Selling a Construction Company

According to Dun & Bradstreet’s 2022 industry profile, the global demand for construction businesses and contractors is forecast to reach nearly $15 trillion within the next decade. California’s high population, paired with the considerable demand for construction following the impacts of storms and other natural disasters, means that the California construction industry is booming. 

With nearly 12 million privately owned businesses, retiring Baby Boomers are at the precipice of making a sizeable impact on the American economy. With construction news showing a steady demand for employment, now is the time to consider selling your lower middle market construction business in California.

However, with the market flooded with individuals hoping to move on to their next adventure, selling your business may be difficult. Whether you are selling to retire or to move towards a new industry, here are some things to consider before selling your lower middle market construction company in California.

What to consider before selling your construction company

The average time spent between beginning the selling process and closing a deal on a small business is between eight to ten months, with a low success rate. There are a few things you can do to give your construction company the best chance of selling successfully. 

Preparation is key: the earlier you begin preparing to sell your construction company, the less hassle you will have to deal with later. In other words, ensure your “exit plan.”

Before selling your construction company, consider: 

• What is the value of your business?
• What are the tax implications of selling your business?
• Is now the best time to sell your business–in other words, is my business currently appealing to potential buyers at this moment?
• How can you best maintain your business throughout the selling process?
• What are your options for potential buyers–are they current employees, competitors, equity companies, etc.?

What is your construction company worth?

Before selling your construction company in the lower middle market segment in California, know what it is worth. Many factors influence the value of your company, the most important being your company’s assets, liabilities, and equity. 

These three factors generally determine your company’s value. They may be analyzed through multiple perspectives, such as the market value of similar construction businesses, the fair market value of your company’s assets, your company’s future annual returns, or your annual income. 

However, there are also intangible factors that influence your company’s value, such as:

• Broad client and customer base
• Unique selling strategies
• Good reputation
• Cash flow
• Location within a populated geographic region
• Reputable management 

Additionally, the construction industry is showing trends towards sustainability, such as increasing demands for solar roofs and shingles. Construction businesses or contractors specializing in roofing, siding, or sheet metal, are forecast to grow by an annual compounded rate of 4% before 2026. 

If your company offers or supplies equipment for these services, it may have a higher value within the California construction industry.

Would you like to know that's your construction company's worth? You can start valuing your construction company by hiring an expert appraisal, give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call at 1-844-414-9600 or email him at support@rogersonbusinessservices.com who service the entire state of California.

How to sell a construction company?

Selling your construction company is a complex process. No matter the size, it is highly recommended to find a professional representative like middle-market business brokers to guide you through the process. Construction business brokers or intermediaries bring knowledge and expertise that will make this transition easier.

Preparation

A construction business broker will perform a business valuation to estimate the value of your construction company. This will help determine a fair but competitive asking price. An inaccurate estimate may cause you to suffer a loss of potential income or cause a buyer to shy away from a deal. 

Create a business profile to describe your company. Your construction company should be presentable but remain truthful and forthright about the facts. 

Finally, it is essential to have all of your documents in order. This includes documents such as previous years’ financials, lease arrangements, lists of equipment or fixtures included in the sale, partnership agreements, previous sales or marketing materials, etc. 

These and all following procedures are undertaken with the utmost confidentiality. Prematurely disclosing information may be harmful to your business and its assets. 

Marketing to potential buyers

The low entry barrier for the construction business as well as competition from big-name suppliers such as Lowe’s and Sears may make it difficult to find a buyer at the right time. 

Depending on the size of your construction business, your potential buyers will vary. Marketing the deal should be tailored to the specific buyers through methods such as: 

• Business Listing Market Places
• Networking
• Direct Mail
• Social Selling
• Digital Marketing

The market is most crowded with small construction companies or individual contractors. Selling to a current employee or a competitor looking to make an acquisition offer may be best.

Selling lower mid-market construction companies, or companies making between five and fifty million USD annual profit, is even more difficult. These are rarely purchased by individuals, though it is possible. You may be able to sell your construction company to a competitor or a private equity firm.

Construction companies in many different business niches that make over $10 million in annual profit are easily sold with the help of experienced lower-middle-mid-market investment banks or experienced lower-middle-market business brokers, though this is a lengthy process. You may choose to sell directly to a strategic buyer, but not recommended.

Closing the deal

After securing a potential buyer, your M&A advisor will guide you through negotiations. These ideally result in a written agreement, after which you will transfer possession and responsibility of your company to the future owner and receive the full agreed-upon payment.

Are you considering selling your lower middle market construction company in California? Give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call at 1-844-414-9600 or email him at support@rogersonbusinessservices.com .

who service the entire state of California.

Mistakes to avoid

Here are some mistakes to avoid when selling your construction company in California:

• Handling everything yourself. If your company is dependent on you, putting everything on hold to manage marketing and selling may cause your business to fall into disorder and ultimately appear less appealing to potential buyers. 

• Being dishonest about your company’s situation. Your potential buyer will also bring a professional representative to protect their investments in this deal. Not being forthright about your company’s condition may cause your buyer to back out of a deal. 

• Not agreeing to a reasonable price. While your business may be highly unique and invaluable in your eyes, a high price driven by sentiment may deter potential buyers.

• Not checking financial, tax, or legal implications of selling your business. Speak with your professional representative or a qualified construction business broker in the lower middle market in California about reasonable expectations and profits following your sale. They may supply you with a task list to ensure that everything is in order. 

Conclusions

Selling your construction company in the lower middle market in California is a life change that requires forethought and careful planning. Before selling your business, know its worth in both tangible and intangible assets. Find a reliable professional representative like a certified business intermediary specialized in M&A deals to manage the process while you continue to maintain your business. The broker will do the heavy lifting by marketing to and negotiate with vetted buyers and close for a reasonable price. 

See how Rogerson Business Services sold a landscaping business in California in this case study.

If you have decided to value and then sell your construction business now or within the next six months, click here to get started with this quick and simple form, so we can understand your pain points better and prioritize your inquiry with RBS Advisors.

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