Running a field service operation can be both challenging and rewarding, and there are many motivating factors when making the decision to start a business. Similarly, there are many different reasons that the owner of a field service company might choose to sell their business. You may have started your business knowing you would ultimately sell it if it were successful; you might simply be ready to move on to retirement or your next project; or perhaps you never expected to sell but are considering doing so after catching the eye of a potential buyer.
Whether you’ve been planning to sell for years or have just started mulling the idea over, there’s a lot to remember when planning a sale. The sooner you start managing your finances accordingly, the more prepared you’ll be if you decide to take the leap.
Ready to start getting your ducks in a row? Read on to explore our top tips on how you can set your field service business up for success when you’re ready to be acquired.
Start Planning Early
Whether you know for sure that you want to sell your home services business in the next few years or not, having that potential sale in mind can help you set your business up for ongoing success and, when the time comes, an easier and more profitable sale.
By thinking of your business through the lens of a prospective buyer, you stand to gain a more comprehensive view of your business’s overall position, strengths and potential drawbacks – which will give you the foundation you need to make your business as attractive as possible for potential buyers. This is especially true when identifying any pitfalls and working to resolve them.
Taking the idea of acquisition into consideration early on also gives you an advantage in the sales process. Just like selling a pre-owned vehicle — or just about anything else — you can approach the sale of your business from a more favorable position by planning ahead and ensuring you don’t need to rush the process.
Maximize Your Business’s Value
By planning early, you ensure that you have the time you need to get a better handle on your business’s current strengths and shortcomings, take steps that improve your standing and help you get the most for your business. Even if you ultimately decide against selling, making decisions that improve the value of your business is never a bad decision.
If you’ve been considering any major purchases for your business, such as new vehicles, operations software, computer systems or equipment, it’s best to do so as early as possible. This provides a two-fold benefit for your business: first, it can help your business to run more efficiently and, as a result, attract buyers when the time comes; and second, it ensures you don’t need to make any major purchases once the sales process is underway, which can be a red flag for potential buyers.
This stage is also when you should be taking a close look at your operations and financials, ideally tying up any loose ends and ensuring your business is running as smoothly as possible. If your accounts receivable are backlogged, it can be a red flag for potential buyers — not to mention how it can significantly impact your day-to-day cash flow. Staying current with accounts receivable shows that your business is running effectively and frees up money to reinvest in raising your business’s value.
This is easily achieved through software that enables automation for time-consuming recurring tasks like updating customer payment information, sending invoices and reminders, processing payments and notifying customers when their balance is past due. By automating these tasks, you can set your business up for success without the need to hire additional office staff.
Bring In an Expert
As a business owner, it’s virtually impossible to be fully impartial when reflecting on your business — particularly when it comes to your financials. Personal investment and emotional attachment to a business can cloud the judgment of even the best entrepreneurs, so it’s crucial to rely on expert input when preparing to sell your business.
Work with a financial advisor — whether it’s your CFO or a CPA — to review your financial documents regularly. This list should include:
- Your profit & loss sheet
- Balance sheets
- Accounts payable
- Accounts receivable
By familiarizing yourself with all the details of these documents and working with a finance professional, you can speak accurately to your business’s financial health and processes when it’s time to sell. Of course, this is also invaluable when it comes to identifying and resolving any discrepancies. Ideally, you should already be using field service software that keeps all of your financial information organized and up-to-date; if you’re not, getting started sooner than later can help you streamline operations, make your business more attractive and ensure everything is in order.
Factor In Taxes
As you might expect, a financial decision as significant as the sale of your business does come with tax implications. Another benefit of planning ahead when it comes to selling your business or being acquired is that you can anticipate your tax liability and make plans to address it.
Selling your field service business will trigger different taxable events based on your business’s status. For S corporations, the sale of the business’s assets typically leads to a single taxable event for the business owner — similar to the Schedule K-1 form that S corporations are used to seeing annually.
If your business is a C corporation, taxes may vary because the sale is likely to trigger two taxable events. The first is tax paid on the sale of corporate assets, while the second is tax paid on the proceeds that go to the owner or owners.
While anticipating the tax implications of selling your business shouldn’t be the sole factor when choosing how to register your business or deciding to reclassify your business, it shouldn’t be overlooked either. As you consider the future of your business and solidify your plans to sell, your best option is to discuss the status of your business and any related tax implications with your CFO or a CPA. Anticipating your tax liability and planning accordingly is a major benefit of working with a professional financial advisor.
As you consider the future of your field service company and potential plans to sell your business, planning ahead and ensuring your business data is all in order is absolutely crucial for a smooth process. To get started with field service software that offers integration with finance-specific functionality, visit WorkWave Financial Services today.