The construction industry is a highly competitive industry with low barriers to entry and exit, which can facilitate a large number of businesses being bought and sold every year. As such, mergers and acquisitions in the construction industry are also very common.
In this article, we will take a look at electrical contracting businesses and how you can go about buying or selling electrical contracting businesses.
What to Look for When Buying an Electrical Contracting Business
Many entrepreneurs prefer to start their own businesses rather than buying existing ones. However, when it comes to the highly competitive construction industry with distinctly low barriers to entry and exit, buying an already existing business can often be a good idea.
When it comes to electrical contracting businesses, there are several good reasons why you might want to buy an existing business rather than start one from scratch. Some of these reasons include things like having an already established customer base to work with, inheriting well-trained and qualified workmen, fewer startup costs like buying new equipment or office spaces, and generally more time to focus on growing the business and expanding the scope of it.
There are many online avenues where you can find a great electrical contracting company for sale. However, you have to keep certain things in mind when deciding which company might be the best fit for you. Out of the tens or hundreds of electrical contracting or even electrical wholesale businesses for sale, you need to find one that suits all of your requirements and actually has the potential to grow and flourish under new leadership.
Here are some of the things to look out for when choosing an electrical contracting business to buy:
Qualified and Trained Employees
As is true with most businesses in the construction industry, electrical contracting businesses rely heavily on qualified and trained electrical technicians that make up the majority of the team of employees. These electrical technicians should have formal training through vocational training, trade school, or through receiving different qualifications. All of this is imperative when it comes to any kind of electrical work as it can significantly impact the safety of the employees and the business’s customers, but also because the electrical technicians are the employees with the most engagement with the actual customers.
While a strong and effective management team is very important for any business to succeed, when you shop for an electrical contracting business, you need to ensure that the workers and technicians employed by the business have all the relevant training. Not only should they be able to skillfully carry out all kinds of electrical work for customers, but they will also be responsible for creating a positive impression of the business for the customers.
Relevant and Up-to-Date Licensing
When looking for a business to buy, you should take a look at the electrical licenses of all potential businesses you are considering. Electrical licensing is essential when providing legal and safe electrical services to customers. So, the businesses you consider buying should also have relevant and up-to-date licenses to avoid any run-ins with the law or any other health or safety risks.
There are various different licensing bodies in Canada that are relevant to electrical contracting businesses. Some of these bodies include the Canadian Electrical Contractors Association, the National Electrical Contractors Association, the Canadian Standards Association, the National Trade Contractors Coalition of Canada, and so on.
The electrical contracting business you do buy should have licensing that is legal, up-to-date, and meets the state requirements or any other requirements for the area in which the business operates. While you’re at it, you should also check that other relevant business permits are all in order.
A Strong Insurance Policy
As with most construction businesses, an electrical contracting business can run into all kinds of on-site dangers like electrical fires, accidents and injuries to technicians, damage to customers’ properties, and so on. If you buy an electrical contracting business that does not have insurance, then the business itself can be held liable for any such accidents and runs the risk of having to pay for these things out of pocket. This can be a huge risk for a business and can even lead to businesses going bankrupt or shutting down.
So, if you are looking for an electrical contracting business to buy, be sure to consider whether the business has a strong insurance policy. The policy should cover all kinds of on-site accidents relating to property damage, equipment damage, and injury to the technicians.
An Established Customer Base
Because the construction industry is highly competitive and several electrical contractors are located in most areas, a strong and well-established customer base is essential for a business’s success. If you purchase an electrical contracting business that has a solid list of customers to work with, the chances of success once the sale has been completed will be much higher. It will also be more helpful to have loyal customers to work with since finding new customers directly after the sale of a business can be difficult, and it can take some time to get a business back on track once management changes.
A Brand Image and Online Presence
Standing out from the competition is very important for small contracting businesses or businesses looking for growth and expansion. Suppose you buy an electrical contracting business with a strong and recognizable brand image and an online presence. In that case, there is a greater chance that the business will be able to keep up with the competition and bring in more customers.
