Starfish Coaching · Selling Your Business
A checklist for design and construction owners, anywhere
Many of the costliest mistakes in a sale are made well before anyone makes an offer, by decisions that felt sensible at the time. This page lists ten of them, what each one does to the price or to what you keep, and the check that catches it while there is still time.
A sale loses money in two places. Some mistakes lower the price a buyer will offer, because they raise the risk the buyer sees. Others lower what you keep from that price, because of debts, fees, tax and terms you did not plan for. Each of the ten below is marked with the place it hits, and each comes with a check you can run on your own business.
Every cost can be turned into a figure of your own. A gap that takes points off the multiple costs you your yearly earnings times those points. Earnings that a buyer will not accept cost you the same amount times the multiple. A fee you did not negotiate costs you the fee. The Exit Readiness Assessment estimates the first, and the checks below show you how to find the others.
You're not selling a business. You're offering to sell a job.
What it costs: what you keep. When you are worn out, the instinct is to take the first reasonable offer, and you accept terms you would have refused with more energy.
The check: set your net figure and your walk-away line while you still have the energy to hold them. What is my construction company worth shows how.
What it costs: the price. A broker may tell you the business is not ready, or give you a number well below what you expected, because the business is you. Take you out of it and there is no proven process, no team that holds quality without you and no documented way of working a buyer could inherit.
The check: take the free Exit Readiness Scorecard and read the reasons behind your score, then read a business that runs without you.
What it costs: the price. Buyers look at financials over multiple years. Changes made just before a sale look like window dressing, and the buyer discounts them. If you are planning to exit in six months, most of the value-building window has closed.
The check: count the year-ends you have left before you list, as in when to start planning your exit.
What it costs: both. A figure from a rule of thumb, a friend's sale or a broker trying to win your listing is not a price that anyone has agreed to pay. Hold out for it and the right buyer may walk away. Accept a lower one and you may undersell.
The check: build your own from the seven numbers in what is my construction company worth, and ask any adviser who names a figure which sales it rests on.
What it costs: the price. Add-backs raise the earnings a buyer sees, and the price is those earnings times the multiple. Every dollar of add-back that a buyer rejects therefore costs you that dollar multiplied by the multiple, and the doubt can colour everything else they check.
The check: list each add-back with the invoice or record that proves it, and remove any you cannot support before the buyer does.
What it costs: the price. A buyer prices the chance of losing a client that large, and a contract that ends during the sale can reopen the price. The Exit Readiness Scorecard uses 15% of revenue as its test for any single client.
The check: work out your largest client's share of revenue and note when each large contract ends. If the share is high, start widening the base and adding repeat work.
What it costs: what you keep. A price that looks right on paper can leave you short once debts, fees, tax and deferred payments are taken off.
The check: do the sum before the first conversation: price, less debts, fees, tax and anything not paid at closing. The steps are in what is my construction company worth, and your accountant can estimate the tax.
What it costs: the price. Buyers ask whether your key people would stay through and after a sale. If the estimator or project manager who holds your best clients might leave, a buyer prices that.
The check: name the few people the business cannot lose, and find out what would keep them. Ask your lawyer how and when to approach them.
What it costs: what you keep, and sometimes the deal itself. Plenty of owners get the business ready and then find that they are not. A seller with second thoughts slows a sale and can end it.
The check: write down what you will do the day after the sale, and who you will be when you are not running the company. If you cannot, that is part of the work.
What it costs: what you keep. Structure and tax decisions are hard to change after an offer is made, and an adviser who has not handled the sale of a business may miss what a buyer's lawyer will not.
The check: speak to a lawyer and an accountant who have handled sales of businesses before you list, and ask each for their fee in writing. A broker comes in once you know your net figure. Selling to a partner or on the market covers how the route changes who you need.
Tick the ones you have already avoided, and put a figure against each one you have not. The sort below shows where each cost lands.
Most of these mistakes come from the same place, which is a business that depends on its owner. That is fixable. It just isn't fixable in ninety days. The sooner the work starts, the more of it shows in the numbers a buyer reads, and the list a buyer works from shows what they will look for.
The Exit Readiness Assessment goes through all eight components in writing. It tells you which of these mistakes apply to your business, what each gap is costing you in multiple, and in what order to fix them. If you are planning to exit in six months, most of the value-building window has closed, and Eric will tell you that rather than sell you a program.
This page is general information for owners of design and construction businesses. It is not legal, tax or financial advice. Rules differ by country and by how a sale is structured, so take advice from your own lawyer and accountant before you act.
Treating a business that depends on its owner as one that can be sold. Without the owner there is often no proven process, no team that holds quality without them and no documented way of working that a buyer could inherit, so the owner is offering to sell a job and not a business. It is fixable, but not in ninety days.
Some of them. Documenting add-backs, working out your net figure and choosing advisers can still be done. Anything that has to show as a trend in the financial statements cannot, and changes made just before a sale look like window dressing.
Not if it meets your net figure and your terms. The mistake is accepting because you are tired and not because the numbers work. Decide your net figure and your walk-away line before offers arrive, so that you have something to measure each one against.
There is no single answer, and the timing matters. Decide who needs to know and when, before anyone hears it from someone else, and take advice from your lawyer and your broker on confidentiality and on how to approach your key people. A buyer will want to know that they would stay.
What they cannot verify. Add-backs without documents, revenue that rests on one client, knowledge that lives in the owner's head and financials that are hard to read all raise the risk a buyer sees. Uncertainty is discounted, often more harshly than the gap itself deserves.
Work out your net figure, take the free Exit Readiness Scorecard to see how much of the business a buyer would inherit, and gather the documents a buyer will ask for. A broker can then tell you what is realistic against facts and not guesses.
There is no honest general figure, because it depends on your earnings and on how many points of multiple a gap takes off. You can calculate your own: your yearly earnings times the points a gap takes off, or the earnings a buyer rejects times the multiple. The Exit Readiness Assessment estimates what each gap is costing you in multiple.
The Exit Readiness Assessment is $2,500, credited in full against your first monthly payment if you join the Master Plan Program within one month. It shows which of these mistakes your business is exposed to, what each is costing you in multiple, and what to fix first. If you would rather talk first, talk it through with Eric.
Eric Lee · Starfish Coaching · 1937 Triumph St, Vancouver BC V5L 1K6
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