When planning to sell your construction business, you will want to make sure you extract the most from the business you’ve worked so hard to build. Yes, selling a business is hard, especially if it’s your first time, but with the right strategy, preparation, and execution, you can attract the ideal buyer for your company.
7 Tips to Maximize Value of Your Construction Business Before Selling
Here are a few things you can do to improve the chances of selling your construction business for maximum value:
1. Time Your Exit
Depending on market conditions and the financial health of your company, you may be able to time the sale of your business correctly. Most experts agree that the best time to sell a business is when it’s still growing and most profitable, not when sales are in decline.
So if you have the luxury, sell when your business is at its strongest. If you wait until profits start to fall or the market slumps, prospective buyers will become suspicious and use your declining financial performance to discount your business. A growing and profitable business is much more attractive and commands a higher price.
It may be tempting to wait a little longer if your business is profitable, but don’t. Sell as soon as you feel the value of your company is at its highest before an unforeseen event forces you to put your company on the market. In fact, when you just land a lucrative contract or secure a major client, that’s the best time to sell.
2. Diversify Your Revenue
When you rely on a few clients for your income, you risk losing a major revenue source if any of them leave.
Relying too much on a single source of income can hurt the value of your company. It doesn’t matter how much research or valuation you’ve done, you can’t accurately predict the market movement or your customers’ behavior.
By diversifying your revenue sources, you will be in a much better position to drive the kind of outcome you want from the sale. If one source of revenue fails, the impact will be minimal and it won’t wreck your plan.
3. Keep Your Equipment In Good Shape
In the construction industry, equipment and infrastructure make up a huge part of a company’s value.
To sell for maximum value, you need to ensure the upkeep of your equipment and facility at all times. While the cost of maintenance can be steep, keeping your equipment in good shape will go a long way in boosting your asking price.
It’s better to spend a little more now than risk your assets losing value. Equipment and infrastructure are so valuable in construction businesses; their upkeep should be a top priority.
4. Put Your Finances In Order
Prospective buyers will want to take a look at your financial records, so make sure they are organized and up-to-date.
Your taxes, credit history, financial statements, and other relevant documents should be readily available to potential investors and prospects. Also, try as much as you can to reduce or pay off any debts you owe prior to listing your business.
If your accounting practices are not up to par, or your accounting records are not accurate and complete, bring in professionals to fix them before showing your financial records to prospects. In the construction industry, revenue recognition and cash flow are important to buyers, and getting that right so you can present an accurate picture of sales, cost of goods sold and more is attractive to buyers. The last thing you want is to present questionable financial documents to a prospective buyer who can buy your business for maximum value.
5. Reinforce Your Executive Team
An experienced and skilled workforce adds a lot to a company’s value. Savvy buyers will want to see that the business can continue to run without you at the helm. Thus, it is important to strengthen your team, especially your executive team prior to selling.
If no one else can run the business except you, the buyer will have to bring in a new executive or form a new team. That can hurt your asking price as potential buyers will factor in the cost of assembling a new workforce.
6. Differentiate Yourself From The Competition
To gain competitive advantage, you need to stay one step ahead of the competition. Whether it’s launching a new product or diversifying your revenue sources, stepping up your game will give you an edge. And when you’re leading, it becomes easier to attract qualified buyers.
It’s important to take a look at other businesses in your industry. What are they doing? Are there gaps in the services they provide? If there are, how can you fill the gaps? Filling those gaps will not only help you stay competitive but will also give you the upper hand when you take your company to the market.
7. Develop A Growth Road Map
Savvy buyers are attracted to businesses that have clear strategies for future growth. As a seller, you need to understand what buyers want and take steps to put that in place before listing your business.
It’s also important to understand the type of buyers you want. Strategic buyers, for example, might want to acquire your business for strategic purposes, while financial buyers are more likely to be drawn by potential profits. The fact is that if your company doesn’t meet certain standards, you may find it difficult to attract the right kind of buyer.
So you need to develop a strategic plan to continue to generate growth. If you currently don’t have a growth strategy, it’s not too late to start. Keep nurturing your business until you’re satisfied with the direction of things.
The benefits of improving your business before listing may not seem cost-effective now, but if you prepare your business for the future, you will be in a much better position to achieve your sales and exit goals. Working with a business brokerage like Raincatcher will ensure that you don’t miss a step. Raincatcher can help you get the most for your business and walk you through each step of the selling process.
For more info on how to get the best value for your construction business sale, contact Raincatcher today.