A society that scorns excellence in plumbing as a humble activity and tolerates hypocrisy in philosophy because it is a noble activity will not have good plumbing or good philosophy: neither pipe nor its theory will hold water.John W. Gardner
As a plumbing business owner, your focus on achieving excellence in this profession has led to great success. You love what you do and your passion and hard work pays off.
Your business has managed to survive and thrive in the toughest economic climates and has earned the respect of your customers, co-workers and employees. Your plumbing company is considered a true asset to society with a reputation for reliability and honesty.
All of this, however, has come at a price. You’ll have to sacrifice time you might be spending with your family or pursuing other hobbies or interests. You may have been procrastinating to take better care of your health and fitness. You may be at a point, right now where you want to retire from business and start the next half of your life.
If you’re like most plumbing company owners, you don’t have time to sit down and plan the inevitable day when you’ll be going out of business. In fact, the vast majority of small and medium-sized business owners (nearly 80%!) admit that they do not have a succession plan.
This fact demonstrates a common assumption made by many business owners.
“My business is so profitable and extraordinary that it will be easy for me to find buyers and sell them quickly.”
Unfortunately this is far from reality. Even in the best of times, for the best businesses, the sales success rate in the United States is less than 3%.
That’s why, if you are planning to go out of your business, you should start planning at least two years before you intend to leave.
Document your finances to help assess…
Drawing up a thorough and comprehensive exit plan requires paying attention to several critical areas of your business to attract the highest caliber potential buyers.
For example, you must have fully documented finances spanning a minimum of five years, including this year.
For the savvy buyer, the reality of the potential return on investment is what your plumbing company actually looks like on paper, and not what you as a seller look like. thinking It’s valuable.
While you’ll want to use the services of an experienced professional who is well versed in all the nuances of proper appraisal, you need to understand at least some of the factors that are considered in an appraisal.
Potential buyers will focus on obvious things like net income, revenue and cash flow as a baseline
Buyers can also consider what’s known as EBITDA, or “earnings before interest, taxes, depreciation, and amortization,” a measure used to analyze and compare profitability between companies.
In addition to a thorough financial review, a buyer looking to invest in a plumbing business will consider other things before making a bid. The prospect may want to know details such as how many services are calling you on average per day and the value of those calls.
He or she will look outside the books for tangible and intangible factors that make your business more likely to generate a quick return on investment. Planning ahead will ensure that you have done everything possible to make your business an attractive choice for potential buyers.
What can you do now to prepare for great results…
The first place to start when planning an exit from the business is to form a highly skilled and trustworthy transition team.
This team is made up of trusted experts and advisors with experience in business transitions, as well as key employees, family members and other interested parties. In addition to your attorney and tax consultant, include mentors from your industry who have been through the sales process; someone who has been in the trenches and can help and advise you.
Selling a business is no longer done with a bundle of cash and a handshake. This is a very complex process and you need as much skill and wisdom as you can muster together. Once your team is formed, you can meet regularly to lay out a step-by-step transition blueprint.
Once your team has been formed and you have created a basic timeline of how your exit will play out, you then need to put in a lot of effort to make your business as profitable and efficient as possible.
Experts liken this to a home salesman making cosmetic repairs that lead to “bridling attraction.”
You don’t want to wait until the last minute to start improving the curb appeal of your plumbing establishment.
If it makes sense to your transition team, consider replacing or repairing outdated equipment and tools. Run the numbers to determine whether or not it’s worth investing in a new truck, communications equipment, or computer.
Your physical location speaks volumes to potential buyers, so don’t ignore it. Something as simple and inexpensive as sprucing up the landscaping, throwing in a fresh coat of paint on the exterior, or making sure that the bin is emptied and clean, can make a huge difference when you woo a buyer.
Make it a habit for your employees to keep their company vehicles clean, their workspace organized, and their personal appearance neat and professional.
First impressions count and never more so than when you are trying to find the perfect buyer for your plumbing company.
Don’t forget to grow your business…
Once you decide to leave your business, it’s easy to get caught up in the sales process and forget that you still have customers you need to take care of.
Don’t let yourself be distracted from running your day-to-day business. Allow your advisor and transition team to handle the exit details while you do all you can to increase your bottom line and make the company run more efficiently.
Remember: the typical qualified buyer will most likely not buy your business because he or she has always dreamed of becoming a plumber. The buyer is looking for a business that will make a profit now and for years to come.
If you have a major commercial account, now is the time to make them feel highly valued. Customer loyalty is one of the intangible qualities that experienced buyers look for in business. Do your best to keep your client base happy, satisfied, and complimenting you. Something as simple as a phone call from you, a thank you card, or a lunch invitation can create a strong feeling of loyalty in the client.
You may also want to increase your marketing efforts a bit to get those service calls coming in more regularly or to shore up your commercial database.
Even if you are busy and successful, building a channel to add new clients is not a bad thing. For potential buyers, a phone that never stops ringing is an unbearable siren song.
Consider this…
Chances are you will only get one chance to successfully sell your plumbing company. There are many gremlins that can sneak into the process and end up making it longer and more expensive.
That’s why it’s so important to get your team together and come up with a game plan that doesn’t overlook any details.
As you prepare to end your career in the plumbing and move on to the next phase of your life, you must avoid making strategic planning mistakes that will cost you money.
A short article like this is unlikely to cover all the factors that lead to a very successful and stress-free business transition. The hope is, however, that this will get you started doing the things necessary to guarantee the best results.
Leaving your plumbing business is one of the most important phases in your life. Planning and preparation ensures that you will be able to put the money you need out of your business to create the future you desire.
Educating yourself now about the perfect exit strategy and implementing it gradually is the best way to avoid making bad decisions that will impact your retirement.