Do You Have an Exit Strategy for Your Remodeling Business?
A survey that Pro Remodeler conducted this spring about remodeling business owners’ plans for when they eventually leave their companies reveals a wide gap between when owners plan to retire and how prepared they actually are to do so.
According to the survey, owners are divided about their exit strategy: 47% said they have no exit strategy, while 42% said they have a solid plan in place.
A well-executed exit strategy takes three to five years of dedicated preparation. With 65% of respondents saying they hope to retire within the next five years, and nearly 80% reporting to be in the age range of 60 to 70-plus, those who haven’t started planning are already behind. For the 22% who said they plan to retire within 6-10 years, there’s no time better than the present to start getting things in order.
What Owners Are Planning to Do
Among those who have explored or settled on an exit strategy:
- 33% plan to sell to employees,
- 23% plan to sell to family members,
- 23% simply plan to close, and
- 21% plan to sell to an outside buyer.
Interestingly, 70% of respondents said they do not currently have family members working at their company. As for the pool of outside buyers, it’s a shallow one. Most private equity and strategic buyers target companies above a certain revenue threshold, so with 93% of respondents reporting annual revenues below $10 million, they aren’t attractive targets.
The Challenges Keeping Owners From Acting
Top barriers to exiting include:
- 53% of respondents say financial readiness,
- 41% say finding the right buyer, and
- 41% say letting go emotionally tied at 41%.
Remodeling companies are built around the founder's relationships and decision-making, so a successor has to be capable of sustaining what was built and ideally expanding on it. And the emotional consideration is real because the business can be the identity for a lot of owners — especially when 88% said they have been in business for more than 20 years.
To help remodelers plan their exit strategy, Pro Remodeler’s latest issue features profiles of those in the middle of their exits and expert advice about what you need to do now.