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Maximize the Value of Construction Business Before Selling It


If you have spent many years of sweat and blood in starting and building a construction business, selling it can be a difficult point to reach. Making the decision to sell a business is critical, and there is usually a lot of thought put into it. You would not want to risk selling a business you worked so hard to build to the wrong buyers or for a low selling price.

Additionally, selling a business is no easy task. The transition period can often last for months, and it can be difficult to find the right buyer.


If this is your first time selling a business, you may want to consider maximizing your construction business's value before you put it on the market. Not only would you be able to obtain a higher selling price, but you would be selling a strengthened business and likely be able to keep afloat during the uncertain transition period and under the new management.


Tips to Maximize your Construction Business’s Value Before You Sell It


So, what exactly can be done to maximize a construction business's value? Read ahead for eight tips on ways to maximize your business's value so that you can sell it for a higher price and earn fair profits from the sale.


Tip 1: Consider the Timing for Selling Your Construction Business


When making a successful and profitable business sale, timing is key. Many people might think that the best time to sell a business is when sales are low, the business isn’t doing well, and might be making a loss. This is actually far from what you should be doing. The best time to sell your construction business is when it is still experiencing growth and making profits.


If your business is doing well and going strong, and the market is growing too, then prospective buyers will find your business attractive and be willing to buy it at a higher selling price. Conversely, during a market slump and at a time when your company is running into losses, there will be fewer prospective buyers, and those buyers will likely try and acquire the business at a price below asking due to the lower performance.


Many owners can sometimes become double-minded about selling a business once it is growing and more profitable. Try to avoid doing this, as you don’t want to risk any unforeseen circumstances making it to that the business either stops doing well or you might be forced to sell at an unsuitable time. Instead, you should put the business up for sale as soon as you hit an upward trend in growth or land a few new contracts.


Tip 2: Expand Your Customer Base for More Diversified Revenue Sources


It is very possible that your construction business might be making high profits and bringing in steady revenue. However, it is not just the numbers you need to be looking at.


Oftentimes, construction companies have a handful of customers with large contracts. This can be a big risk for the business because if one or two of those customers don’t renew their contracts or leave, the business’s revenue can drop drastically.


To minimize this risk and diversity your construction business’s sources of revenue, it is important to expand your customer base. With more customers, you don’t have to rely too heavily on them to keep your business running. After all, you can’t always predict how your customers will behave or how the market might fluctuate in the future.


So, with more customers for the business, you reduce your risk of losing too much revenue and running into a loss if one or two customers leave. With more diversified revenue sources, the impact of any one customer leaving will be minimized.


Tip 3: Ensure that your Equipment Is Well Maintained


For any construction company, the biggest asset and determiner of value is the equipment that is owned. The value of your equipment inventory can greatly maximize your business's value and, ultimately, the selling price too. So, to sell your business at its maximum value, it is very important to take all the steps necessary to ensure that the equipment is well maintained.


Equipment maintenance requires regular upkeep and scheduled maintenance checks. This maintenance can actually end up being a high cost for your business, but it is well worth it when the alternative is having to buy all new equipment because the old equipment was not maintained properly. Buying new equipment would be significantly higher than routine maintenance costs. Additionally, the cost of maintenance is worth the increased selling price you could ask for with a construction company that has good quality equipment versus a construction company without functioning equipment.


Due to the nature of construction companies, the equipment owned by the company is invaluable, and the upkeep and maintenance of this equipment should be one of the top priorities.


Tip 4: Get Your Finances and Financial Records in Order


When you go on to sell your construction business, any and all prospective buyers will want to take a look at your financial history in order to gauge the success of the business. So, it would be a good idea to get ahead of this and get your finances and financial records in order. Your tax records and financial statements from the last three to five years should be available for prospective buyers, especially when the time comes for due diligence before the sale.


If your financial records are not in order, now is the time to bring in accounting professionals to fix any errors. In the construction industry, showing your cash flows and revenue stream to buyers is essential if you want to make a successful sale.


