b'THE OFFICIAL NFBA MAGAZINEENSURING A SMOOTH TRANSITION OF OWNERSHIP IN A CONSTRUCTION COMPANYBUSINESS MANAGEMENTTransfer of ownership of a construction company isnt as simple as signing some paperwork and handing over a set of keys. Owners must understand their options, along with what they can do to maximize company value prior to selling. Most importantly, owners must recognize why many construction business succession efforts failso they can proactively take steps to ensure a successful, lucrative exit of their ownMichael ClancyT here are two primary elements of businessownership transfers often fall apart succession: ownership transfer and managementduringthosetransitionalyears:succession. Ownership transfer is transactional; Successor management proves it is largely about making sure the financial and legalto be incompetentaspects are handled properly. The management piece, on the other hand, is where good planning becomes Children not capable of crucial. running business"The management succession piece can be really Key management leaves due to nepotismtough,"saysMikeClancy,principalatFMI Key management leaves due to poor Corporation. "There are a lot of things ownersplanningdo in the business that they don\'t even realize Owner asking too high a pricethey are doing. For example, they often decide whotheconstructioncompanyisandisn\'t"Asyoucansee,alotofthiscomesdownto going to do work for. The problem is that thesepeople," Clancy points out. "Very few potential decisions typically aren\'t based on pre-definedpitfalls relate to the financial transaction. It is criteria; they are based on years of experiencelargely about people."and intuition. How do you transfer that kind of3 Ways to Sell a Construction Companythinking to the next generation of management?"First things firstlet\'s quickly discuss the three You can\'tat least not in the final days leadingprimary methods for selling a construction company. As up to the moment when the owner walks outyou will see, optimizing this transactional component the door. This is why continuity planning is solargely comes down to people, too.important.OwnersshouldbedevelopingtheLiquidation Sale. While this is definitely a viable people behind them well in advance of puttingoption, it is not the best option. In fact, this is typically thecompanyupforsale.Infact,thetypicalthe "last resort" option when other means for selling a ownership/managementtransitiontakes8-12business fall apart. There\'s a good reason why: Owners years, according to Clancy. typically get roughly 60% of what the company is actually worth. Not ideal.ThereareahandfulofcommonreasonswhyExternal Sale. While this can prove to be the most 10 / FRAME BUILDER -OCT2020'