Steps to Ensure Effective Business Transition when Selling a Construction Company

Whether you are considering selling your construction company right away or sometime soon, there are many things to keep in mind to ensure an effective and smooth transition period. The transition period is essentially the entire period when you first decide to sell until the sale process has been completed.

During the transition period, you would need to get in touch with an advisory team to help you ensure that your construction company is prepared for the sale and that you choose the right buyers to make a deal with.

Read ahead to understand all of the steps you will need to take to effectively business transition when selling your construction company, as well as a short introduction to N3 Business Advisors and how we can help you in your business transition process.

Steps to Effectively Transition when Selling a Construction Company

An effective transition period when selling your construction company can be beneficial to all parties involved in the sale. The transition can allow you to prepare yourself, your staff, and other stakeholders in your company. It can also offer you the chance to prepare and improve your company in any way you can. And finally, it can also make the buying process much easier for the prospective buyer, which can lead to good relations between you and the buyer in the future.

Let’s take a look at six steps that can be taken to ensure an effective business transition:

Step 1: Assess the Market

The first thing you need to do after deciding to sell your construction company is to assess the market. The market for the construction industry is usually highly competitive, with many new companies cropping up every year and a number of business mergers and acquisitions taking place. As such, you may be able to come up with a list of potential buyers very quickly.

However, you need to assess the market not just within the construction industry but on a broader economic scale as well. How is the global market faring? Are the consumer confidence levels in the industry high enough? Is there any economic activity in your region that might impact the transition of your business sale? These are all important questions to consider.

Step 2: Assemble an Advisory Team for the Sale

Once you have assessed the market and concluded that the market would be receptive to you selling your business, you need to assemble an advisory team. A team of professional and experienced advisors can help you in every aspect of the sale. They can also confirm whether the market is right for you to sell at this time, and they may also have a network of potential buyers to get you in touch with. An advisory team that you can rely on for support can be a huge asset to an effective transition. Additionally, the earlier you get together with an advisory team, the more time the team will have to understand your business and get familiar with your finances and history.

An advisory team can consist of various personnel providing different services. For example, you need a team of people that can help you handle business acquisition searches, business valuation, and transaction support. The advisory team can also help you develop growth strategies to sell your company for a strong profit. 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.

Step 3: Prepare your Business

Once you have your team set up and in place, you are ready to start taking in their insights and preparing your construction company for the sale according to their advice. If your business is prepared for the sale, you can maximize the sale price and increase your profit from the sale. There are some ways you can prepare your business to make it more desirable to potential buyers. Some of these examples include:

Improving the Company’s Online Presence

While traditional forms of advertising can help promote your construction company, you might be able to gain more customers by improving your online presence. Many potential customers might be online and simply don’t know about your company. You can tap into a large potential customer base by advertising online and working to improve your company’s website. You can also list your company on Yelp and other relevant sites. Work towards getting some good online reviews as well, since potential customers will be reading these reviews and deciding on whether they want to do business with your company or not.

Ensuring that all Equipment is Properly Maintained

As a construction company, your business’s biggest asset is the equipment you own. Therefore, the value of your equipment inventory plays a large role in how successfully you can sell your company. Before you move onto the step of business valuation, you should ensure that all of your equipment is in the best possible condition. While equipment upkeep can be a large upfront cost, you can more than makeup for it when you ultimately get a better deal for the business sale. Additionally, equipment maintenance costs are a lot lower and more manageable than replacement costs if you do not keep the equipment in good order.

Restructure your Company’s Management

Right before the sale is a good time for you to evaluate the corporate structure of your construction company and restructure the management team if need be. A well-adjusted management team can help the new buyer settle in during the transition period. As the owner of the company, you should not be managing all or most of your large customers so that when the new owner takes over, they do not become overwhelmed with a majority of the workload. If it is easier for the new owner to take over your company’s accounts, then the transition can become much more effective.

Step 4: Obtain a Valuation

Once your construction company has been adequately prepared, you can move on to the next step of obtaining a valuation. You can begin with an informal valuation to estimate how much your company could sell for. This estimate can be a good number to go off for your formal valuation. Alongside your advisory team, you may also want to get in touch with a professional business Valuation specialist and tax professionals to confirm the sale value of your company.

The valuation document you end up with from the valuation process will ultimately be your company’s most important financial document. Here are some of the documents that will be required for an official valuation of your construction company:

● Federal tax returns for the past 3 years

● Profit and loss statements and balance sheets for the past 3 years

● An inventory of equipment or sellable products

● Additional lease information

Step 5: Compare the Valuation Estimate to Personal Financial Needs

The final sale amount that you settle on in the business valuation should be an amount that you are comfortable with. It should surpass the minimum amount you would be willing to accept. Once you have the amount of the valuation estimate, you should compare it to all of your future financial needs. It should be comfortable to cover your living expenses and other spending needs for the near future after debt repayments and tax obligations.

Step 6: Get in Touch with Prospective Buyers

The previous five steps outlined everything you need to do before the sale. Now, we can move on to the actual sale and the sale process. This starts with getting in touch with prospective buyers. It is important to interview the prospective buyers and learn more about their plans with the company if they buy it. For example, you might want to confirm with potential buyers that they will keep on a majority of your employees and continue to uphold outstanding contracts with your customers. You should also decide if you want to continue to have any kind of managerial role in the company once it is sold and discuss this option with potential buyers.

Step 7: Structure the Sale

The final step in ensuring that you have an effective transition period when selling your construction company is by structuring the sale in a manner that keeps in mind some key questions. You need to consider a number of things when making the sale. Some of these things include how you are planning to structure the payment, whether you will be staying on to play a consulting or management role, if you want to go for a share sale or an asset sale, if you want to go for a buyout or a reorganization, and so on. While structuring your sale, remember to keep all of your major goals in mind. You want to ensure that your best interests are met and that the construction company you have built continues to uphold your legacy.

The Bottom Line

Selling a business you have built from the ground up can be a challenging and emotional experience. You want to ensure that you choose the right buyer and structure the sale so that all parties involved are satisfied. As such, you must take all the essential steps to ensure a smooth and effective transition period that can lead to a successful sale.

We have outlined the important steps needed to effectively business transition when selling your construction company, starting with a market assessment, assembling a professional advisory team, preparing the business for sale, getting a professional valuation, getting in touch with prospective buyers, and structuring your sale.

If you’re looking to sell your construction company, try following these steps, and hopefully, you will have a very effective and successful business transition.

N3 Business Advisors – Construction Industry Mergers & Acquisition Advisors

If you are an owner of a construction company – whether you are working in general contracting, HVAC installation, electrical, mechanical, or any other kind of construction work – and are looking for business advisors for your company sale, 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.