5 ways to get your construction business ready for sale

Do you have an exit plan for your business? 

Have you ever considered whether you will sell your business at some point in the future? 

As business owners, you aim to grow your business and to generate more wealth for yourself. But have you ever considered selling your business? 

If you have, then the following points below will help position your business in the best way possible for a potential sale: 

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Systems and Processes 

What systems does your business have? Having an effective CRM or ERP, a purchase order system or stock management software’s demonstrate the level of control that you have within your business, allowing the business to scale up and grow, without the level of control being risked. 

Keeping your accounts in order

Having tidy books and accounts is another way of making your business more attractive sale proposition. When a potential buyer looks at your company, they will carry out ”due diligence,” which will include looking through your accounts. 

Ensuring that you have up to date accounts and they provide a fair representation of the company’s performance is vitally important to potential buyers. 

Strong company reserves

Many business owners will take a dividend from the company, from the profits that it has made. What isn’t declared as a dividend, remains in the company reserves. When a potential buyer looks at your company, they will pay attention to the company reserves, and will use this as a basis of valuing the company (a good rule of thumb is to multiply your company reserves by 5 to give you an idea of your company’s sale price.)

Striking a balance between taking a dividend from the profits and rewarding yourself for the company’s performance, with keeping the reserves at a healthy level within the company is something which business owners need to take into account if they are considering a future sale. 

Client List

If your company has a good name, or is very reputable in the industry in which you operate, then potential buyers will take this into consideration when buying the company. We sometimes call this ”goodwill,” which is an intangible asset as we cannot necessarily quantify the value of the company’s goodwill.

Having a strong portfolio of clients, or, better still, being on OJEU frameworks or housing association tender lists, demonstrates that there is a steady stream of good quality of work coming in providing future turnover for the company. 

Post Deal Participation

If sell your company and have agreed a price, in many cases you as the owner are required to stay on for a period of time, either in an active role or as a member of the newly formed board. 

One thing to consider when you are looking to sell your business, is your role after the sale. Deals can often be structured over a few years, with payments being made in stages on completion of certain milestones. 

During this period, you must ensure that its business as usual and you continue to be involved with the business and help achieve its objectives. 

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It may not be something that many business owners have on their radar, but similar to having a pension plan for retirement, having a plan in the event of a potential sale is also something which you must consider for the long term. 

There are many different tax reliefs on the sale of your company, most notably, Entrepreneurs Relief, which make the prospect of selling your company very attractive. 

In the past few years, many SME construction companies have been bought out by larger construction companies, retaining the original companies name and moving into the new group. 

Your company can make itself an attractive proposition, provided that you have the correct procedures in place if the time ever comes!