The construction industry in California is extremely healthy, and when it comes to home remodeling businesses, companies are thriving.
As the seasons change, people often want to make changes too, and that includes remodeling their home. However, you may also be craving change and feel like selling your home remodeling business.
Whatever your reason, whether you are ready to retire or simply prepared to move on to a new project, selling your home remodeling business in California presents some challenges.
However, by following a few simple tips and paying attention to key details, you can successfully sell your construction business in California.
Step One: Valuing Your Home Remodeling Business
The first key to selling your home remodeling business is knowing its worth. That means you need to start with a business valuation.
If you are early in the process, we offer you a complimentary tool here at Rogerson Business Services. It will guide you through the process of valuing your business, and at the same time, it will help you know what to expect when you are ready for an official business valuation. Many businesses undergo this process annually to help determine their growth year-over-year.
Once you are ready to list your business, it is essential to contact a business broker for an official business valuation. This valuation must be accurate. It will not only determine what a potential buyer is willing to pay for your business and expedite the due diligence process, but it will also provide a basis for a lender to fund the sale if your buyer requires financing.
Without knowing what your business is worth, it’s hard to move forward in the process of selling it.
Step Two: Assembling Your Team
One of the keys to selling your business located in California is that you must keep it running and growing during the sale process. But selling your business can itself be a part-time job. That is why you need a team to help you. There are a few key elements to this team.
- A Certified California-Based Business Broker: Your business broker is a member of your team who ensures every part of the sale proceeds smoothly. At Rogerson Business Brokers, one of our specializations is selling businesses in the construction industry just like yours.
- Your Accountant: While your business broker can help you understand the tax implications and financial impact selling your business will have, your accountant can get specific about your situation. It’s best to introduce them to your business broker so the two of them can communicate and work together to protect your interests. For many people, selling a business will be one of the most impactful transactions of their lives, and you must understand it before you even get started.
- Your Attorney: Just like the financial aspect of selling your home remodeling business, the legal aspect is equally important. Having your attorney review contracts and other documents will ensure that you are fully informed and comfortable with the entire process.
Your team is the key to your ability to focus on your business while they focus on the sale for you, particularly in areas such as finding a buyer and vetting them, which leads us to the next step.
Step Three: Finding a Qualified Buyer
In the state of California, there are numerous local and state certifications and requirements that a buyer must meet to operate a home remodeling business or any business in the construction industry. When looking for a qualified buyer, the ideal situation is that they already have the necessary licenses or have a clear path to obtaining them quickly.
If your buyer does not have a California General Contractor’s License, they will need to obtain one. This process can take time, even if they are certified in another state. If you plan to sell to this buyer, please note that the process may take longer.
Your buyer must also be financially qualified. Ideally, they will already have cash or other financing in place when they make an offer. However, if not, this is where the importance of your business valuation comes into play. If they plan to obtain an SBA loan or another small business loan from a different lender, they will need to be able to prove the value of what they are purchasing. Read more about key challenges of selling a construction business in California.
Another consideration is whether you will carry some of the financing as the business owner. Owner financing is often an expected part of the deal and can be an excellent way for you to earn some residual income in the future. Be sure to discuss with your business broker the various ways this can be structured as part of the sale.
Step Four: Selling Your Home Remodeling Business
The final step is closing the sale, and this is one of the aspects that makes selling a business in California unique. The escrow process is a mandatory part of the final sale of your business, and that comes after some other essential keys:
- Your Lease: Make sure your lease is negotiable if you are renting. It is even a good idea to negotiate your lease ahead of time.
- Real Estate: If you own the real estate associated with your business, you must decide whether to sell it along with the business, retain it and lease it to the new owner, or explore other options.
- Due Diligence: Your buyer will want to ensure that everything you’ve stated about your business and the income is accurate. This is often the longest part of the process before the final sale, and that’s why it’s essential to ensure your business books are in good shape before you sell. Your business broker can help with this vital step.
Once you have completed these steps, you can feel confident about entering the escrow process and closing the sale of the business.
Want to learn more about Successfully Selling Your Business? Andrew Rogerson of Rogerson Business Services has written a comprehensive book about the process, which is available for purchase here.
Are you ready to start the process of selling your home remodeling business? Get in touch with us at Rogerson Business Services today. We’d love to be your California business broker and help you every step of the way, from business valuation to escrow and closing day.