Prospects are bright if you’re considering selling a business in construction-related trades. Here are six reasons why:
1. Some construction-related trades are virtually recession proof.
Skilled trades with recurring sales (e.g. HVAC and plumbing businesses) have a constant demand for service and remain strong even during economic downturns, making them attractive to prospective buyers. HVAC and heating systems require regular maintenance to operate at peak efficiency. Whether homeowners and property owners have contractual agreements for service, they will finance needed repairs such as when a heating or air conditioning system fails or if pipes freeze.
2. Construction has rebounded, and specialty trade contract service businesses are profiting.
According to IBISWorld, Inc.’s November 2020 report on Construction in the US, revenue for specialty trade contract services such as electrical, plumbing, HVAC, drywall, installation, painting and site preparation, has grown over the past five years as share of revenue and was expected to comprise 44.9% of construction business revenue in 2020. Much of this growth can be attributed to businesses that have pivoted during the pandemic. Boston’s Seaport District is currently undergoing a transformation as office space is being converted into life science research labs. Commercial properties such as strip malls are being retrofitted for different types of businesses or are being converted into residential properties to ease the housing crunch. Buyers are taking notice of this activity.
3. Homeowners are investing in home improvements.
Two different trends account for a strong home improvement market. The lack of affordable city housing has caused millennials to migrate to the suburbs over the past few years. Bidding on homes is competitive because inventory is low, which has driven house values up as interest rates have fallen. COVID-19 has influenced consumer habits as well. Homeowners of all ages and income brackets are renovating their residential properties to increase their value and to create havens during the pandemic. Not only are homeowners creating offices, playrooms and gyms, they are also reimagining their yards with entertainment areas that include pools and outdoor kitchens. These trends are causing buyers to consider buying related businesses.
4. Corporate professionals are emerging as new buyer pool.
Many former corporate professionals are pivoting to control their own destinies. They want the hands-on experience of running their own businesses while benefitting from the expertise of other small business partners and advisors. Together, small groups of investors are buying complementary businesses that cover a range of homeowner and residential property services such as tree removal, landscaping and snow removal services. While the businesses are run independently, the investors benefit by jointly leveraging resources. Collectively, they can offer “one-stop shopping” to homeowners and property managers for their services.
5. Businesses are growing through competitive acquisition.
Acquiring a competitive business is a quick and logical way for any business to expand, and economic conditions are favorable for considering this option. The owner is already grounded in the business and has inside knowledge of what a successful expansion requires. As business owners reach retirement age, they are beginning to think about options such as selling to their competition.
6. Dynamics are likely to shift in the next few years.
The construction industry tends to be cyclical, and while it is expected to remain strong for the next few years, that’s unlikely to be the case once interest rates go up. Selling a business in the next few years will likely gain a better valuation than will be possible in the following ten years.
If you’re considering selling your business, contact us. I grew up in the construction trades and have a CSL license in MA. I’ve walked in your boots and understand the challenges you face. There’s no commitment, and we can give you advice that can help you get the best price for your business at the right time.
