You’ve no doubt heard many pitches proclaiming how information technology can help you run your business. But can IT help you when you’re getting ready to retire or seek a new opportunity?
As it turns out, information technology helps the specialty contractor sell his or her operation and realize a higher price. The biggest monthly expenses contractors see are for payroll, the financing of fixed assets and, in some operations, materials. Of these three, only fixed assets can enhance the value of your company: you can sell a truck but you can’t sell material placed at a job site or the labor expended to put it there. And fixed assets are often of marginal value. If you’ve financed a truck or other piece of equipment, its value to you as the seller of a business is only the difference between what it’s worth–always declining quickly–and what you still owe–which never seems to decline too quickly.
The best way to realize a premium from the sale of your specialty contracting operations is to demonstrate the stability–or better yet–the upward trajectory of both your sales and your profits. You can enhance your case for a premium price by having an organized and detailed record of your customers, being able to prove potential customers will see your business toward the top of an internet search and demonstrating the financial health of your business with professional accounting records. Customer and accounting records needn’t be stored using software, but the added benefits and now low cost of software makes it the better choice.
Proving Your Past Success
We’ve long used a custom-built Job Management System (JMS) to manage all projects from bid request to paid-in-full. The system not only holds static information like all of our accounts, the contacts associated with those accounts and their contact information. It also stores the data that allow us to run trend reports. We can run reports showing our increasing bid requests over time or an improving bid win rate. Of course, these trends might not always be favorable. We can also use our data to show repeat business. For example, the JMS can show how many of our total accounts awarded us two or more contracts. Because the JMS holds all of our customer records in electronic form, it’s also easier to use the data to launch an email campaign. There has been a proliferation of services such as Constant Contact that allow users to quickly build email campaigns. We use a system called Yet Another Mail Merge, which integrates with our Google Apps for Work account.
Proving Your Future Prospects
Getting your phone to ring has changed so much over the past two decades. If your contracting operations doesn’t drum up a lot of referrals or repeat work you used to have to pay for costly radio or yellow page ads. These days, most people use Google search to find just about everything, including specialty contractors. Getting your business to rank toward the top of a Google keyword search isn’t just a matter of building a beautiful website. You’ll need to make sure your entire web presence is optimized for search engines. The industry jargon is Search Engine Optimization or SEO. You needn’t be a coder to perform your own SEO, but the breadth of knowledge to do it well is vast and hiring someone to perform SEO for you can be relatively affordable. Be prepared for an expanded scope, however. Making your website rank high among search engines might require a complete redesign of your website, which could become a costly project itself. But it still represents a valuable investment proposition whether you’re preparing your business for a sale or are in it for the long haul. How much is it worth to have, for example, your Kansas City electrical business rank first every time someone in the greater Kansas City metro market types electrical contractor into a Google search field.
Proving Your Buyer’s Profits
If a Job Management System can demonstrate the stability and growth of your customer base and your Google page rank can demonstrate that customers will continue to find your business whether or not you’re running it, good accounting records show that all your work resulted in a profitable enterprise that can continue to be profitable in the hands of your prospective buyer. While you can keep only paper accounting records, computer software will save you time and probably money as you run your business and make it more attractive as you sell it. Your potential buyers are probably using software and it’ll be a much bigger headache to merge your accounting records with their’s if no electronic records exist. An additional benefit of accounting software–especially QuickBooks–is that its widespread use will make your potential buyer more comfortable he or she can understand your business, because the buyer will already be familiar with the tool and can focus on the numbers. We began using QuickBooks Online in early 2009. We replaced Microsoft Accounting, a product Microsoft discontinued about a year later. The full-featured Plus version we use runs $39.95/month as of this writing and the price has been stable since we implemented it. QuickBooks also offers a Premier version, which can be tailored to the contracting industry. Unlike the Online version, you download the Premier version to one or more PCs or Macs. The Premier version is available for a one-time price of $299.95, but we prefer the benefits of QuickBook’s online offering.
The equipment you’ve acquired with many years of profits of course has value to a prospective buyer of your business. But any buyer can find equipment without buying a whole business–usually at a better rate. You want to charge a premium for having created a system that will continue to deliver customers and profits. Information technology in the form of a Job Management System, an accounting software package and a high page rank will help you achieve that premium.
