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How To Prepare Your Painting Contracting Business for Sale


November 11, 2019

Most painting contractors don’t start a business to get rich.  They want the freedom of being their own boss, to create a positive work environment, and to do great work for their customers.

Most owners do reach a point where the financial value of their business becomes important.  You might be trying to decide whether to expand or franchise your business.  You might also be hoping to sell your business and retire some day.  In these cases, the financial value of your business is an important consideration.

It takes more than a steady flow of jobs to make a painting business valuable.  Surprisingly, it also takes more than strong profits.  Here are three factors that help to determine any business’s financial value.

Accurate Financials

Maybe your business has never missed a pay cycle.  Maybe it’s been providing you with enough income to keep your family happy and send the kids to college.  Unfortunately, your potential buyers weren’t likely around for all of that, and those aren’t the criteria they will use to evaluate how much profit they’ll make when they buy your business.

What they want is to see the accounting books – and they want those books to show a consistent trend of profitability, after all expenses are considered.  That means they want books based on accrual accounting, not cash accounting.  Without a few years of well-kept books, the buyer is taking on a heightened profitability risk – and taking that risk means they can’t offer you as much money for your business.

A Business That Runs Without You

What would happen if you took a few weeks off?  Most small business owners have taken very few vacations over the years because they’re terrified of the answer to this question.  They simply don’t have the processes in place to allow the business to function for weeks or months without their presence.

In most cases, however, when you’re retiring, you don’t sell yourself with the business.  If the painting business can’t make a profit in your absence, that means it has no value without you.  Even if you intend to work for the new owner for a year or two to ease the transition, that’s not always a reality.  Sometimes, unexpected health issues or other factors force a retirement.  You want to make sure that these unforeseen circumstances don’t wipe out the value of your business.

This means that your business needs processes in place to produce a strong profit even when you aren’t there.  Employees need to have the knowledge, and to be empowered, to make good decisions without being able to reach you first.  Painting contracting businesses that can “run themselves” are far more valuable than businesses that require hiring new management to be profitable.

If your business cannot run without you in the middle of it, you’ll want to develop a plan to get there if you plan to sell in the next 3-5 years.

A Competitive Differentiator

The highest profit painting contractors have customers who are willing to pay extra for that business’s services.  There are many reasons that might be the case.  Your employees might be more professional, and make customers more at-ease with strangers in the house.  It might seem well-run, and inspire confidence even among new customers.  You might be the only painting contractor with hundreds of five-star online reviews in the area.

If your painting business doesn’t have a competitive differentiator, the profit that you’re making is likely to be whittled down over time by other nearby painters.  If the differentiator is you, that’s also not good.  Remember, you’re not generally trying to sell yourself with the company.

If you don’t know what your differentiator is, it’s a great opportunity to improve your profit margin!  Competitive advantages tend to build on themselves, leading to higher profits, more satisfied customers, and more confident, purpose-driven employees.

Figure out why customers select you as their painter.  See if you can find trends among their answers.  Finally, focus on those things, always working to make them better, and tell your employees these are the reasons that customers choose to let them paint their house.  Don’t forget to advertise your excellence in these areas!

To learn how ProPainter Websites can help your business generate more revenue, email us at Team_PPW@ProPainterWebsites.com or call us at 919-424-6121.

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