If you’re a business owner in the construction industry planning to sell their company, there are some essential tips to remember. As experts in buying and selling businesses across various sectors, we have identified five critical tips to help ensure a successful sale.

Understand Business Valuation

The first and most important tip for selling your construction company is understanding business valuation. Business valuation is the process of determining the economic value of a business, which is necessary when selling a construction company. A professional business appraisal is required and requires an accurate and comprehensive approach. This includes providing financial information such as tax returns, profit and loss statements, equipment lists, and lease information.

A professional valuation of your construction company will require the following:

  • Past three years of federal tax returns.
  • Last three years of profit and loss statements (P&L), including balance sheets.
  • Interim P&L statement, including balance sheet and a year-to-date comparison for the same period last year.
  • The average value of the inventory of saleable products on hand at any time of the year.
  • Equipment list.
  • Copy of tax bill on real estate if it’s included in the sale.
  • Copy of any available real estate appraisal.
  • Lease information.

Maximizing the Valuation of Your Construction Company 

To maximize the value of your construction company, there are several steps you can take. First, having a solid online presence on social media platforms like Facebook and Twitter is essential. You should also have a website and encourage satisfied customers to leave reviews on sites like Yelp and Google. Positive online reviews will build trust with potential customers and increase your company’s value.

Your inventory value is a significant part of your construction company’s worth. To ensure a top sales price, ensure your equipment is in the best condition possible before a business valuation. Ensure your equipment stays on schedule for routine maintenance, that repairs are being completed, and that equipment is replaced when necessary. If you are still a few years away from selling, it is wise to spread maintenance costs over the lifespan of the piece of equipment rather than scrambling to complete repairs while preparing to sell. An impressive inventory will not only increase the sales price of your business but will also attract more buyers.

A solid management team is essential for maximizing the valuation of your construction company. When the owner is heavily involved in the company’s details, including operations and client relationships, it can be challenging for a new owner to transition into the business. Most buyers consider this a high-risk situation as they consider the potential fallout from the owner’s exit. To fix this problem, build out your management team or perhaps better empower the management team you already have. Once that team is established, it is time to begin transferring your responsibilities. Then, when the new owner comes on board, the transition will be virtually seamless.

Factors to Consider When Selling Your Construction Company

As a business owner planning to sell your construction company, it is essential to consider why you are selling the business. This consideration will inform how you will sell the business. Here are some reasons why you may want to sell your construction company and how to handle the sale:

Retirement

Suppose you are retiring and selling your business. You may consider family succession, allowing an employee to buy the business, or dissolving a business partnership. In that case, working with an experienced partner is crucial to ensure a smooth transition, maintain business continuity, and preserve your business’s legacy and reputation.

Opportunity

If you have another investment opportunity, you may want to take advantage of it but are not ready to retire from the construction business. In this case, a strategic buyer like a private equity firm may be interested. You can maintain income and benefits, likely even a minority stake in the company, but reduce exposure and gain financial security.

Asset Liquidation

Finding a strategic buyer could open up valuable options if you need an influx of cash due to life circumstances but are not ready to launch an exit strategy. Look for an upfront liquidity event that allows you to keep your job and ideally offers you a minority stake in the business. This provides financial security along with long-term income and growth opportunities.

Determining the Best Time to Sell Your Construction Company

As a business owner looking to sell your construction company, you may wonder when the best time to sell is. Simply put, the best time to sell your construction company is when it is doing well. This applies to any business, even if it may seem counterintuitive. If your construction business is trending up, it is customary to assume that if you wait a little longer, you can get even more for your company. However, waiting too long can lead to unforeseen circumstances that negatively impact your business, such as a change in your health, the loss of a key client, or an unfortunate turn in the economy or business operations.

To avoid these situations, evaluating the best time to sell your construction company is crucial. A confidential, professional business valuation provides essential information that helps indicate the best time to sell a company. Financials are the best evidence of where your construction company is going. Timing is vital; you do not want to look back and wish you had acted sooner. Working with an experienced partner who can provide insights and help you make informed decisions is essential.

Finding the Right Partner to Help Sell Your Construction Company

Selling a construction company begins with an accurate, comprehensive business valuation. However, utilizing a business broker or advisor with an extensive network of potential buyers is advantageous when considering the reasons for wanting or needing to sell. At Creative Business Services/CBS-Global, we prioritize our clients and ensure the most successful transitions and lucrative exits.

Creative Business Services is also available to help you understand the process of selling a construction company, where your business stands today, and how far you need to go to achieve your goals. We are dedicated to helping business owners sell their businesses and have a team of experienced advisors who can help guide you through the process.

Selling a construction company can be a complex and emotional process, so working with the right partner who understands your needs and can help you achieve your goals is crucial. Finding the right partner can make all the difference in ensuring a successful sale. Contact us today for a business valuation and to learn more about how I can help you sell your construction company.

 

Thomas Martin is a Business and Real Estate Intermediary of Creative Business Services/CBS-Global.

Call us to 920-432-1166. All your inquiries are strictly confidential.