The construction industry is constantly growing and changing. With the competitive nature of the market and low barriers to entry, hundreds of new plumbing, HVAC, mechanical, electrical, or general contractor businesses are cropping up. There are also several mergers and acquisitions taking place every year in different areas and regions within Ontario and across Canada.
Due to the nature of the construction industry, growing and selling a construction business, such as a plumbing business, can be tricky and requires the best model and structure. With the right growth and sale model, you can grow your plumbing business before you decide to sell it, earning you high profits and a higher valuation multiple for plumbing business leading to a great sale price.
Read ahead for a more detailed explanation of what is your plumbing business worth, how you can structure your plumbing business for more growth and how you can sell it in the future.
How to Grow Your Plumbing Business
With a highly competitive market and hundreds of plumbing businesses across Canada competing within every area, it takes a lot of thought, time, and effort to grow your business and make it stand out from the competition. After all, there are only so many customers that all of the businesses are competing for.
Here are some of the ways in which you can successfully grow your plumbing business:
1. Come Up with a Solid Growth Plan and a Financial Model for Future Finances
Before you can start growing your plumbing business, you need to develop a growth plan – or a growth strategy – alongside a financial model you want to follow. Look at your business’s growth so far and see if you want the business to be headed in any particular direction.
Are you hoping to grow in terms of the number of clients you work with, grow in terms of the area or region you are operating in, or maybe grow into the residential or commercial sectors of the plumbing industry?
If you haven’t got a specific growth plan figured out, you might end up owning a completely different business in the end compared to what you initially planned for, getting in touch with a business advisory firm – such as N3 Business Advisors – would help you develop a strong growth strategy.
Alongside growth, you also need to build a financial model for the future. This model will look at the business’s past finances and predict future financial goals. You can set goals such as how much profit you hope to make in the next 3 to 6 months or make separate budgets for new equipment purchasing and other such factors. We have seen many construction businesses that grow too fast but never manage their cash flows effectively and in the end go out of business. Remember, a very important valuation metric for plumbing business is the EBITDA and not just annual revenue.
2. Ensure that your Plumbing Team is Trained and Qualified
A plumbing business can only get so far without properly trained and qualified workers. The plumbing team itself is the part of your business that directly represents you to your clients. Therefore, if you want to achieve significant growth, investing time and energy into ensuring that the plumbing team is trained and receives the relevant qualifications will help you along the way. You also need to have a balance between how many licensed plumbers you have on the payroll vs how many apprentice plumbers you have. It may also vary if you are working in a unionized environment versus being non-union plumbing business. If you offer your team support and opportunities for growth within the company, this will also stop your employees from finding jobs with competing businesses.
3. Invest in Your Plumbing Business’s Marketing
An important aspect of achieving growth is finding more clients and diversifying your customer base. You can do this by investing in your plumbing business’s marketing and making your business a more recognizable brand. To start off, you can try to emphasize the business’s brand by developing a recognizable logo printed on your equipment, vehicles, and plumbing team’s uniforms. You should also focus on increasing your business’s online presence. You can do this by updating your website and looking into search engine optimization (SEO) practices. You can also start listing your plumbing services on online yellow pages and directories like Yelp, Google Maps, Angie’s List, etc. A professionally developed digital marketing strategy can be very helpful in growing your plumbing business. If you have identified your marketing strategy, it will help your help your business quickly ramp up within your niche market. Remember, selling a plumbing company should be a goal that you have to keep in mind. We know some businesses who only provide plumbing services within certain geography and are know for that example quick and fast plumbing services in Mississauga or Scarborough or plumber specializing in apartment buildings or plumber for food plants etc.
4. Reorganize The Structure of Your Plumbing Business
To accommodate growth, you need to bring in larger or multiple teams of trained plumbing technicians, managers, administrative workers, and support staff. A smaller plumbing business would have the owner in charge of most things, including most client contracts. As you account for growth, it is important to reorganize your business’s structure to have enough supporting staff. This includes establishing a new chain of command, delegating tasks, and dividing responsibilities amongst your team.
5. Invest in the Business’s Culture and Communication
As you try to grow your plumbing business, you should invest in the kind of company culture you are looking to promote. Your employees are the most important aspect of your business; therefore, you should do whatever you can to keep them happy and satisfied with their jobs. Ensure that your employees are comfortable with how the company is structured and that there are open and comfortable communication channels between the workers and the management teams. This is essential when it comes to employee retention and employee satisfaction. Try to carry out regular check-ins with employees, share success stories to keep your employees motivated, and try to build employee loyalty and satisfaction.
6. Keep Your Pricing Structure Competitive and Profitable
Finally, another way to grow your plumbing business is by keeping your pricing structure competitive to bring in new clients. You and other plumbing businesses in your area are competing for only so many customers. So, to bring in more customers, you should try offering your services at competitive yet profitable prices. Keep your overhead costs in mind when setting your pricing structure, and consider the kind of profits you are hoping to achieve. It could also be helpful to offer discount packages or lower prices for several plumbing services lumped together. We also find that HVAC, Plumbing, Landscaping or other construction companies that specialize in a certain niche become more profitable quickly.
