I’m Considering Selling My Restoration Business, What Are My Options?

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Historically there have been two choices: hire a Broker or sell it yourself. Now there is a third option combining the best of both, it’s called BrokerAssist℠.

As Featured in June 2018 Restoration & Remediation (R&R) Magazine

One of many lessons learned after almost 20 years in the industry, is the need for crystal clear communication. So, here are some facts to consider.

Three Choices

When first considering a sale, you have 3 initial choices:

1.)  Do nothing, letting death cover the details.

2.)  Wait until the last minute, then hope for the best.

3.)  Prepare for the sale, planning for the best.

Regardless of your choices or path, fast forward- you’re now ready to exit. Now what?

First, you’re in need of answers. Here are answers to 7 questions asked from virtually every business owner:

What is my business worth?

No blanket answer of course, as every business is different. However, the real questions should be,  “Beyond ‘worth’, what happens to cash, AR’s, AP’s, WIP and the long-term debt?”

Business ‘worth’ is a necessary number, but far more meaningful if it’s clarified. You ultimately want to know what you get to keep after closing, and all taxes/expenses have been paid.

When should I sell?

It’s easy enough to determine most variables surrounding a sale. However, timing is always key. This answer is intimately personal to you and your family, including discussions surrounding: net worth, health, knowing who you are without your business, energy levels, outside hobbies, children/heirs in place to take over, and more.

In a broad sense, business values are like stocks- when times and trends are good, it’s more desirable and value goes up. When times are bad, risk goes up, desire and price decline.

How long does it take to sell my business?

Most restoration related companies will take 8 – 14 months to sell. Some a bit longer depending on size, location, and business related details. For your sanity, plan on 10 – 14 months, anything sooner is a bonus.

How do I keep it confidential from employees and the industry?

Simply, all communication is 100% confidential between you and the potential buyer. (It’s easier than you think.) Many sales are 100% confidential to all employees.

That said, companies may have a handful of ‘key’ employees a buyer and seller want to protect with Key Employee Contracts. After signing Confidentiality Agreements, these employees are made aware of the sale just prior to closing.

Can I be cashed-out? Or, do I need to carry some paper? 

In virtually every instance expect to carry some paper. The question then becomes ‘How much and when is it paid?’ Many disaster restoration sales below a $5M transaction price are backed by the SBA, expecting between 20 – 30% down, split between the buyer and seller.

For example, if the SBA requires 30%, the buyer would need a 15% down payment, and you’d carry a 15% Seller Carry Back Note (SCBN). Thus, at closing you would receive the bank’s 70% loan, plus the buyer’s 15% down-payment, or 85% of the sales price. Typically, you would also receive your cash and AR’s, less your AP and long-term liabilities. It is important to note- the terms of your SCBN needs to match the terms of the bank’s loan; currently 6.75 – 7.25% interest, at either 3, 5, 7 or 10 years, depending on the dollar amount.

How do I handle my premise lease?   

One of 3 things commonly occur with the lease:

1.)  It can be assumed by the buyer, as is. This is rare as lenders need the lease term (or options) in place for the duration of the buyer’s loan.

2.)  It can be assumed with negotiated options added to the current term, satisfying the lender’s requirements (most common).

3.)  The buyer and landlord entirely renegotiate lease prior to closing.

How long will I need to stay and train a new buyer?

Depending on the experience of the buyer, sellers can expect to train anywhere between 4-6 weeks (smaller companies), up to 6-8 months (larger companies). Occasionally this can stretch to 9-12 months. (For these longer periods, some compensation is typically included.)

Three Sales Options (2 Good Ones)

When the decision is made to sell, historically there have been two choices: hire a Broker/Advisor, or sell it yourself. The first can be expensive; the latter is thrifty, but terrifying.

However, there is a third option combining the best of both, it’s called BrokerAssist℠. This choice offers the constant advice, direction and assistance of a broker/advisor throughout the entire process. It requires a bit more involvement from you (a couple hours a week), but at a fraction of the cost. Saving are 75% – 85% of normal fees, equaling tens or hundreds of thousands of dollars.

Your confidence and peace of mind will remain strong knowing details are handled professionally, helping ensure a successful sale and exit.

Ill-Advised Strategies

History indicates a few sellers are intimidated by details surrounding a sale. Though unnecessary, apprehension follows, then avoidance. The result can be ill-informed decisions such as:

·      Waiting and hoping for the right buyer to just walk thru the front door.

·      ‘Putting the word out’ through industry channels that you’re ‘thinking of doing something different’.

·      Approach a competitor without first understanding the pros and cons.

With minimal effort and resources, ill-informed decisions can easily be avoided.

Recap

It’s a fact, the remediation/restoration industry is extremely complex and demanding. You’ve already mastered thousands of hurdles and details. You’ve done the hard part! With so much at stake, a few additional questions and details surrounding your best exit will not be as intimidating as you might think.