There are a lot of painful truths about being in the painting business, but this one may be the most painful of all: When the vast majority of painting contractors retire or leave the profession, they liquidate a few pieces of run-down equipment for pennies-on-the-dollar and then close the doors forever.
No nest egg. No equity. No nothing.
Why does this happen routinely and how can you keep it from happening to you?
Here are five steps you can follow to get your mindset right about selling your painting business and prepare to for the “Big Payday.”
#1 Understand What You Are “Selling” – Put yourself in the shoes of a prospective buyer. Because painting companies have very little in the way of hard assets and recurring revenue, you are essentially selling one thing and one thing only: The promise that future profits will continue to flow into the company’s bank account after you sell the business.
#2 Backing Up the Promise with Proof – The buyer of your business wants more than empty assurances that your reputation will continue to make the phone ring. In most cases, they want to see hard proof. This proof typically takes the form of the owner’s demonstration and documentation of a reliable and predictable marketing and advertising system that systematically delivers leads, estimate opportunities, and painting contracts. In a way, they are buying your promise that, “If you keep doing what we’re doing now after you purchase the business, you will always have projects to paint.” If you don’t have a system for generating customers, then you must build one before going to market.
#3 Be Realistic with Yourself – If you have a reliable, reproducible way to drive sales and profits, then a buyer will likely value your business based on some multiple of profits or “owner’s direct benefit,” which includes expense line items such as insurance, cars, and other perks not essential for the running of the business. These multiples vary based on a number of elements related to the desirability of your business, but range from 1.5 to 3 times net profits or owner’s direct benefit. So, be reasonable when setting a price.
#4 Make it Paint-by-Numbers – When your business is “all in your head,” it does not make it very appealing for prospective buyers to purchase. There should be written instructions and manuals for every critical aspect of your business so that “anyone” could do it. Remember: Systems run your business and people run your systems.
#5 Write a Prospectus and Find a Good Business Broker – In most cases, you will want to keep the sale of your painting business “hush-hush” to prevent alarming customers and employees. This puts a fine point on discretion, and a broker is necessary unless you can sell to someone who has already expressed an interest in purchasing your business. A prospectus is the “sales letter” a broker will give to prospective buyers. Make certain it is engaging, appealing, and motivates potential buyers to express interest to the broker about buying your business without giving away too much information.
When I was getting my MBA, one of my professors with real entrepreneurial experience said something I’ll never forget: Never go into any business without first determining if and how you will profitably sell it.
That’s still good advice today and it’s never too late or too early to prepare for selling your painting contracting business. If you need help, feel free to reach out directly by clicking here or calling 423-800-0520!
Brandon Lewis, MBA
Founder – THE ACADEMY for PROFESSIONAL PAINTING CONTRACTORS
Publisher – Painter’s Weekly
1523 East 27th Street
Chattanooga, TN 37404