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Want To Sell Your Construction Business Someday- Consider These Buyer Types Today

Posted by Shawn McCadden on Fri, Mar 27,2015 @ 06:30 AM

Want To Sell Your Construction Business Someday- Consider These Buyer Types Today


Buyer types for a residential construction businessIn a previous blog about selling your construction business I had suggested business owners write a for sale ad describing the business they plan to sell in the future. In this blog I describe the two typical construction business buyer types that became obvious to me as I worked towards selling my business.  By considering your target buyer you can make better decisions about what to do and put in place as you build your business to get it ready to sell.

 

First is the investor. 

This person will want to buy a business that pretty much runs on its own, needing little hands-on attention from the buyer. This buyer will be looking for time tested systems and industry best practices already in place and well documented.  This buyer will also be looking for a business that already has technology and software in place to proactively predict and measure business activities.  This buyer will also be looking to keep most or all of the existing employees in place. To attract this buyer type make sure you assemble a great team of high performing and self directed employees who work well together and embrace the systems and technology you will put in place.

finding a buyer for a remodeling businessThis investor buyer will need a leader/manager to run the company. Before offering your business for sale to this buyer type I suggest you transfer the leadership and the day to day management of your business to a well qualified employee over a period of time. During the evolution you can test and prove his/her effectiveness as a general manager in advance of selling.  By taking adequate time to accomplish this important consideration at my business both me and my employees felt good about and respected the new leader, before I fully transitioned out of the day to day.

Some key advantages of selling to an investor can include a high selling price assuming you have a great business with future growth potential.  And, this buyer will also have the funds or can get his/her own financing for the purchase. My experience proved this could be a great way to go, but due to the reputation of our industry, the pool of potential buyers was very limited. I think this is still true today, but may not be the case in the future.

The second type of buyer will be the owner operator. 

Likely an entrepreneur, this type of buyer will want to take over an existing business and jump right in physically working in the business.  This buyer will want to see steady profits and a strong customer list, but as an entrepreneur with energy to burn will also be looking for growth potential

buyers for a remodeling businessHaving systems and employees in place will be important, but you might want to assume that this buyer will likely change or evolve the systems you have put in place.  As a result the employees described above might not like and/or agree with the changes. In particular experienced management employees may not tolerate any loss of the independence they have already earned in performing their day to day roles. If you plan to sell to this type of a buyer, I suggest you assemble employees who desire to follow a leader and will go with the flow. 

Also consider selling to this type of buyer will not command as high a price when you sell. On the other hand you will likely find more potential buyers because of the lower price.

 

The best of both worlds?

The sale of my business was in several ways a hybrid of the two models described above. I ultimately sold to my general manger. He had already earned the leadership role and had participated for many years in the direction, growth and day to day management of the business. All of the practical experience he gained during that evolution prepared him to be a well trained, experienced and motivated candidate to buy and continue growing the business. To make the purchase practical I had to finance the sale. In my case I felt financing the purchase was worth the risk because the buyer had proven his competency, trustworthiness and ability to not only maintain the business, but also grow it in a strategic and manageable way.


Subscribe to the Design/Builders Blog If you would like to consider selling your business someday and want to banter options and considerations let me know.   By helping you becoming aware of and understand critical details you can leverage them as you grow your business and will increase your chances of selling; and selling at the highest price!

 

Topics: Business Management, Success Strategies, Differentiating your Business, Retirement Planning, Business Planning, Selling your Business