#57 – The Maryland Construction Network

by Rob

in Podcast Episodes

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Exit Planning

In today’s show we welcome Mr. Stephen K. Ball MCN Podcast 130x130 Brownback to the program for a discussion about succession planning and how get the most value out of your business when you retire. Steve is a Partner in the accounting firm of Gross Mendelsohn – www.gma-cpa.com – 410-900-1308. Today’s podcast sets the stage for Steve’s February 17th seminar – “Exit Planning Strategies: How To Get Real Value For Your Construction Company“.

Steve had just returned from the AICPA Construction Conference and he wanted to start the discussion by relaying the underlying trend in all construction – better, faster, cheaper. This has become the norm for all construction companies competing in the post-depression era.

With the retirement of the “baby boomers” we are poised to see the largest transfer of wealth in history within the upcoming years. Proper planning makes all the difference.

What percentage of companies continue to operate beyond the retirement/passing of the founder?

  •  Approximately 30%
  • Less than 20% survive into the 3rd generation

Why?

  • Lack of planning
  • Improper structure
  • Liquidity issues
  • Family & estate issues
  • No plan at all

Why is exit planning important?

  • It defines personal, business, family, & financial objectives
  • Most of the owners wealth is tied up in the business
  • Facilitates retirement and financial security
  • Identifies goals
  • Develops new leaders
  • Satisfies stakeholders (sureties)

Why do owners avoid exit planning?

  • Possibly don’t like to think about death
  • Unwilling to schedule to relinquish control
  • Do not want others to know financial details of the business
  • Working in the business instead of on it
  • Other things are more vital and important at the time

What are the obstacles?

  • Not enough money
  • Not enough time
  • Personnel
  • Family members

What are some exit strategy options?

  • Close the doors and sell whatever you can for whatever you get
  • Continuation
  • Total outright sale
  • Partial sale
  • Gradual transition

When you are selling a constriction company you are basically selling any assets plus the assembled workforce and the current book of work. To get the best price it is often advantageous to have a trained and qualified person/persons assembled well in advance of the exit date. Since 30/40 year olds rarely have the capital to purchase outright, it is imperative to have nurtured a team that can successfully carry-on the business, thereby allowing a gradual buyout to complete the transfer.

We hope you will join us on February 17th for Steve’s full presentation of “Exit Planning Strategies: How To Get Real Value For Your Construction Company“.

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