Facilities management is a complex, and often specialist, area of work. Property maintenance, fire safety and security companies generally come with lots of valuable moving parts, all of which must be carefully addressed when planning your exit strategy.
If you’re thinking of selling your facilities management company, this post explores some key considerations to prepare for a smooth and profitable sale.
Are your certificates up to date?
A fairly easy one to begin with. Some areas of facilities management are regulated so check you have the relevant accreditations and certificates and they are all valid. ISO9001 accreditation is a badge of quality for prospective buyers.
Buyers want to feel confident a business is run in adherence to all applicable laws and guidelines. Don’t let a single out-of-date certificate hinder your business sale.
Secure regular recurring contracts
A track record of recurring client contracts is a sure sign of customer commitment. Ongoing contracts provide evidence of repeatable work and regular guaranteed income streams, which in turn builds confidence amongst prospective buyers. After all, they are looking to invest in a profitable business.
Prime examples of recurring contracts include fire and smoke alarm servicing, exterior grounds maintenance, PAT testing, and pest prevention and control.
Client contracts also suggest a business that’s organised and disciplined in its management.
A word of warning! Check the wording of your contracts to make sure there are no clauses that could jeopardise the sale of your business, e.g. clauses that would allow clients to walk away should the business be sold. A buyer wants reassurance that customers are both contracted and their agreements are secure. All contracts must be future-proofed and fit for purpose.
Check contract duration and renewal dates
Whilst we’re on the subject of contracts, check through each one and make a note of the renewal dates. Keep on top of contract renewals and start the process early, where possible. There will always be exceptions as every sale is unique. Most buyers are looking for the security of long-term contracts and will be satisfied with a contract duration of 3-5 years.
Formalise informal relationships
If you don’t have clients on contract, is it possible to sign them up? Arduous as they may sound, contracts are hugely attractive and appealing for buyers purchasing a facilities management business. Formalising relationships on paper builds buyer confidence and means you can demand a higher sale price because of the value and guarantees contracts provide. Even a specialist business broker like us cannot put a value on good intentions.
Tie in sub-contractors
If your facilities management business uses sub-contractors to carry out any element of your service, make sure their services are tied in by contract. This is crucial in the case of specialist sub-contractors where it could be difficult to find another supplier to fill their shoes, e.g. hazardous waste disposal. If a key service provider decided to cut ties following your business sale, would the business still be able to deliver that service? If the buyer can’t replace that service it will reduce profits and if you have some sort of deferred earn out arrangement on the sale, your cash could be at risk.
When tying in a service provider, think about the key terms of your business relationship and set this out in writing. For example, what’s the minimum volume of work? Which days of the week do they work for you? How many hours? Do they provide out-of-hours response?
It may not be possible to agree a contract with every sub-contractor, but it’s always worth a conversation. Once your contracts are in place, be sure to store the information in an orderly fashion to impress potential buyers.
Consider employee terms and relations
Employees are a critical consideration in every business sale. Every responsible business owner should be looking out for the job security and wellbeing of their people throughout the sale process.
Have an employment law specialist check the details of your employment contracts and make sure they are up to accepted standards and adhere to current TUPE and other employment legislation. Make sure each employee’s terms and conditions are correct and legally binding, e.g. holiday and sickness entitlement, and ensure any new business owner is liable for retaining staff and upholding those terms when they take over.
As with all contracts, keep them somewhere safe, secure and easily accessible in preparation for your business sale.
Add new facilities management services to the mix
Is your facilities management business delivering all the services your market expects? Branching out to deliver complementary services could make you the go-to supplier, which adds to the market value of your business and the price buyers are willing to pay.
Offering new subscription services or bringing a sub-contracted service in house has the potential to increase average income per customer and secure more contracts. As we’ve established, buyers enjoy the security and stability of a watertight contract.
Contract in preparation to sell
Every business is worth a multiple of its net profits, which rises if recurring income streams are in place and secured. So instead of a value which represents 1-2 times net profit, you might be able to increase it to 4-5 times net profit. Financially, that makes a big difference to the cash you walk away with on sale.
If you’re preparing to sell your facilities management business and want to achieve a profitable sale, it makes complete sense to have a set of legally binding agreements in place.
How to sell your facilities management company?
As specialist business brokers with experience in selling facilities management businesses at profit, we’d be happy to guide you through the process. Here’s how to get in touch.
Would prefer to read a case study specific to this sector, no problem.