Contractors are usually very large businesses which deal with very large and complex projects, but there are also some contractors that operate with few employees and only locally.
Regardless, contractors are difficult businesses to run, as it has to deal with lots of technical details and finance management, and with it comes a great deal of responsibility.
But, both big and small contractors can be very profitable, so if you own a business like that and are thinking of selling it, you better know exactly what your contractor business is worth and make the proper valuation.
What is your Contractor business worth?
In order to know what your contractor business is worth, first you have to have to have a clear view of your financials. Gather finance reports from the past three to five years and compile it into another report with more specific information regarding your business finance situation. Remember, you can always count with the help from a business broker professional.
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Contractor business worth more?
Before setting your asking price, you have to take into account other aspects that can improve your business valuation. Take a look at the metrics below and make sure you cover it all:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average Contractor business sell for?
Since 2008, there have been 1,087 contractor sales in the United States. As predicted, as contractors are usually very large and profitable business, the average sales price in the past 10 years was over $823k, with a total transaction value of more than $894 million.
General Contractor owner usually achieve a 2.35x multiple of Net profit on the sale.
What is the most frequent deal size?
Most of contractor businesses are very expensive, so it is no surprise that most frequent deal size from contractor sales in the past ten years is $500k.
Is the Contractor market getting bigger?
2018 was by far the best year for contractor market since 2008, but it is too soon to say that it is getting bigger. For sure, it is a much better moment to sell a contractor, and you can rely on that before setting your asking price too.
Are bigger businesses worth more?
Yes, with a few exceptions. In 2018, all deal sizes got a very similar average multiple, but the only negotiation rate better than the highest one ($2-10 million) was the smallest one (less than $250k). 2.86x to 2.65x.
Analyzing the last five years numbers, it’s correct to say that average sales price was pretty much the same, so it is expected that you get the same from your business sale.
What states have the most Contractor business deals?
Are you wondering where the most deals were made throughout the country, or if your state has a hot market to sell fast? As you can see if you are located in California, Arizona, Connecticut, Texas or Florida, you may get a lot more offers than if you are in Vermont or Nevada. But sometimes you can overcome the low number of deals with investors or competitors looking to enter a specific new area, and get lucky with an offer!
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Contractor business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Contractor business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your Contractor, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the contractor industry it may likely be a person who already had a store in the field.
How should I sell my contractor business?
Marketplaces – (under $500k yearly profit)
Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.
To sell your contractor business, check out:
Broker/M&A Advisor – ($500k – $10m yearly profit)
Medium sized businesses in the $100k-$20m are best sold through brokers who help with finding buyers, negotiating and structuring the deal. To sell your contractor business, check out:
Investment Banks – (Over $10m yearly profit)
Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your contractor business, check out:
How much will it cost to sell my contractor business?
Generally a business broker will charge 8-12% of the sales price of an contractor business including inventory depending on the deal size. Larger deals attract a smaller fee. Below is a range of fees at each deal value level.
- Under $1m – 12%
- $1m -$4m – 10%
- $4m -$10m – 8%
- $10m -$25m – 6%
- $25m + – 4%
Contractors are usually very large businesses which can be very profitable as well if you know how to sell it. Make sure you get the proper valuation to close deal time.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!