the assets in your business.
- Outreach to potential buyers: Developing a list of potential acquires, be their corporate, private equity or individual buyers is key to finding the right buyer for your business. During this step it is important to ensure confidentiality is maintained so your employees, customer and competitors don’t know you are for sale.
- Interview potential buyers: Once a few viable candidates, it’s important to do your due diligence and thoroughly vet them. We probe into their financial capability and any prior experience they may have in purchasing construction businesses. We are also always looking for who we think will be the right fit for the type of sale you desire.
- Negotiate the transaction: Now it’s time to be sure you get the best price and payment terms for your business and to ensure you end up with a deal that works for both parties. Also, there are a number of contracts and other documents that will need to be negotiated to transfer your business to your selected buyer. These are vitally important as they assign risk and specify exactly what the buyer is getting in the transaction.
And in all of the above matters, Destined can be your guide. Let’s connect – we’re ready to find the right buyer for your business.
Calculating the Value of your Business
Calculating the value of your business is an important step to take before making any big decisions. It helps you determine what price you expect for your business when selling. Calculating the value of a business involves multiple factors, including:
- Assets: Calculating the value of your business’s assets is a great place to start. This includes anything from property and inventory to equipment and intellectual property like patents – plus all of your systems, process and “secret sauce” for how you ensure projects are done on time and on budget.
- Liabilities: Calculating liabilities can also help you determine the overall value of your business. This includes any money you owe to creditors or debtors, taxes, potential legal claims from work injuries or construction defects and other obligations.
- Profits: Calculating the profitability of your business is essential for determining its value. This includes current profits as well as future potential earnings based on current trends in your business.
- Market conditions: The market changes constantly, and the value of your business depends largely on what is going on in your local market. Assessing market conditions can help you determine how much potential buyers or investors may be willing to pay for your business.
Selling a construction business is no easy task. It requires knowledge of the process, market trends, and an understanding of customer psychology. And Destined is here to help you find the right strategic path.