Starfish Coaching · Selling Your Business
A planning checklist for design and construction owners, anywhere
The date that decides your price is not the day you want to be out. It is the day a buyer first reads your numbers, and a buyer reads years, not months. So the question that matters is how many of your financial years you have left to change what they will see.
Start while there are still financial year-ends left to change what a buyer will read. That is earlier than most owners expect, because a buyer looks at several years of financial statements and judges the direction as much as the level. Changes made just before a sale look like window dressing. Changes made earlier look like how the company operates.
No single number of years fits every business, because it depends on what is wrong and how big the gap is. What can be said for certain is the short end. 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. The rest of this page is a checklist for working out how much time your own business needs.
Count financial year-ends, not calendar years.
Five steps, each with a number of your own to write down. Together they tell you how much runway you have, in the unit a buyer actually reads it in.
A rough date is enough, and it can be a month and a year. If you do not have one, write down the earliest date you would be happy with.
Your number: that date.
Selling takes time: preparing the documents, finding and screening buyers, negotiating, and then the buyer's checking, known as due diligence. Ask more than one broker how long their recent sales took from listing to closing, and how much of that was due diligence. Use their answers and not a rule of thumb.
Your number: the months from listing to closing, taken from the brokers' recent deals.
Clean books, documented add-backs, a manager who makes decisions and written processes do not appear overnight. Make an honest list of the fixes and estimate how long each one takes. The Exit Readiness Assessment sequences the work against your date, and you can make a first version yourself from what buyers look for.
Your number: the date by which the business should be ready to list.
Each financial year-end between now and the day you list is one more statement that a buyer will read. Any improvement you make has to show up in them.
Your number: how many year-ends fall before you list.
A broader client base shows in revenue by client. Better job costing shows in margin by job. If you cannot say what a statement will show, the change is not yet a plan.
Your number: for each year-end, the one figure that should have moved.
Once you have your count, compare your position with the two columns below. They do not give a safe number of years. They show what each position can and cannot change.
| Six months or less | More than six months | |
|---|---|---|
| What a buyer will read | The history that already exists. Nothing you change now will show as a trend. | That history, plus every year-end between now and listing. The more of them a change runs through, the more it reads as how the company operates. |
| Still worth doing | Clean the books, document each add-back, check that contracts, licences and key agreements can transfer, work out the net figure you would take home and choose your advisers. None of it needs a trend. | All of that, and the work that does need a trend: a manager who makes decisions, a wider spread of clients and written processes that hold quality without you. |
| The honest answer | Most of the value-building window has closed. Go to market with what you have, priced honestly, or decide whether waiting is worth it. | How much of the gap can close depends on how big it is. A written assessment can say what is realistic in the time you have. |
| First step | Take the free Exit Readiness Scorecard for a first read, and book the assessment if you want it in writing. | Book the Exit Readiness Assessment, which sequences the work against your date. |
Sometimes the right answer is to wait, and sometimes it is not. Put both sides in writing so that the decision is made on figures and not on how tired you are.
Your number: to put a figure on the first side, take the points of multiple you think a year of work could add and multiply them by your yearly earnings. The assessment estimates what each gap is costing you in multiple, which is where that figure comes from. Set it against what another year costs you in your own time and in the risk you carry, and compare the result with the net figure you worked out in what is my construction company worth.
For many owners the date is not chosen. Something happens, and the plan has to be made under pressure. These are the usual causes, and each is worth asking about while nothing is forcing your hand.
Most owners find out the business isn't sellable at the worst possible moment, when they're finally ready to leave. The point of planning early is to find out while there is still time to fix it.
This is a sensible order, because the early items need no trend and the later ones need time. Each links to the page that goes deeper.
What is my construction company worth shows how to work out the net figure you need and the multiple it implies.
The free Exit Readiness Scorecard gives you a first read. The assessment maps every function that runs through you.
Document the add-backs, get job costing by project, and report on the same basis every month. This needs no trend, so it can start straight away.
A manager who makes the decisions and has the authority to do it. See a business that runs without you.
Reduce your dependence on any one client, add repeat work where you can, and put the way the work is done into processes that someone new could follow.
Selling to a partner and selling on the market are priced on different logic, and the choice shapes who needs to be ready.
A lawyer and an accountant who have handled sales of businesses, before you list, and a broker once you know your net figure. The mistakes that cost you at sale shows what happens when this is left late.
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.
As early as you can, and in practice while there are still financial year-ends left to change what a buyer will read. Buyers look at several years of statements, so the changes that matter most are the ones that have time to show up as a trend. Work backward from the date you want to be out, subtract the time the sale will take and the time the business needs to be ready, and count the year-ends that remain.
It varies with the size and trade of the business, the market and how ready the business is, so no single figure is honest. Ask more than one broker how long their recent sales took from listing to closing, and how much of that was the buyer's checking, then add the time you need to get the business ready to list.
For some things, yes. Anything that has to show as a trend in the financial statements cannot be created in a few months, and changes made just before a sale look like window dressing. If you are planning to exit in six months, most of the value-building window has closed. Other things still help, such as cleaner books, documented add-backs, contracts that can transfer and an honest figure for what you would take home.
Buyers read several years, so one strong year after weaker ones reads as an event and not a trend. A better year helps most when it is the result of something that will continue, such as a manager who now runs the work, and it helps least when it is a one-off. Weigh it against what waiting costs: another year of your time and another year of risk.
Then the aim is to make the business as ready as it can be in the time available, and to have the right people in place. Document the add-backs, tidy the books, and make sure that someone besides you can run the work and hold the key relationships. Take legal and tax advice early, because a forced timetable narrows your options. Preparing before you need to is what makes a forced sale easier to survive.
Your accountant and lawyer come first, because tax and structure shape everything else and are hard to change after you list. A broker is most useful once you know the net figure you need and the business is ready to be shown. A broker who finds the business is not ready may tell you so, which is useful to hear before you list and painful to hear during a sale.
Plan for readiness and not for a date. Every exit route, whether retirement, succession or an outright sale, is priced off the same thing, which is how well the business runs without you. Build that first and choose the route later. The free Exit Readiness Scorecard shows how much of it is already in place.
Tell Eric the date you want to be out and whether a broker is already involved. Those two answers change the conversation more than anything else. 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. 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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