We get it. Deciding to sell your electrical company is not easy. You have poured years into establishing a quality reputation within your community. For this reason, many electrical company owners spend years contemplating a sale before making the step to do so, fearing that the process will prove to be a headache riddled with disappointment.
The good news is you can sell your electrical company hassle-free by taking the appropriate steps. This review tells you everything you need to know about how to sell your electrical company, including how to determine your value and a general overview of how the sales process works.
About The Electrical Industry
The electrical industry is massive. There are numerous opportunities, and skilled contractors who develop strong reputations within their community can generate large customer bases with appointments booked weeks in advance. The demand for electricians has continually increased over the past five years. Many experts also predict an increased demand for electrical companies who offer services and installations for generators and solar appliances. Here are several key figures related to the electrical industry (the information is from Business Reference Guide):
- There are approximately 230,000 electrical contractors and companies in the U.S.
- There was a 2.2% annual growth for electricians between 2018 and 2023
- There is a 0.2% projected growth for the electrical industry between 2023 and 2028
- The annual revenue for the electrical industry is $225.4 Billion ($12.6 billion profit)
Business Valuation: How to Determine Your Electrical Company’s Worth
Several key metrics are used to determine your electrical company’s worth. Notably, these metrics include your SDE, gross profit, net sales, and EBITDA. Other considerations include, but are not limited to, your electrical company’s future earning prospects, capital structure, and market value of assets. Below are several rules of thumb that should help you formulate a range for your business valuation:
- Electrical companies sold between 2.5 and 3.5 times the Seller’s Discretionary Earnings (SDE)
- Electrical companies sold between .79 and 1.57 times the company’s gross profit
- Electrical companies sold between 3.00 and 4.78 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
The data is from an analysis of U.S. private industry transactions. For example, if your electrical company’s SDE is $120,000, then your company (according to the rule of thumb), is most likely valued between $255,600 and $382,800. It is essential to keep in mind that these are only general and tentative guidelines and rules of thumb. They, by themselves, are not precise ways to measure the value of an electrical company.
Instead, it is vital to consider other factors. For instance, this includes many considerations that do not show up on a financial report or tax return. This may include your unique selling proposition. In other words, it may consist of the very thing that sets you apart from your competitors. Your geographic location, local reputation, and financial projections and trends are also key for business brokers when formulating your business valuation.
You should also check: How to Sell a Custom Architectural Millwork Manufacturing Company
How The Sales Process Works for Electrical Companies
The mergers and acquisitions process for electrical companies is unique. There is no cookie-cutter approach, and your business broker should evaluate your electrical company and personalize your sales approach. However, in general, here are the five steps you can expect throughout the process.
Consult with an Experienced Business Broker
A broker who understands the electrical industry makes the sales process easy and more successful.
Receive and Review Your Business Valuation
A professional valuation gives you a sense of how much your business is worth on the market. It is not always the right time to sell; this value helps you determine if you should sell now or continue improving your value.
Market Your Business in a Discrete Manner
Selling an electrical company can be tricky. Confidentiality is of the utmost importance throughout the process. A business broker can ensure your business is discretely brought to the market.
Review Offers and Choose The Right Buyer
The bottom line is a key consideration, but you may have other goals for the sale of your electrical company, such as a buyer who will continue your vision.
Finalize The Sale
The sale process is riddled with complexities, legalities, contingencies, and more. Your business broker can assist you with finalizing the sale and ensuring the buyout is appropriately transferred to you.
Schedule a Consultation and Speak With a Professional Business Broker
Are you considering selling your electrical company? If so, then contact our office and speak with a professional business broker. We have helped more than 600 businesses sell their company and meet the unique goals they have for the sale. We are happy to answer your initial questions and provide you with more information during the consultation call.
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!