Contractor Exit Strategy 2 of 6: Pass Down to Family

This is a very common strategy for contractors and is successful for those with interested family member(s) who are effectively working in leadership roles.

D. Brown Management Profile Picture
Share
Succession: Exit Strategy 2 of 6 - Pass-Down to Family.

The valuation focus for these deals is on tax efficiency and risk management by tightly integrating the transaction with estate planning. The upside is that there are typically solid tax savings with this type of deal.

The typical downsides of these deal structures include:

  • Deal structures that potentially make adding non-family members as equity partners difficult. 
  • The deal structure keeping the incoming owners from feeling the full weight of their capital-at-risk that would typically be felt by a non-family buyer. This is a very underestimated dynamic that often negatively impacts professional development and business performance significantly. 

Other common risks include:

  • Key non-family management team members leaving if they feel they are being passed up, which is why there is a huge burden for family members to be effectively performing in leadership roles prior to succession.
  • Family members being pushed into roles they don’t want to please their parents, which negatively impacts them personally, the business performance, and family dynamics.  
  • Toxic team dynamics created by unclear boundaries between family and business. 

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Incentive Compensation for Contractors - Audience Question: Keep Why Top Of Mind?
Incentive programs can be as seemingly small and informal as a handshake from a manager for a job well done up to very large cash compensation.
Production Tracking - Having Fun and Winning
Contractors will get the most out of their teams by building a culture around the fun of the construction game and how fun playing a game is and how good winning feels. How fun are you making your projects?
9 Ownership Transition Issues Specific to Contractors
All businesses face challenges with an ownership transition. There are nine interrelated issues that heavily impact contractors.