Contractor Exit Strategy 2 of 6: Pass Down to Family

This is a very common strategy for contractors and is successful for those with interested family member(s) who are effectively working in leadership roles.

D. Brown Management Profile Picture
Share
Succession: Exit Strategy 2 of 6 - Pass-Down to Family.

The valuation focus for these deals is on tax efficiency and risk management by tightly integrating the transaction with estate planning. The upside is that there are typically solid tax savings with this type of deal.

The typical downsides of these deal structures include:

  • Deal structures that potentially make adding non-family members as equity partners difficult. 
  • The deal structure keeping the incoming owners from feeling the full weight of their capital-at-risk that would typically be felt by a non-family buyer. This is a very underestimated dynamic that often negatively impacts professional development and business performance significantly. 

Other common risks include:

  • Key non-family management team members leaving if they feel they are being passed up, which is why there is a huge burden for family members to be effectively performing in leadership roles prior to succession.
  • Family members being pushed into roles they don’t want to please their parents, which negatively impacts them personally, the business performance, and family dynamics.  
  • Toxic team dynamics created by unclear boundaries between family and business. 

Contractor Exit Strategy 2 of 6: Pass Down to Family
Continue building value in your business, yourself and your key team members with a good succession strategy....

Contractor Exit Strategy 2 of 6: Pass Down to Family
Continue building value in your business, yourself and your key team members with a good succession strategy....

Creative Adaptability as a Company Culture and Capability
Ensure that your business and career thrives in the current COVID shutdown and in the likely post-COVID recession. Be like Batman and build yourself into who you need to be in order to thrive in all situations.
Coaching and "GPS Feedback" - John Wooden Example
The best coaches and superintendents all have an eye for detail and constant communication. Winning in construction or sports is about ensuring that thousands of details come together correctly. The game (or project) is won far away from the scoreboard.
Required Leadership Focus Changes at Each Stage of Growth
At each stage of growth, the leadership focus at the top for majority Owners/CEO/President must change to continue navigating growth effectively. Concurrently, the leadership focus from the prior stage of growth must be transferred and expanded downward.