Ownership Transition - Key Seller Risks

Whether you are buying a construction business or selling one, it is important to understand the perspectives of the other party, including what their major risks are.

D. Brown Management Profile Picture
Share

In general, each party will tend to discount the risks and concerns of the other and that impacts the ability to create the best deal.  

Succession: Key Ownership Transition Risks the Sellers Side.

The biggest seller risks are:

  • Doing nothing or moving too slowly is the biggest danger given today’s changing construction industry and shortage of executive level talent
  • If not done with the right levels of timing, education, and communication, the process is likely to demoralize the team and impact performance, and therefore, value.  
  • Following any internal demoralization, the ability to attract great talent will become impacted.  
  • Banks and sureties will start to look at their risks very differently if the business does not have a clear succession plan, especially as the owner(s) get into their late 50’s.  
  • If it is an asset sale, the current owner(s) must be able to roughly quantify the existing risks and how to mitigate them. 
  • Valuing and selling the business for too little, therefore not capturing the value they have created during their period of ownership. 
  • Since most sellers will be financing or earning out a portion of the sell price, they have significant risk around whether the business will be able to continue to generate the cash flow required.  

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....

The Stress-Performance Curve
Achieving maximum performance from yourself and your team requires understanding the stress-performance curve as it relates both to individuals and types of work.
How Effectively Do You Ask for Help?
Effectively asking for help is one of the most important skills you can build for your own development. Developing a team culture where everyone is comfortable asking for help and helping others is a critical leadership skill.
Issue 7 of 9: Growth Strategy
Construction Ownership Transition Issue 7 of 9: In general, with all other key factors including cash flow, profitability, and customer satisfaction being equal, a contractor that is growing will be able to better handle an ownership transition.