SUCCESSION PLANNING FOR A CONSTRUCTION COMPANY FOUR WAYS OUT, AND WHAT EACH ONE PAYS.
A subcontractor owner has four ways to pass on the company: to family, to key employees, to an employee stock ownership plan or to an outside buyer. Each pays the owner differently and takes a different amount of time, and all four work better with three to five years of planning. Buyers, lenders and the surety all look at the same things: clean books, a backlog that does not depend on the owner, and managers who can manage jobs and relationships without the owner in the room.
Most construction owners plan to sell someday and start the work too late. A company whose estimating, customer relationships and bonding all depend on one person is worth far less than its profits suggest, because the buyer is paying for a business that may walk out the door with the seller. The planning years are spent moving that dependence onto a management team, documenting the systems and building three to five years of reliable financial statements. Those same steps raise the value on any of the four paths the owner picks.
WHAT IT MEANS.
A succession plan is a written plan for who will own and manage a company after the current owner leaves, how the owner will be paid for the shares and over what period the change will happen.
Succession is also a surety question. The surety holds the owner's personal indemnity, and it will want to know who signs for the bonds once the owner is gone and whether the new owners have the balance sheet to support the line.
WHERE SUCCESSION PLANS COME UP SHORT.
The company depends on the owner for every big decision
The owner bids the large jobs, holds the GC relationships and is the person the surety knows. A buyer or a successor sees that and lowers the price or asks for an earnout, because the value leaves with the seller. Moving those decisions onto managers takes years, and it has to start well before the owner wants out.
The books cannot support a price
A buyer or an appraiser values the company on reliable earnings. Books that mix personal expenses, report revenue as invoiced and close without a WIP schedule produce earnings no one will pay a full multiple for. Three years of clean statements are part of the asset being sold.
The plan pays the owner with money the company does not have
Family and key employee buyers rarely have cash. The usual answer is a seller-financed buyout paid from company profits over five to ten years. If the plan does not account for working capital, bonding and the new owners' pay, the payments compete with the cash the jobs need, and the seller's retirement depends on the company's next few years.
WHAT IT LOOKS LIKE IN DOLLARS.
Usually a seller-financed sale paid over several years from company cash flow, sometimes with a bank loan for part. The owner keeps influence longer and takes more risk on the payout.
A trust buys the owner's shares, usually with bank and seller financing, and the company repays it with pre-tax contributions. It needs a company with consistent profit and enough size to absorb the setup and annual costs.
A competitor, a larger contractor or a private equity group pays more cash at closing and usually asks for a transition period, an earnout or both. It is the fastest exit and the least control over what happens after.
THREE STEPS TO TAKE FIVE YEARS BEFORE YOU LEAVE.
Start with a professional valuation of the company and a personal plan that says how much the sale has to pay you and when. The difference between the two is the work of the next five years. Owners who know the number make better decisions about which path to take.
Pick the people who will estimate, manage the jobs and own the GC relationships, and give them the authority now. Introduce them to the surety and the bank. Each relationship you move onto a manager is value a buyer or successor can count on.
Separate personal expenses, recognize revenue on percent complete, keep a monthly WIP schedule and get reviewed statements if the surety does not already require them. Three years of reliable numbers raise the price and shorten every buyer's due diligence.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $3,300 | $1,000 |
| $1M to $3.5M | $2,600 to $5,300 | $1,500 |
| $3.5M to $6.5M | $3,800 to $8,300 | $3,000 |
| $6.5M to $9.5M | $5,100 to $11,800 | $4,500 |
| $9.5M to $12.5M | $6,100 to $14,900 | $6,000 |
| $12.5M to $15.5M | $7,400 to $17,650 | $7,500 |
| $15.5M to $18.5M | $9,400 to $22,400 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
