Issue 4 of 9: Financial Partners

Construction Ownership Transition Issue 4 of 9: Are Your Financial Partners, including Bank and Surety, Onboard with the Transition?

D. Brown Management Profile Picture
Share
Succession: Ownership Transition Issues - Number 4 Financial Partners. Construction is a cash-intensive business. Ownership transitions require even more cash.
  • Engage them very early in the process to understand what they are looking for. Because they see this a lot, they often have great advice for owners making transitions. 
  • Start building the relationships with the management team early.
  • Get a good understanding of the capital and collateral that will be required to be left in the company for the bank, surety, and insurance.  
  • Build these requirements into your financial model of the transition and build some cushion in because things will never go as planned.
  • If a personal guarantee will still be required from the current owner(s) for a period of time, set a value for what that guarantee will be worth for them if they are willing to take that risk at all. This will typically be a percentage for what is guaranteed paid annually.  
  • Depending on the exit strategy, this may or may not be that big of an issue, but the financial partners are one of the major stakeholders in the transition. 

Issue 4 of 9: Financial Partners
Continue building value in your business, yourself and your key team members with a good succession strategy....

Issue 4 of 9: Financial Partners
Continue building value in your business, yourself and your key team members with a good succession strategy....

Resource - Stratified Systems Theory (SST) and Timespan 101
All contractors navigate through very predictable stages of growth delivering larger and more complex projects. Business complexity evolves requiring different capabilities at all levels. Tom Foster lays out some of these key differences very clearly.
Cash Flow Tip 14 - Aggressive Billings and Pre-Wiring the Process
Contractors can significantly improve their Return-On-Capital by being aggressive and focusing on the details of monthly billings.
Leadership and Management of Details
Building a great contracting business requires the right balance of leadership and management. While it is possible to separate them the truth is that many of the top leaders are relentlessly disciplined managers.