How To Sell Your Plumbing Business?
Are you interested in selling your plumbing business?
If this is the case, it is a good idea to think about your goals and objectives for the sale, which include the reasons why you are selling your firm and the value you want to attain. To get the best price possible when selling a plumbing business, a difficult endeavor that calls for the assistance of seasoned financial and legal specialists who are familiar with the intricacies, you need to understand that the level of preparation you put in will directly correlate to the amount of money you make. You must understand that the amount of preparation you put in will be directly proportional to the amount of money you make.
It is advised that you start preparing your plumbing business for sale at least a year or two before the transaction is actually scheduled to take place. You will be able to get everything in order, get the maximum price feasible, and demonstrate that your company is an appealing choice for potential purchasers if you do this. If you are interested in selling your plumbing firm but are unsure how to get started, the following instructions will guide you through the sales process and help you make the most of the time you have available.
Step 1: Get Ready to Sell Your Business
You cannot just put up a “for sale” sign and expect bids to start pouring in if you have made the decision to sell your plumbing company for any reason. Selling at the proper price requires planning and effort. The more time you invest in thoroughly evaluating, preparing, and marketing your plumbing firm for sale, the more likely it is that the sale will go through. You may do the following to get your plumbing company ready for sale:
Get your business’s finances in order by making sure you have the right financial statements and accounting processes and procedures in place. It is recommended that you show strong performance in all areas, such as sales growth, backlog, gross margins, and other plumbing-related metrics. Prepare financial and tax statements going back two to three years. Be ready to list and value both the tangible and intangible assets of your plumbing business.
Sort out your legal documents. Check your licenses, contracts for licensing, incorporation documents, and contracts with clients and vendors. Make sure they are up to date, organized, and readily available.
Streamline your everyday operations by producing checklists and instruction manuals for each function so that everyone is aware of what to do and how to accomplish it. The important processes, rules, and procedures that have the most influence should get more attention than everything else that needs to be documented. Keep in mind that your business’ systems and procedures are what make it valuable, enabling you to hand the keys over to a buyer with a system they can use to differentiate you from your rivals. Focus on these areas:
Do you employ a successful sales and marketing process?
How are leads produced and transferred to sales?
Has your product pipeline been simplified, effective, and efficient?
Will the new owner need to teach your current crew, purchase new equipment, or hire more employees?
How well does your second-tier management function?
Do you micromanage your managers and staff?
Do you have a solid management structure that includes decision-makers for important business matters?
Do you give your team permission to act on your behalf?
Do you cross-train your managers and employees to help fill in the gaps and reduce downtime when team members are out sick or on vacation?
Do your employees lack motivation or discipline?
Aim for effective, quantifiable, and repeatable pricing and marketing tactics. The new owner can be sure that there won’t be a big need to change the way sales are done because the marketing strategy has been working well for years and consistently brings in new leads.
Your crew needs to be friendly, well-trained, and content, from the dispatchers to the plumbers. Let them know in advance that you want to sell your business. Motivate them to cooperate with the new proprietor.
If the new owner is not a plumber themselves, create a five-year business plan that they can use to increase their chances of success.
Step 2: Obtain an expert valuation
Next, determine the value of your plumbing company to make sure you are not pricing it too high or too low. Valuing a plumbing business is not always an easy task. You might want to hire a professional valuation firm to help you figure out how much your business is really worth. Using a professional’s services also lends legitimacy to the asking price. The appraiser will take into account everything from sales and inventory to debts and other company assets in order to come up with a fair price.
While figuring out how much your plumbing company is worth is crucial, you should be prepared to justify your asking price when negotiating with a possible buyer. The best way to show that your plumbing company’s value is correct is to keep accurate, up-to-date financial records. AlthoEven though some potential buyers don’t care about things like goodwill and market share, they can’t argue with your financial numbers, which is why it’s so important to keep accurate records. Income statements, cash flow statements, balance sheets, and tax returns from the previous two to three years are all important financial records to support your assessment.
Step 3: Get Ready to Exit
A prospective buyer will want to know how you intend to end your participation with the business. Experts advise creating an exit strategy at least a year or two beforehand. A solid exit strategy may help you get things in order and boost your clientele, finances, and sales. Additionally, this increases the appeal of your plumbing company to potential customers.
A successful exit strategy should include the following: a plan for the person who will take over the day-to-day operations; a clear understanding of potential pitfalls and how to manage and correct them; and an estimation of the amount you will need to make from the sale in order to cover your expenses. Additionally, keep in mind the following:
(a) Who will take over for you?
b) Do you want your present personnel to remain with the new owner?
c) How will you encourage your key personnel to stick around following the sale?
d) Are your insurance plans and contracts up to date?
e) Is there going to be a transition phase, or are you going to walk away the moment the buyer delivers you the check (not likely an option)?
f) Will you inform your current clients and leads of the ownership change? What about other important parties, like suppliers, strategic partners, bankers, attorneys, brokers of business and health insurance, your CPA, and more?
The biggest mistake you can make when selling a plumbing company is not having a good plan for how to leave the business. If you want to sell your plumbing business for the most money possible, make an exit plan for it now, before something unexpected forces you to.
Step 4: Depending on the size and worth of your business, hire a professional business broker or M&A advisor.
Working with an experienced business broker is the best way to get the most money for your plumbing business and find the right buyer. This is especially true if your company works in the small and lower middle markets, which are often thought to have net profits of less than $1 million, or more specifically, EBITDA (earnings before interest, taxes, depreciation, and amortization). If your company makes more than that, you should hire an experienced “mergers and acquisitions” (M&A) lawyer who will market your business to a different type of buyer.
In this conversation, we’ll focus on what a company broker can do for you when it comes to selling your business.
A business broker who knows what they are doing can help you with valuing a business, negotiating, and doing your due diligence. They might list your plumbing business on many online marketplaces to get more customers and the best prices. A qualified business broker can also speak on your behalf in all negotiations and help you get money from a reputable bank.
A professional business broker performs the following crucial roles:
a) Business Evaluation.
Based on the sales of similar businesses, a qualified broker could help you figure out how much your plumbing business is worth.
b) Construct a prospectus.
A prospectus is a long business document that tells people who might be interested in your plumbing business about what you do. The document, which is usually 15 to 30 pages long, has all the important details about your plumbing business on it.
On their database, a broker promotes your offering to possible customers and inventors.
d) Handle calls, emails, and inquiries.
All buyer queries regarding your firm will be handled by a business broker. Also, they will help you choose the best offer from all the letters of intent that have been sent. A letter of intent is a document that states the buyer’s intentions on the terms of the offer to buy your plumbing business.
(e) Due diligence
A broker will look at all the data, metrics, and facts about your plumbing business before helping you hire a contractor. This is done to make sure that all of the data you’ve given is accurate. The broker will make sure that everything is going as planned and will answer any questions your buyers may have about your data and accounting.
(g) Confirm the last offer.
Your broker will look over a buyer’s final offer to buy your plumbing business very carefully and will negotiate until you are happy with the result.
If you try to sell your plumbing business on your own, you might tell your competitors about your plans. Using the knowledge of a qualified company broker can help you keep your information private and shield it from potential purchasers who haven’t signed a disclosure agreement. A broker helps you sell for a profit and saves you a lot of time.