Service 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.
Depending on the nature of the service, service companies tend to have a weak balance sheet,
therefore developing and maintaining intangible value drivers are critical to the success of a
profitable ownership transfer. However, all service companies are dependent on the goodwill created
from the very service offered and many are acquired by competitors seeking to expand services or
market area. Some are acquired at a premium to decrease the pool of competitors.
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Bonding: Does the company qualify for sufficient bonding? Is the company required to
be bonded for the service provided and as a bonded provider, does the company gain contracts
competitors may not?
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Certification of personnel: Are employees certified and/or credentialed in the company’s
service offering?
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Clientele, repeat clientele and diversity: Who is it comprised of (government, commercial,
residential) and is it transferable? Repeat clientele are essential value drivers and a high volume
of referred clientele signals efficient operations management and a core position within the community
and industry at large. A diverse base enhances intangible value.
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Competition: Are services priced competitively? How does the company offer competitive prices
and still maintain high-quality, timely services?
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Contracts: Do they exist and are they transferable to an unrelated new owner?
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Employee retention: What is the turnover rate and how does the company retain productive,
reliable employees?
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EPA, EEOC and workers’ compensation claims: Has the company experienced any significant
litigious claims/issues?
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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?
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Marketing and sales techniques: How is new business generated and how are existing clients
retained?
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Union affiliated: In some regions and industry sub-categories, union affiliation drives
value down.
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Working capital: Does the company maintain a sufficient ratio of sales to working capital?
Sufficient working capital implies effective operations management and an adequate turnover of
receivables.