Selling Your Contracting Business - The Ultimate Step by Step Guide

Contracts can be the blueprint for a smooth project or a roadmap to a headache (or lawsuit). Here are five practical things every contractor should know about their contracts:

 

. Assessing Your Readiness to Sell

• Evaluate Your Personal Goals: Understand your reasons for selling. Retirement, pursuing other ventures, or financial needs are common motivators.
• Determine Your Timeline: Set a realistic timeline for the sale process, factoring in preparation and market conditions.

2. Financial and Operational Health

• Clean Up Financials:
  • Ensure financial statements are accurate and up-to-date.
  • Consider hiring a CPA to audit your books and verify the financial health of your business.
• Review Contracts and Liabilities:
  • Check all existing contracts for terms that might affect the sale.
  • Resolve any outstanding disputes or liabilities.

3. Increasing Business Value

• Enhance Financial Performance:

  • Boost profitability through cost-saving measures and efficiency improvements.
  • Diversify your client base to reduce dependency on a few major clients.
    
    

• Optimize Operations:

  • Streamline processes and implement technology solutions to improve productivity.
  • Update and maintain equipment and assets to ensure they are in good condition.
    
    

• Strengthen Your Brand and Reputation:

  • Gather testimonials and case studies to showcase successful projects.
  • Invest in marketing to enhance your brand’s visibility and reputation.

4. Deciding on Sale Structure

• Sell the Entire Business:

  • Consider if selling the entire business is the best option for you.
  • Prepare all assets, including equipment, inventory, and intellectual property, for sale.

• Retain Partial Ownership:

  • Explore options like selling a majority stake while retaining a minority interest.
  • This allows you to continue receiving dividends or maintain some control.

5. Finding the Right Buyer

• Identify Potential Buyers:

  • Look for strategic buyers (other construction companies) or financial buyers (investors, private equity).
  • Network through industry contacts, brokers, or industry-specific M&A advisors.

• Prepare a Comprehensive Offering Memorandum:

  • Include detailed business information, financial statements, client lists, and growth potential.

6. Negotiation and Deal Closure

• Negotiate Terms:

  • Work with your attorney and accountant to draft a sale agreement.
  • Consider terms such as payment structure, warranties, and post-sale involvement.
    
    

• Conduct Due Diligence:

  • Be prepared for the buyer’s due diligence process, which includes audits of financials, legal matters, and operational aspects.
    
    

• Finalize the Sale:

  • Review all documents carefully before signing.
  • Ensure all regulatory requirements and contractual obligations are met.

Want to discuss your business and increase your value? Schedule a consultation with Will Blake today!