If you are the owner of a plumbing company, then you are probably like many other business owners.
You realize that you can’t work forever. In fact, it may be that you do not WANT to work forever despite enjoying what you do.
Even the most successful plumbers eventually get to the place where they are ready to hang up the wrench and do something different.
They may be burned out from the daily stresses of running a business, have physical or family issues that demand more of their time, or they simply want to move on to a new challenge.
However, for many owners, it’s difficult to find the time to sit down and map out a strategy for exiting the business. If you own a successful plumbing company, you probably don’t have a plan in place that will facilitate your goals of selling your business quickly, without a lot of hassles, while creating a lifetime stream of income from the proceeds.
A significant portion of your retirement planning is likely predicated on a successful sale of your business. Exiting a business is truly one of life’s most important transitions; a transition whose outcome can make or break your retirement future.
That’s why it is so important to create an action strategy that will help you avoid making mistakes that can result in you running out of money in retirement.
But, do you know exactly what it will take to create such a sale? When the time comes to leave will you become so frustrated, overwhelmed and desperate that you make poor decisions that will cost you lots of money?
Knowing the answers to these questions is important, especially if you are nearing retirement and more than ready to start the process of selling your business. You must seek solutions that promise a better, more financially lucrative and less stressful way of achieving your selling goals.
Plumbing company owners who want to sell in the 21st Century must seek alternative systems for selling a business that address some of the common mistakes owners make when they try to sell their companies.
I say “try” because more often than not, sellers wind up either not selling at all or having their businesses sit on the market for months, even years, before they find a qualified buyer. Even if they do manage to find a good buying prospect, there are currently so many businesses on the market that they may wind up getting a lot less money than anticipated.
9 of the most common business exit planning mistakes plumbers make and how to avoid them:
It is not uncommon for plumbing company owners to have no exit blueprint at all. They usually either haven’t given it much thought or they make assumptions about the future that may not be true.
1. Not planning at all
As the old saying goes, “it isn’t a plan until it’s written down.” For a succession plan to be effective and implementable, it MUST be written down and reviewed by all parties involved. A plan must be clear, concise, and free of ambiguities that could cause problems later.
A business exit plan, while being distinctly different than your estate plan, should nevertheless complement the estate plan and ensure that your overall retirement goals are being met.
That’s why it’s a good idea to have your CPA and/or estate planner review the blueprint and make suggestions that align with your goals and aspirations.
2. Making too many assumptions
In talking with business owners who are thinking about selling, it’s interesting to see how many of them are making assumptions about both the process of selling and the outcome of the sale. The skies in their world are a different color than reality when it comes to the futures of their businesses.
For example, some plumbing company owners take for granted that a son, daughter, granddaughter, grandson, or other relative will take over the business. They may have the idea that in the event their heirs don’t want it; a group of key employees will step in to buy out the company. Or, some savvy investment group will recognize how great the business really is and snap it up.
Another common assumption made by sellers is that the selling process is easy and quick -a handshake, a check and it’s done. They take it for granted that there will always be someone looking to buy at exactly the time they decide to sell, and that the price they are asking is correct and reasonable.
Unfortunately, none of these assumptions may wind up being true. Selling in the 21st century, with its economic flux and massively shifting demographics, is anything but simple. You can’t afford to predicate your plan on assumptions based in the past.
3.Not including your family in the planning process
“Stan” was the owner of an extremely successful commercial plumbing business.
His oldest son had worked alongside him for several years, proving himself especially adroit at bidding for large jobs, handling customer issues, and managing employees. Stan assumed, without ever really discussing it, that his son would take over from him when he decided to retire.
When he finally made that decision and approached his son, he was stunned to learn that Stan, Jr. had applied to a local business college and had no interest in taking over his dad’s company. Neither did the other kids, for that matter.
It’s easy to avoid this situation (and many others) by keeping your family apprised of your intentions from the very beginning in an honest, transparent manner.
You should work to achieve consensus on all important issues, including discovering whether or not a family member or spouse wants to take over, which family members will stay on as employees or move into management.
