Construction: The freedom of choice

With the construction sector in a state of recovery it’s easy to view an eventual exit from your business as a hazy oasis in the distant future. However, for owners in the industry, that final reward for all your hard work can easily recede to nothing more than a mirage as the time to retire approaches. An issue perfectly illustrated during the crash when many owners, having failed to put future plans in place from an early stage, were stuck in limbo dealing with the operation of a company when their true motivation was actually retirement or just slowing down.

Most business owners strive for the choice to carry on working whilst having the luxury of knowing it’s not a necessity. So, with the lessons of the crash still raw for some, let’s focus on delivering that choice, regardless of your age and immediate plans.

As the owner or shareholder of a construction company, laying the foundations for freedom requires a long term, unique approach. There are two key reasons which can make it difficult to sell businesses in the sector for significant sums:

1) Customer relationships are quite often specific to the owners which can result in a legitimate fear that, on sale, many such clients will be lost.

2) The contractual/litigious potential in the sector can make a prospective acquirer nervous. Such trepidation can reflect in the perceived value of your company.

So, for most in the industry to achieve that oasis of choice, it is essential to prepare a sound personal financial plan beyond a normal exit strategy from an early stage.

Always keeping one eye on your future will help to deliver an element of certainty regarding your financial situation. This will mean that the proceeds you receive from the sale of your business can act as a fantastic bonus when (and if) that is achieved whilst ensuring you’re not reliant upon it.

With the experience of the most recent recession still fresh in mind, any shareholders who have yet to put a plan in place should consider implementing the following 3 step strategy as soon as possible.

1) How concrete are your foundations?
Firstly it is vital to establish a current business valuation and evaluate your personal asset position in order to understand exactly what your starting point is. This will also help in terms of measuring growth further down the line if necessary.

2) Gauging the distance between the mirage and reality
It is always best to quantify your goals. By understanding what assets are needed in order to provide for your expected lifestyle when you consider exiting the business, you can more easily map out a clear strategy towards the end goal – your future security and that of your family.

3) Bridging the gap
Often there is a disparity between your personal aspirations and the current trajectory of the business. It’s at this point that a more detailed action plan must be implemented in order to drive both personal wealth and, if necessary, company performance in order to reach your ultimate goal – choice!

There are certainly strategies which can be implemented to make the business more saleable and more valuable and these should not be overlooked. It is also critically important to protect the hard earned cash and assets your business has created from the threat of any potential issues. We have seen too many construction companies decimated by factors out of their control having not ring-fenced historic profits. A carefully considered corporate structure can also prove invaluable.

In short, allying the potential growth and value of your construction company with your long term personal needs is absolutely fundamental for a sector that doesn’t adhere to normal rules. With the risk factors involved in a potential sale, having a sound personal investment strategy in place from an early stage is also of utmost importance.

Make sure you don’t get lost seeking a pot of retirement gold – start drawing up the map today to help give you that freedom of choice tomorrow.

 

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