Been in the remodeling and electrical business about 20 years. Have great interest in building my business for the next 20 plus years to put it into shape so that I can sell it when I am retirement age.
What will make it the most valuable?
What sorts of terms are you familiar with to make the deal happen? $X down and a percentage per year?
How can I stay involved in the business to assure the next person is successful?
Anyone have experience with buying or selling a business?
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Replies
Long standing method for a professional business (white collar) i.e. accounting, business services, that is mostly labor oriented is sales price equal to 1 to 1.5 years of gross receipts.
Since many trades that are maybe under 10 employees are super-dependent on the skills and motiviation of one or two people, and that/those individual talents and reputation, unfortunately, the value of that type of business is typically limited to value of inventories and equipment, plus some (small) amount of 'goodwill'.
Now, a contracting/remodel firm that does commercial work totally, and not residential, is a different animal, as long as it has a consistent (10+year) track record. Investors would look more at the management aspects of the business, and it's potential via the company reputation as far as establishing value (which could be anywhere from 6 months to 4 years of gross income (gross receipts less cost of goods less direct expenses), plus business equipment and inventories).
If residential remodelling, your best bet will be to find a parter to bring in, and slowly turn the business voer to him, keeping some percentage of ownership, eventually as a "silent" partner. But remember if he gets to be doing 100% of the work, he will be getting the lions share of the income, unless you have a substantial crew or use subcontract labor.
Over the next 20 years, I'd try and expand the business, don't try to be a 1 or 2 man operation. Bring in a partner, tailoring yourself to gradually become a managing partner, not a field laborer. If you want to build value, do it on a bigger level. What kind of electrical work? Unlimited license? I'd think of expanding that aspect of your business, and lean more to commercial work, and new home wiring, not service calls on existing as your primary source of business. The electrical business will be easier to value when it comes time to sell.
Sorry for the random, disjointed post, but I wrote it as it came to me.