Business succession planning is definitely NOT something you want to keep secret from your loved ones.
Meet regularly with the family all during the planning process. Explain to them what your vision of the future looks like and what must occur in order for you to achieve this. By doing these things, you will go a long way toward avoiding the kinds of family feuds that can derail the sale of a business.
4. Poor organization and record keeping
The day before you decide to sell is not the time to discover that your records are a mess and that key documents are missing. If you intend to sell, or even if you want to keep the business in the family, organized records are essential.
Buyers will want to see your financial records for at least the past five years, perhaps even for the last ten years. They will want to know where to locate your marketing pieces, customer lists, employee records, leases, and everything else pertaining to the business that should be filed and easy to locate.
To ensure less stress when selling, start organizing your records right now.
Note: To get a free exit planning checklist detailing exactly what kinds of documents buyers will want to see when valuating your business visit the website listed at the end of this article.
5. Forgetting to give the business “curb appeal.”
A temptation for all business owners who realize they want to sell the business and retire is to stop putting any more money into the company that is necessary to keep the daily operations going.
They might stop repairing or replacing tools and machinery, not wash their fleet vehicles as much, or allow their building and landscaping to become shabby.
Owners might postpone doing things such as buying new uniforms and badges for employees or upgrading safety equipment and signage.
Just as a home that has had some basic TLC before going on the market usually sells for more money, it’s the same for a business that wants to attract more qualified buyers.
Buyers of businesses are in short supply and they know it. They can afford to be very picky when it comes to which businesses they decide to purchase.
A savvy plumbing company owner who wants to sell more quickly and for more money will invest a bit of time and money in ensuring that their company looks appealing and professional.
6. Not sustaining your succession planning focus
Many times plumbing company owners who, coming to terms with their need to plan their exits, throw themselves into succession planning with a vengeance.
They hold formal planning review meetings, talk to their families and seek out the counsel of their trusted advisors and mentors,
Then, for whatever reason, the succession planning process just dies on the vine. It goes nowhere, frustrating the owner as well as all his key employees and advisors.
Why does this happen? I believe it is because business owners tend to see succession planning as a “one of” event, rather than a vital part of the company’s business planning cycle.
Exit strategies risk gathering dust unless they are integrated into the overall plans of any business long before the time comes to leave
7. Failure to integrate your plan into your company culture
It’s absolutely true: Long-term business objectives can’t be reached without an effective succession plan. That plan has to be as integrated into your company culture as your mission statement or guarantees.
Having an exit plan in place will allow you to retain your best and brightest employees by allowing them to know that when ready to sell, they will still have a future with the company.
A company built around the idea that there will be an orderly succession that keeps the business intact and thriving is a company whose managers and key employees are not inclined to abandon.
8. Not understanding that selling takes time
In the same way you take time to plan before performing a complex plumbing project, you must allow an adequate amount of preparation when you get ready to sell your company. In fact, your success is directly related to how much quality time you put into the process.
You need to sit down and write down what your idea of a successful sale looks like. How do you want the sales process to play out? Walk through everything thing has to happen to make this a reality.
You need to be able to articulate what success in exiting your business looks like to you and share this vision with your key players, employees, and family members.
Yes, this will take a lot of time and thought. But it is definitely NOT something you want to rush through just to “get it over with.” After all, if you are like most people, you are only going to get one chance to sell your business and retire successfully. Take the time to do it the right way and avoid any mistakes that could wind up significantly impacting your lifestyle in retirement.
9. Not staying on top of the plan
Exiting your plumbing business, in many ways, is a lot more work than when you first started it. There are many moving parts and complex tasks that must be executed successfully in order to avoid failure.
You need to be sure that all of your employees and family members have bought into your vision and are performing their tasks as assigned.
You are going to need the support of all key players if you are going to break past the lousy 3% success rate for selling a business in the United States.
Check in often with those entrusted to help you exit, and hold each one accountable for completing their assigned tasks within a stated time frame.