In today’s day and age, having a strong online presence is just as important as more traditional forms of advertising. Ideally, you should buy a business that already has a well-built website or has a website that can potentially be built upon. Online marketing and advertising are also very important factors to consider.
And finally, when you narrow down your choices of electrical contracting companies for sale, you should choose companies that have all of their finances in order. This will make the due diligence process leading to the final sale much quicker and easier. You also want to ensure that the business you buy does not have any significant debts, that all of their taxes and receipts are in order, and that the accounting is up-to-date.
What to Consider When Selling an Electrical Contracting Business
As most industries bounce back from the dwindling economic effects of Covid-19, the construction industry is no different, and now is as good a time as any to sell your electrical contracting business. When deciding to sell an electrical contracting business, it might be in your best interest to work with an advisory team or an experienced broker to help you increase the value of your business and sell it for the highest possible sale price.
How much you can actually end up selling your electrical contracting business for depends on certain factors, such as what niche or specialty the business operates in, whether you provide residential or commercial electrical services, the size of the company, and how many trained and qualified electrical technicians you employ, what kind of relevant assets your business owns, such as equipment, computers, customer lists, and so on.
A proper business valuation carried out by professional valuation experts can tell you more about the real and fair market value of your electrical contracting business. But while the valuation can be left to the professionals, there are other factors that can be considered when selling an electrical contracting business and actions that can be taken to prepare the business for sale.
Here are some of the things to consider when putting up your electrical contracting company for sale:
Ensuring Legal and Financial Standing
When putting your business up for sale, you want to make it as attractive to potential buyers as possible. One of the best ways to do this is to ensure that your electrical contracting business is in good legal and financial standing. This means getting all your legal matters in order, working with lawyers to ensure that your permits and licensing are up-to-date, and cleaning up your books and financial records. You may benefit greatly from working with an accountant to get together your balance sheets and tax reports for the due diligence that precedes any business sale.
Inventory of Tangible and Intangible Assets
It is also important to take inventory of any valuables that can add to the general value of your business. This includes tangible assets like equipment and tools but also intangible assets like well-trained technicians, good relations with vendors, good legal standing, and more. These assets can help show potential buyers that your business is valuable and worth considering.
Strengthened Customer Relations
Strengthening customer relations will help you ensure that your customers are loyal to your business and will remain loyal even after the business management changes from your hands to the hands of the new owners. Having good relations with customers also reduces risks for your business and ensures that your business can keep up with its competitors.
Your Role in Day-to-Day Business Operations
As you prepare to sell your electrical contracting business, you need to consider your role in the day-to-day operations of the business. As the business is prepared for sale, it is customary for the owner to start removing themselves from the business. This means taking on more of an advisory role and allowing the managerial team to play a more hands-on role in how the business operates. Once you start delegating tasks to different employees, it is easier for a new owner to step into the team and take on the day-to-day business operations.
Meeting with Potential Buyers
As the owner of a business that you have spent time and effort building and growing, it makes sense that you would be unwilling to pass the business over to just anyone. When it’s the right time to sell your electrical contracting business, meeting with potential buyers is very important. It is not enough to see what the potential buyers come across as on paper; you also need to hold meetings with them to ensure that your goals for the future of the business align. You also want to choose potential new buyers you can get along with and those who will agree to allow you whatever role you would prefer to keep within the business once the sale has been completed.
N3 Business Advisors Can Help You Buy or Sell an Electrical Contracting Business
When buying or selling a business, the input and help from a professional business advisory team can add a lot of value to the sale process. N3 Business Advisors is a mergers and acquisitions advisory team that focuses on businesses in the construction industry. We have experience working with general contractors, electrical contractors, HVAC and plumbing businesses, landscaping businesses, and more.
Our team is made up of highly experienced professionals, including lawyers, accountants, financial specialists, realtors, valuation experts, due diligence experts, and more. As such, we are the perfect team to help you in your business endeavors or buying or selling an electrical contracting business.
For an electrical business for sale near me – N3 Business Advisors Inc. is a M&A Consultant you need to speak with. We are based in Ontario, Canada, and our office is at 55 Village Centre Place, Suite 200, Mississauga, ON L4Z 1V9.