Episode
242
Tue, 09 Apr 2024 08:00:00 +0000
So you want to sell your contracting business but are just not sure HOW to do it.
If you’d like a fat payday - you need to set up value beyond your shop.
That way you can get paid MORE than your tools, trucks, and property are worth.
So, I invited Jeff Domenick to talk about building up to a hefty exit sum.
With roots in landscaping since the '80s, Jeff has an impressive track record in acquisitions. He's seen it from both sides of the table – being acquired and acquiring others.
By now Jeff’s been part of a whopping 25 deals, including 13 at Site One and 8 at KeyServ - a landscaping services company with over 3,000 residential and commercial customers.
So, when it comes to selling your contracting business, Jeff's got the inside scoop on what works and what doesn't.
Here’s the mindset shift you need to make, so you can sell your business:
YOU can't be the business.
Because if you're the heart and soul of your company, what happens when you're out of the picture?
So, you need a solid number two.
Someone who can keep things running smoothly even if you're not there.
Of course, no “unicorn” will ever replace you.
That’s why you need systems so anyone can step in and run things just as smoothly as you can.
That means having a management team in place…
And making decisions based on data rather than intuition.
And when it comes to problem-solving, get used to trusting the folks closest to the action.
Don’t insert yourself into every decision.
Instead of telling them what to do ask them to come up with their own solutions.
Jeff says his job is asking a lot of questions, poking holes in their ideas, consulting them, and ultimately letting them decide what to do about a problem.
After all, your employees are the ones in the trenches, so they often have the best insights...
And remember - at the end of the day, potential buyers aren't interested in your skills.
They don’t care.
They want a well-oiled machine they can step into without missing a beat.
That's why having systems in place is so important.
So, build your business like it's meant to be sold – even if you're not planning to sell anytime soon.
It's the smart move for long-term success anyway.
Creating a common language in your contracting business is crucial for making it sellable… but what does it mean in the boots-on-the-ground sense?
Picture a football team.
You've got defensive players and offensive players.
If everyone has their own lingo it's chaos.
Similarly, your company has different departments that need to work in harmony.
The fix?
Get everyone on the same page by using a unified system.
There are plenty of pre-made systems you can use like The Traction Entrepreneurial Operating System (EOS).
The point is to get explicit about speaking the same language and syncing up schedules.
That means meetings are essential.
Set a regular time, like every Monday, to hash out issues and align goals.
Every Monday, Jeff has his leadership meeting, where they tackle any unresolved issues and set the tone for the week ahead.
By the end of Monday, they’ve already addressed any major hurdles, so their team has a clear direction for the rest of the week.
When Jeff looks at companies to acquire he focuses on three key aspects.
First and foremost - the people involved.
Jeff believes that a successful acquisition is akin to a marriage.
So, he evaluates whether the seller is someone he wants to partner with for the long haul.
Chemistry and mutual respect are essential for success.
Next, Jeff delves into understanding the seller's post-exit goals.
Unlike some models that simply acquire and replace leadership, KeyServ prefers sellers to remain involved.
However, the seller’s role shifts to focus on areas where they excel.
KeyServ takes on tasks they may struggle with or prefer to delegate, such as finance, HR, or marketing.
Finally, Jeff looks at the profitability of the business.
KeyServ targets well-run, profitable companies rather than fixer-uppers.
However, Jeff recognizes that every business has growth opportunities.
How to deal with bottlenecks and are they a dealbreaker when selling our business?
No company is perfect.
When it comes to dealing with bottlenecks, Jeff's approach is straightforward:
They try not to be the bottleneck themselves.
Instead, they ask the sellers to deal with issues.
The owners are seasoned entrepreneurs with creative problem-solving skills, but they sometimes may be a bit blind to bottlenecks in their businesses.
So by exposing the weak spots, they often get solved quickly.
Other times Key Serve offers innovative solutions to bottlenecks because they’ve seen them work for other companies.
How willing the sellers are to solve the bottlenecks, comes down to values, so it’s another thing buyers pay attention to.
For example, Jeff’s company has four key values: taking the harder right, enjoying what they do, having an impact, and solving problems.
During their quarterly meetings, Jeff spends 30 minutes reinforcing these values with his team.
Jeff says his values are their secret sauce, setting them apart from others in the industry.
So, your values also play a significant role in the overall success and exit potential of our business.
They make your business more appealing and valuable to potential investors or buyers.
So if your company has a set of values that are actually practiced, it sends a signal to buyers that your company will be able to overcome challenges.
At the end of the day the REAL value of your business doesn’t come down to your tools and equipment. The enterprise value gets built by the system, so even if everything but your organization gets lost you can always rebuild. These are things we can’t touch - but can learn.
So if you’d like to hear a more in-depth discussion on how to sell your contracting business, tune in for the full episode of The Profit Toolbelt with Jeff Domenick.
Show Notes:
Links and Resource:
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