Are you considering selling your pool company but are unsure how or where to start? This review discusses precisely how to sell a pool company without setbacks or disappointment and in a manner that allows you to maximize the purchase price and meet your non-financial goals for the sale.
The Pool Industry: Here is What You Should Know
The pool industry continues to grow as the demand for residential in-ground pools remains high. Additionally, there is a shortage of pool companies across the United States, providing an excellent opportunity for established companies. Below is a brief overview of pool industry data and projections:
- There are approximately 75,000 swimming pool contractors and companies in the U.S
- There was a 6.1% annual growth for pool companies between 2018 and 2023
- There is a 2.0% projected growth for pool companies between 2023 and 2028
- The annual revenue for pool service contractors is $7.8 billion ($871 million profit)
A Step-by-Step Guide to Selling Your Pool Company
A personalized sales strategy is essential. For this reason, we recommend working directly with a reputable and experienced business broker who understands the pool industry. However, there are steps that you can expect and plan for throughout the business sale process for your pool company. Below is an in-depth look at the four steps that you can expect.
Step 1: Determine The Value of Your Pool Company
First, and as mentioned, you should consult with a business broker. They can provide you with more information about the process. More importantly, they can provide you with a professional business valuation. Your valuation is a range of value that your company may be worth if you were to sell. A variety of figures are considered during this process, which are pulled from financial statements and your tax returns.
Established rules-of-thumb within the pool industry also provide a relatively accurate indication of your business’s worth. The rules-of-thumb are calculated means based on the most recent sales data of pool companies in the United States (pulled from Business Reference Guide). The rules-of-thumb include:
- Pool companies sold between 2.21 and 5.26 times the Seller’s Discretionary Earnings (SDE)
- Pool companies sold between .96 and 1.55 times the company’s Gross Profit
- Pool companies sold between 2.18 and 8.41 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
There is no doubt that the finances, rules of thumb, and valuation multiples play an integral role in your business valuation. However, the valuation should go far beyond the numbers themselves. Instead, your broker should also take into consideration the intangibles — the unique traits and opportunities your business has that may not be measurable or found on a financial report.
Step 2: Decide if Now is The Right Time to Sell Your Pool Company
The fact is it is not the right time for every pool company to sell. In some cases, it may be best to continue improving the company’s value and wait for a more opportunistic time to market your pool company. Once you receive your professional valuation, you (and your partners) should closely assess the situation and make an informed decision. In doing so, ask yourself the following questions:
- Does my valuation allow me to reach my financial goals?
- Is the market right to sell my pool company?
- Will my company be worth more now or in the future?
- What are my goals and desires after I sell my company?
By answering these questions, you should gain clarity as to whether or not now is the right time to sell your pool company. Of course, your business broker should be there with you every step of the way to answer your questions and provide honest and accurate advice.
Step 3: Market Your Pool Company in a Confidential Manner
Once you decide to bring your pool company to the market, confidentiality is essential. This ensures your clients, employees, and others who would be impacted by the sale are not negatively affected by rumors of the company’s sale. Consequently, our business broker should maintain confidentiality and sell your pool company discreetly. Your broker should also keep you informed throughout the process and value your input and desires as they search for the right buyer.
Step 4: Find the Right Buyer and Complete The Due Diligence Process
If your business is priced correctly and you can provide the correct documents promptly during the due diligence process, then you (and your broker) will likely have no issue finding a qualified buyer for your pool company.
Once you find the right buyer and receive a letter of intent to purchase your company, then the due diligence process begins. This is when the buyer confirms certain financial aspects of the business. You should have the process well mapped-out with parameters set to ensure the process does not take longer than necessary. Additionally, you (and your team) should prepare the company’s tax returns, bank statements, W2 forms, etc. ahead of time.
Contact The Experts at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions help pool company owners sell their businesses in a hassle-free manner. We review your specific goals for selling and work hard to find the right buyer, so you can move toward the next chapter in your life. To learn more and get started with a free business valuation, schedule a consultation with us today.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!