Planning a successful exit strategy

Selling your business may be your ultimate goal when you start your company—or it may be a  decision you come to after years of running it. Either way, you want to be able to smoothly transition your business to a new owner when the time comes. Exit planning is a process, not just an event.
When Terry Hurt, CR, made the decision to sell his business to Andy Hearn, it was done so smoothly that most clients, potential customers, contractors and suppliers were unaware that T. Hurt Construction had changed hands.
Hurt founded T. Hurt Construction in 1994 in the Omaha area and was spenTHurt_Logopdfding about 70 hours a week managing 15 employees focused on major residential and commercial remodeling, concrete and new construction projects. Not only was Hurt focused on design and sales, but he also managed the day-to-day operations and back-office functions.
“It was all-consuming,” Hurt says. “I wanted to pull back a bit and refocus my passion on design and sales. I had come to the conclusion that one of three things had to happen: I had to hire a manager, downsize the business or sell it outright.”
Hurt interviewed about 15 to 20 people to manage the company, but didn’t seem to find the right person. He was prepared to downsize his company, but decided to first list the business with a local broker.
“The company was begging to go bigger, and we could grow,” Hurt says. “But I didn’t want to do it anymore—I was tired of working all the time. It needed someone who could take it to the next level.”
Hurt met with his attorney and accountant to determine the price. They began with a rule of thumb—a method useful for appraising a small business and helping sellers arrive at a price. Multiple factors are considered in determining the value, including volume, earnings and assets such as equipment, vehicles, inventory and real estate. Intangible assets—such as an owner’s agreement not to compete or to consult during a transition period—are generally included in the value of the business.
He knew that understanding how buyers would value his business was an important factor in determining the company’s worth, especially because he had built a very recognizable and favorable brand in the area.
“My business was running on no debt. I owned all the equipment and I had worked hard to ensure that my company could function without me, which they could, except in the area of sales,” Hurt says. Regular team meetings had always been part of Hurt’s business strategy, and he had gradually trained his staff to take over critical operating functions. 
One of the other important items Hurt determined was that he  wanted to stay involved with the company, not only because he was still young, but because company had his name.
Picking an apple without disrupting the cart
At about the same time, Andy Hearn had made a decision that after 23 years, he wanted to leave corporate life. When the opportunity to purchase T. Hurt popped up, it caught his interest immediately.
“I wanted something I could do the rest of my life,” Hearn says. “What attracted me to the remodeling industry is that all of your five senses are involved building homeowners something they really want.”
After Hearn did an analysis with his accountant to determine if the company’s finances would support the purchase price, his next step was to get to know the company.

“Terry and I met a couple of times and talked about how he had built his company, his philosophy, his employees and his future involvement,” Hearn says.
Once Hearn had decided to move forward with the purchase, he and Hurt set a joint objective for the transition; there should be no visible changes at the company that might significantly disrupt the flow of business. This included no formal announcement of the change of ownership, and Hurt would continue working at the company focusing on sales and design planning.
Terry & Andylp“I don’t know how many people really knew Terry was selling his company,” says Hearn. “We did some field visits to look at active projects, and he introduced me to subcontractors so I could get to know them. We took care not to alarm or worry our customers, subcontractors and suppliers.
Both Hearn and Hurt credit Hurt’s continuing to work with the company as one of the keys to a smooth transition.
“The first day after the paperwork was finalized was as steady as she goes,” Hearn says. “Together we announced it to the employees. We told them the only thing that was different was the name on their paycheck, but it was still the same company name, same office number and same employees. “
Then, like any Monday morning, they all went to their jobs. “The announcement didn’t seem to have an impact on the productivity of the company,” Hearn says.
Hearn and Hurt also talked with the employees on how to respond to questions that customers and suppliers might ask. As word got out, both Hearn and Hurt talked directly with anyone who had concerns. However, out of 100 clients, less than five called to discuss the situation further.
“We really were conscious of not disrupting ongoing operations,” Hearn says. After the sale, Hurt took a four-week vacation and came right back to work.
Lessons learned
Changes have been gradually and discreetly implemented. The name, Website, phone number, logo was not changed. About one year later, a formal announcement finally appeared in the company’s newsletter.
Hearn feels the two best things he did from a buyer’s standpoint was having Hurt stay involved with the company in a major capacity and having a good outside accountant that really understood the numbers. Hearn also credits an internal bookkeeper who has helped him keep his fingertips on the financial pulse of the company.
Hurt adds: “It’s important to have your accountant and lawyer involved. There is going to be negotiation, so you have to be level-headed and compromise. In the end, I wanted to do what was best for the company.”
A year and a half after the sale, T. Hurt Construction has increased its workload and increased sales by three quarters of a million dollars.
When asked if he has plans to rename the company, Hearn laughs.
“When I think about the asset I purchased, the biggest is the name because it’s well-known around town,” Hearn says. “Eighty percent of our leads come through referrals and our signage (trucks and yard signs). I’ll ask people if they can name our competition, and more often than not they can’t. Our logo is very noticeable, and it sticks with people. Am I going to rename the company? No—not in a million years!” —Susan Swartz
 

| 1/10/2014 12:00:00 AM | 0 comments
Add Blogs to RSS FeedAdd Blogs to RSS Feed

Recent posts

No recent posts

Post archive

August 2022(1)
June 2022(2)
May 2022(2)
April 2022(2)
March 2022(3)
February 2022(1)
January 2022(5)
October 2021(2)
August 2021(3)
July 2021(1)
June 2021(2)
May 2021(1)
March 2021(2)
February 2021(1)
December 2020(1)
November 2020(2)
October 2020(2)
September 2020(3)
July 2020(3)
May 2020(2)
March 2020(2)
January 2020(2)
November 2019(1)
October 2019(4)
September 2019(3)
August 2019(3)
July 2019(5)
June 2019(3)
May 2019(5)
February 2019(3)
January 2019(3)
December 2018(1)
November 2018(3)
October 2018(2)
September 2018(3)
August 2018(3)
July 2018(4)
June 2018(6)
May 2018(3)
April 2018(2)
March 2018(3)
February 2018(1)
January 2018(1)
November 2017(4)
October 2017(5)
September 2017(6)
August 2017(4)
July 2017(2)
June 2017(2)
May 2017(4)
April 2017(6)
March 2017(3)
February 2017(6)
January 2017(6)
December 2016(3)
November 2016(4)
October 2016(8)
September 2016(5)
August 2016(3)
June 2016(3)
May 2016(5)
April 2016(4)
March 2016(5)
February 2016(4)
January 2016(4)
December 2015(3)
November 2015(4)
October 2015(9)
August 2015(4)
July 2015(3)
June 2015(7)
May 2015(2)
April 2015(5)
March 2015(9)
February 2015(6)
January 2015(7)
December 2014(2)
November 2014(7)
October 2014(5)
September 2014(3)
August 2014(5)
July 2014(6)
June 2014(7)
May 2014(3)
April 2014(5)
March 2014(8)
February 2014(7)
January 2014(7)
December 2013(6)
November 2013(8)
October 2013(5)
September 2013(4)
August 2013(4)
July 2013(6)
June 2013(8)
May 2013(8)
April 2013(15)
March 2013(6)
February 2013(11)
January 2013(8)
December 2012(6)
November 2012(7)
October 2012(20)
September 2012(14)
August 2012(6)
March 2012(4)
January 2012(1)
April 2011(2)