What is Business Exit Planning?
Business Exit Planning involves preparing yourself and your business for a future sale, retirement or transfer of ownership.
You assess your exit options, review your company’s commercial and financial position and identify the work required before approaching potential purchasers or transferring control.
For construction businesses, you also need to consider current projects, contractual liabilities, future work, management capability and the financial information that a purchaser will want to review.
How do you prepare a construction business for sale?
You need to understand your company’s current financial performance and the commitments a purchaser may inherit.
Construction businesses can have substantial revenue while carrying significant project risks, working capital requirements and unresolved commercial issues.
A purchaser will want to understand how your company earns its profit, whether your current projects are performing and how you manage the risks attached to your contracts.
We help you assess your company’s sale readiness and identify matters you should address before entering negotiations.
Financial performance and profitability
You need reliable financial information that explains your company’s earnings, cash flow and financial commitments.
Your annual accounts may not provide enough detail about individual project performance, cost-to-complete forecasts or outstanding claims.
We can assist you with reviewing:
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Management accounts and financial reporting
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Project profitability and margins
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Work in Progress and cost-to-complete reporting
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Cash flow forecasts and working capital requirements
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Overhead costs and operating expenses
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Outstanding liabilities and commercial commitments
Shannon Drew, Management Accountant, Virtual CFO and Business Adviser, can assist with the financial analysis and reporting required.
Where you need to improve your existing systems, our Construction Financial Management Services provide further support.
Construction Contracts and project commitments
Your company may have substantial contractual obligations when you decide to sell.
You need to identify current projects, outstanding claims, disputed Variations, performance security, warranty obligations and other commitments that may affect the proposed transaction.
A purchaser may also want to understand whether your contracts permit a change in ownership or control without further approvals.
Rachelle Hare can assist with the commercial assessment of your contract portfolio and provide separately scoped Legal Services where you require legal advice about particular contractual or transaction issues.
Management capability and owner dependency
You may be responsible for major tender decisions, commercial negotiations, client relationships and management oversight.
A purchaser will want to understand how your company will continue operating after you leave.
You should assess which responsibilities your managers already perform and where they still depend on your approval or experience.
We help you review management responsibilities, reporting arrangements and the changes needed to prepare your company for a new owner.
Business structure and shareholder arrangements
Your existing company, trust and shareholder arrangements may affect how you can sell or transfer your ownership interests.
You should establish whether you intend to sell shares, transfer business assets or consider another transaction structure.
We can assist with the commercial and structural assessment of your options through our Construction Business Structuring Services.
You should obtain appropriate tax and transaction advice before committing to a particular structure.
What will buyers examine during due diligence?
Potential purchasers will usually want to verify the financial, commercial and operational information you provide about your company.
Depending on the proposed transaction, they may request:
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Financial statements and management accounts
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Current Construction Contracts and project schedules
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Project profitability and Work in Progress reports
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Details of outstanding claims and disputes
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Employee and management information
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Shareholder and corporate records
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Information about business assets and liabilities
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Customer and supplier arrangements
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Insurance, licensing and compliance information
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Financial forecasts and information about future work
You should identify missing records and unresolved issues before a purchaser begins detailed due diligence.
We can assist you with reviewing your company’s readiness and coordinating the preparation of relevant commercial information.
Should you improve your business before selling?
You may benefit from improving your business before approaching potential purchasers.
For example, you may need to improve project reporting, reduce dependence on a small number of customers or strengthen your management team.
You may also need to resolve outstanding commercial issues or establish more reliable financial forecasts.
We help you assess the cost, timing and likely commercial value of proposed improvements so you can decide which work is worthwhile before a sale.
Where your business needs wider operational or management improvements, our Construction Business Improvement Services can assist.
Business Exit Planning and Business Succession Planning
You may want to sell your company to an external purchaser, transfer ownership to family members or arrange for your managers to acquire the business.
Your preferred option will affect how you prepare.
If you intend to transfer ownership within your family or management team, you may also need Business Succession Planning to address future leadership, control and management responsibilities.
If you intend to sell externally, you will usually need to concentrate on sale readiness, financial information, commercial risks and the requirements of potential purchasers.
How we help with Business Exit Planning
We begin by understanding your objectives, preferred timing and current business arrangements.
We then help you assess the matters relevant to your proposed exit, including financial performance, commercial commitments, management capability and ownership arrangements.
Depending on your requirements, we can assist with a defined sale readiness review, recommendations for business improvements and preparation for buyer due diligence.
We can also work with your Accountant, tax adviser, business valuer and other transaction professionals.
FAQs About Business Exit Planning Brisbane
1. How far in advance should I plan to sell my construction business?
You should begin Business Exit Planning while you have time to review your company’s financial information, management capability and commercial commitments.
If you need to improve reporting, resolve significant issues or reduce your company’s dependence on you, you may need substantial preparation before approaching buyers.
2. What affects the value of my construction business?
Potential purchasers may consider your company’s earnings, cash flow, current projects, contractual risks, management capability, customer concentration and future work.
You should obtain an independent valuation from an appropriately qualified professional when you need a formal assessment of your company’s value.
3. Can I sell my construction business while projects are underway?
You can consider selling your construction business while you have active projects.
You need to assess your contractual commitments, transaction structure, outstanding liabilities and any approvals or consents required before proceeding.
4. Do I need Business Exit Planning if I already have a buyer?
You may still need Business Exit Planning if someone has offered to buy your business.
We can help you assess your company’s commercial readiness, identify issues that require attention and coordinate the information needed for negotiations and due diligence.
5. Can you help me prepare my construction business for sale?
We can assist with reviewing your company’s financial and commercial position, management capability, business structure and sale readiness.
We can also coordinate specialist valuation, tax and transaction advice where required.
Discuss your Business Exit Planning requirements
If you are considering selling your construction business or preparing to retire, we can help you assess your options and identify what you need to do before proceeding.
Book a 60-minute Strategy Session for $650 + GST with Rachelle or Shannon, or $750 + GST with both.
Or contact Blaze Business & Legal to discuss your proposed exit.
