To Take Over a Contracting Business, You Need a Succession Strategy
When you’re getting started as a contractor, you have a couple of options. You can work under another contractor or start your own business. Sometimes, you find an opportunity to take over a thriving company in your field. If you get this chance, you may be able to build a successful career with the help of your predecessor’s hard work. These tips help you make for a smooth transition.
Decide Which Approach Is Best for You
There are many reasons to take over someone else’s business instead of trying to start your own. New businesses have a higher rate of failure, often due to inexperience. If you’re starting in a field with lots of competition where the margins are razor thin, taking over a business might be the smoothest path to success. Benefits include:
- existing inventory of tools, equipment and supplies
- current clients with paying contracts
- employees who are already committed to the business
- brand recognition
Of course, having a company’s reputation precede you can be a boon or a complication. If the current owner’s management style is significantly different than your own, you may have the added hassle of transitioning to your approach. This can lead to conflicts with current customers and employees, and possibly the former owner if they intend to keep a partial stake in the company.
Make Sure the Business Is Solid
Many successful businesses have a solid grounding. Other businesses may look successful but have a lot of problems hiding just under the surface. Whether you’ve been working for the company for years or you are approaching a contractor that you barely know, you need to look at the books to see how the business is run. Owners may be hesitant to show you figures, but you shouldn’t consider taking over a business without it. Be sure to examine several factors, including:
- project overrun (costs and time)
- marketing budgets and success
- overhead costs
- current debts in relation to income
- cash flow
- expected lifespan of current equipment
Once you take control of the business, you may be able to change a number of things to solve minor problems related to costs. Just make sure that the business can remain solvent until you do. Keep in mind that shifting to a more-efficient system can cost you more at the outset, even if it saves a ton over time.
Create a Succession Strategy
Having a solid succession strategy is crucial to ensuring that the business can function well during and after the transition. How long this process takes depends on your experience with the company and the time you need to take charge. Make sure these aspects are covered in your succession strategy:
- Key Players: all owners and anyone else who may have a stake in decision-making
- Timeline: how long you intend to take to complete a transfer of ownership
- Investment/Ownership: who is going to own the company, and whether the current owner intends to hold a partial share after the transfer
- Training/Experience: which licenses and certifications are held by the current owners, and what you need to do to gain those qualifications
- Transfer Ownership: decide how you’ll transfer ownership, whether it’s by buying the company outright or taking a portion of stocks
Be very clear about your expectations, and check in with the current owners regularly to make sure everyone is on the same page. This will help to avoid confusion and conflicts during transition.
Taking ownership of a successful business can be an excellent way to ensure you have a solid contracting career ahead. These tips help you identify what you will need and how best to get it. To start preparing for the contractor licensing exam, visit CSLS today!
