Construction company owners who plan to sell their enterprise to an outside, third-party must take a hybrid approach in their strategic exit plan. In combination with mapping the value of the entity, or benchmarking, an owner must ascertain other aspects of the business that differentiate it from the pool of existing participants.
MAXIMIZING THE VALUE OF YOUR BUSINESS
Recognizing the underlying intangible value of a company can help sellers to obtain a better deal price, including identifying strategic buyers. In some cases, the intangible value of the business is far more valuable than the actual tangible value of the business.
Contractors may be largely comprised of asset value, however for all contractors and especially those who do not have a substantial balance sheet (electricians, plumbers, etc.), the intangible value is seen in these drivers.
- Bidding Process: Is the company invited to bid? Invitations indicate community and industry goodwill.
- Bonding: Does the company qualify for sufficient bonding? Is the company required to be bonded for the contract service provided? As a bonded contractor, does the company gain contracts competitors may not?
- Clientele and diversity: Who is it comprised of (government, commercial, residential) and is it transferable? A diverse base enhances intangible value.
- Contracts: Do they exist and are they transferable to an unrelated new owner?
- Marketing and new sales techniques: How is new business generated?
- Diversity and nature of specific contracting service: Do the services offered allow for repeat business?
- Experience of management and personnel: Is management and personnel certified?
- EEOC and workers’ compensation claims: Has the company experienced any significant litigious claims/issues?
- Longevity in industry: How long has the company operated in the industry and is the name well-respected and recognized in the community as well?
- Union affiliated: In some regions, union affiliation drives value down.