How to Sell Your Plumbing Business
A growing and valuable plumbing business will sell for a much higher profit than a business that is running into losses and is not well organized or structured. We have already discussed various ways in which you can grow your plumbing business above. However, once you are satisfied with the level of growth achieved, you can move on to selling the business. However, always keep in mind, selling a plumbing business need patience and a good business strategy.
Given how competitive the construction industry is, mergers and acquisitions in the industry are fairly common. If you’re looking to sell your plumbing business, here are some of the things you can do to get started on the process:
1. Prepare Your Plumbing Business for Sale
While growing your plumbing business will help prepare it for sale, there are a few other steps that can be taken. Some of the things that need to be done before you can sell your business include restructuring the business’s management, improving your business’s marketing strategy and online presence, ensuring that all of your equipment and inventory is in good condition, organizing all of your financial documents, and addressing any previous business debts or unclosed contracts. If your business is not prepared and structured for sale, you will have difficulty finding buyers willing to take your business on. For example, you need to analyze the working capital deployed in your plumbing business and what happens to that upon sale. How normalized working capital will be calculated etc. etc. When getting your plumbing business to sell you will have to consider how many plumbing business for sale are there in your immediate territory. You should also consider plumbing franchise business for sale that your business may be competing with.
2. Get Together a Business Advisory Team
If you haven’t ever sold a business before and don’t have the relevant professionals as a part of your business that can help you with the process, you can greatly benefit from getting together a business advisory team. Such a team would consist of accounting and tax professionals, business growth analysts, lawyers, valuation experts, etc. An advisory team can help you assess the market and figure out the right time to sell your business, as well as advise you on every step of the actual selling process. The advisory team can also help you structure the sale and stay on once the business has been sold to help the business settle under the new owners. This is where you can get in touch with N3 Business Advisors to put together a strong team of advisors to carry out your business sale.
3. Get A Business Valuation and Carry Out Due Diligence
Once you have prepared your business for sale and gotten together an advisory team, you can move forward by getting a professional business valuation. A business valuation – carried out by a valuation expert – will help you estimate how much your business might be worth and what amount it can be sold for. A valuation will consider your business’s financial history, revenue streams, cash flows, tax history, and other financial histories. Following a valuation, you should also carry out the due diligence process from your side to help your potential buyers with the sale. The due diligence process goes beyond just the financial aspects of the business and looks at the legal, administrative, tax, and operational aspects of the business, amongst others. A simple thing like not having a minute book for the corporation updated can delay or even derail the deal. Analyze with your tax accountant if you should be looking for an asset sale or a share sale in order to get due benefit of capital gains tax exemption in Canada. This gives your business’s potential buyers a complete image of the business and what they would be getting into were they to go forward with the sale.
4. Find Potential Buyers and Interview Them
The last step in selling your plumbing business is finding potential buyers and interviewing them. Your advisory team can help you scope out the market and find potential buyers willing to buy your business and carry out your growth plans and any other plans you have for your business.
It is also important that you get in touch with all of your potential buyers and interview them to ensure that you are on the same page regarding the sale. You can discuss certain factors like how the transition period will be carried out, whether or not you want to stay in some kind of managerial or advisory position in the business, how many of your business’s employees will be kept on after the sale, and so on. Remember, the right buyer will play a very significant role in successfully selling your plumbing business.
The Bottom Line
So, we have gone into depth on how you can grow and sell your plumbing business by coming up with strong growth and sale strategies. To grow your business, you must invest in your team, culture, and marketing strategy. You will also have to consider reorganizing the structure of your business, as well as your pricing strategy.
Once your business is on a steady growth path, you can move on to selling it. To make selling your plumbing business a seamless and comfortable process, you can start by getting together a business advisory team, carrying out a business valuation, and doing your due diligence. Once you’ve done this, all that is left is finding the right buyers and getting in touch with them.
Now that you have all of this outlined for you, you can start growing and eventually sell your plumbing business for a great profit.
N3 Business Advisors – Construction Industry Mergers & Acquisition Advisors
If you own a plumbing business and are looking for business advisors to help you grow and eventually sell your business, then N3 Business Advisors can help you.
Whether you need help with company growth, preparing your business for sale, valuing your already existing construction company, acquiring, merging, or any other goal, we have a qualified and diverse team that is ready to help. With over 30 years of experience in the industry, our team of lawyers, valuation experts, financial and business advisors, and other professionals can help you cover all the bases.
You can get in touch with N3 Business Advisors now to schedule a confidential consultation. Visit our website for more information, or call us at 647 967 4222. You’re just one step away from getting your construction company to where you want it to be! We are based in Ontario, and our office is at 55 Village Centre Place, Suite 200, Mississauga, ON L4Z 1V9.