Selling your plumbing company can be one of the hardest things in the world to do. You have spent your life building up your company, making it into a profitable venture and now, it is time to sell. Selling your plumbing company can be a complex, stressful and emotional process; however, there are some steps you can take to ensure potential buyers are giving you the best valuation for your business. As a business broker, I have helped plumbing companies sell their business using a few steps to ensure their business is being valued properly.
Maintain employees that can do the job without you
One of the most attractive qualities to prospective buyers is having a business with employees that can do the job without you. A plumbing company with an owner that needs to be involved in every job will signal to any interested buyers that they will spend less time managing the business and will either have to work a job to keep things running or spend time and resources finding someone that can do the job.
Most buyers purchase a business because they want to manage the business and not be on the job providing services. Maintain a staff that can ensure the company runs smoothly after you leave. The key positions you should maintain are lead estimators, service managers, project managers and office managers.
Having depth of management means you have established a plumbing company with a strong infrastructure, making your plumbing company more attractive to any buyer. It is also extremely important you check that either the potential owner or someone on staff has their contractor’s license. The new owner legally can’t operate the business without the proper licensure.
Accumulate an assortment of clientele
When it comes to your client base, it is imperative that you diversify. A plumbing contractor with a number of different accounts shows the business is healthy with a long list of work. Diversity means having a variety of clientele. For example, a plumbing company with 300 jobs from 300 different clients is more diverse than one client contracting your company to work 300 properties.
A company with one big client is in jeopardy of losing all or most of their revenue stream if they lose that client. In contrast, a plumber with a diverse/low concentration client portfolio can absorb the hit of losing a client since they have other clients to work with.
Your business is a symbol of all your hard work and sacrifice, so it makes sense that you would place a high value on it. Working with a professional will help you navigate the difficult selling process.
Get your books in order
Nothing will make a potential buyer run away from your business quicker than messy financials. It is important that you have all your books in order before selling. This means making sure your QuickBook files, tax returns, payroll records, sales tax reports, bank statements, cost of goods and maintenance reports are neat and easy to verify.
Phil Wuollet, a managing member and CPA at Epstein Schenider, PLC, an accounting firm in Arizona, notes clean financial records will be a positive for any potential buyer.
“If your books are a mess, that is going to be a red flag for most buyers out there. So it’s really important you make sure your financial records are in order or work with an accountant to sort them out.” Wuollet says. “Clean books make it easier for the buyer’s CPA to verify your financials and shows that you run a tight ship.”
Your records should consist of clear profit and loss statements. It is also important to make sure all your accounts are set up to be billed on the first of the month and before services are provided. If you can put recurring on an auto-pay schedule that is a bonus as well. This only applies to plumbing companies that have recurring monthly clients.
Taking the time to ensure your financial records are in order will lead to better offers when it comes time to sell your plumbing company.
Show potential buyers you have a working fleet
It is vitally important for any plumbing company to have a fleet of vehicles that are well maintained. A functioning fleet allows your team to complete more jobs and make the company more money. Every fleet vehicle that doesn’t work is one less plumber getting to customers in a timely manner.
Get all your fleet vehicles in good working condition and show potential buyers that you have your fleet on a timely maintenance schedule. This means scheduling regular oil and fluid service in advance and finding a mechanic who will do vehicle maintenance after your business is closed for the day.
Maintain your fleet because the reality is a buyer is not going to be interested in your plumbing company if it comes with a five- to six-figure vehicle maintenance investment.
Keep customers happy
Selling your business does not mean you can neglect customer service, in fact, the perception of your clientele is even more important because you need to show potential buyers that your company has a good reputation. Politely ask customers if they will leave an online review if they think you did a good job.
A high volume of good reviews is going to put your plumbing company in a good light. If you have a large number of negative reviews, it is imperative you try and improve your processes and get some positive reviews. Selling your business when it has a reputation of subpar service will only hurt its valuation.
Be realistic about your company’s value
Most business owners think highly of their businesses, and plumbers are no different. This leads to many business owners having unrealistic and high expectations about the value of their company. Temper your expectations when it comes time to sell your company. Every business is different, and a large number of factors play into establishing the final selling price. No two businesses are the same even within the same industry, so the valuation one plumbing company received does not mean you will get the same value.
If you are working with a business broker, I would recommend setting up a plan that factors in a price range you would be willing to accept and the steps you can take to bring your business to that value.
Your business is a symbol of all your hard work and sacrifice, so it makes sense that you would place a high value on it. Working with a professional will help you navigate the difficult selling process and help you establish a great and realistic valuation for your business.