Tip 5: Strengthen Your Executive and Management Teams


As the owner of a construction business looking to sell, you need to take a step back and assess the role you play in the business. Suppose you are the one that makes a majority of the executive decisions and handles most of your customers' contracts. In that case, a prospective buyer might not have too much confidence in your business's ability to stay afloat once you leave.


In order to avoid this, it is important to strengthen your executive and management teams. The prospective buyers should be able to see a team that is fully capable of running the business when you yourself aren’t there. This way, the buyer also gets the advantage of not having to bring in a whole new executive and management team once the sale takes place, and therefore increases a buyer’s confidence in your business.


Additionally, well-trained and competent employees are more likely to be kept on by the new buyer instead of being let go. This benefits your existing employees and can create more goodwill once the sale has been completed.


Tip 6: Find Ways to Stand Out from Competing Firms


Given that the construction industry is a highly competitive one, there are likely tens of businesses to compete within your area alone. As such, one of the best ways to maximize the value of your business is by making it stand out from competing firms. There are a number of ways you can go about doing this. You can launch a new product, offer promotional deals to bring in new customers, work on increasing your online presence or offer more services to break into different markets in the construction industry.


In order to truly stand out from your competitors, it is important to take a closer look at the other construction businesses in your area. What is it that these businesses are lacking? What gaps are there in the services being provided? Once you have the answers to these questions, you can try to fill in those gaps.


Tip 7: Build A Strong Online Presence


Another way to maximize your construction business's value and gain more customers and revenue is by building a strong online presence. As we mentioned in the previous tip, a strong online presence is a way to make your business stand out from the competition.

You can start this by creating a website if you don't already have one or optimizing an existing one. Be sure to put up positive customer reviews and testimonies for other potential customers to see, and outline all of the services you provide in detail. By having a stronger online presence, you can tap into a previously untapped customer base that relies on the internet to find out information rather than traditional forms of advertising.


Overall, a strong online presence can help you gain your potential customers’ confidence and expand your reach to a wider customer base. This will help you stand out from your competitors and also diversify your revenue sources.


Tip 8: Develop A Strong Growth Strategy


Don’t underestimate the importance of a strong growth strategy for the business’s future. Not only would it be ideal for achieving growth and maximizing your business's value before you sell it, but you should also have a growth strategy planned out for once the business changes hands. Many prospective buyers might appreciate knowing that your business is headed in a certain direction, and they can continue to follow your strategy even after the sale takes place. This is especially beneficial if you have a certain goal for your business and would like to find the right buyers to honor that goal.


If you don’t have any specific growth strategy in place currently, it’s never too late to start developing one. You can get in touch with a business advisory firm – such as N3 Business Advisors – to help you develop a strong growth strategy. That way, you can continue to grow your business and maximize its value until it is the right time to sell it.


The Bottom Line


When selling your construction business, you may think it is a waste of time, effort, and money to try and improve the business right before a sale. As we have outlined above, maximizing your business’s value before selling it can actually help you make a more successful and profitable sale.


So, if you are planning on selling your construction business in the near future, you can greatly benefit from following some of the tips we have mentioned above. You should pay close attention to the market and whether or not it is the right time to sell, try and expand your customer base and revenue sources, make your business stand out from the competition, get all of your equipment and finances in order, and strengthen your executive team and develop a strong growth strategy for the future of your business.


Hopefully, once you have done all of the above, you will be able to find more prospective buyers whose values align with yours and who will be willing to buy your business for what it is worth.


N3 Business Advisors - Construction Industry Mergers & Acquisition Advisors


If you are looking for a team of experienced and professional business advisors to help you maximize your business’s value before selling it, N3 Business Advisors can help you in that regard. Whether you need help with company growth, preparing your business for sale, valuing your existing construction company, acquiring, merging, or any other goal, we have a qualified and diverse team that is ready to help. With over 30 years of experience in the industry, our team of lawyers, valuation experts, financial and business advisors, and other professionals can help you cover all the bases.


You can get in touch with N3 Business Advisors now to schedule a confidential consultation. Visit our website for more information, or call us at 647 967 4222. You're just one step away from getting your construction company to where you want it to be! We are based in Ontario, and our office is at 55 Village Centre Place,​ Suite 200, Mississauga, ON L4Z 1V9.

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