Mike Murphy

As often happens, I learned something new while talking to a contractor a few weeks ago. An interesting thing about learning something new is that I also often discover almost everyone else already knows what I am just figuring out for the first time. But, just in case, I thought I’d share some words of perspective from Tim McGuire.

McGuire works for the Clockwork Inc. group of companies, and is part-owner of a successful Benjamin Franklin Plumbing® franchise in the Twin Cities area.

He and I were discussing the pros and cons of contracting businesses when he made a statement that seemed to tie a nice tight ribbon around the Pandora’s box of business ownership. McGuire said, “I had come to the realization that a business exists for two reasons: fulfill personal objectives and provide an exit strategy when people are ready to leave.”

Across the years, there have been many relevant and laudable reasons for owning one’s own business, but McGuire captured most of those with the first half of his statement, and raised my eyebrows with the latter.

Fulfilling one’s personal objectives seems to cover everything from providing family security to providing gainful employment to other people, and a lot of things that might fall in between such as education for children, wealth and riches, or just simply sticking it to the man.

Providing an exit strategy? Perhaps some entrepreneurs see the future clearly enough to be aware of succession planning and retirement the first day they ever considered hanging their shingle above a front door, but does everyone make that connection so quickly? According to McGuire, he had been in business with his father for quite a while before the light bulb turned on for him. His epiphany occurred with the vision of what he wanted to do with his company - and what he wanted it to do for him.

Vision and mission statements are usually page-one-stuff of Strategic Business Planning 101, but very few contracting businesses really get to start from a clean sheet of paper. In other words, many evolved into ownership - from technician or installer, to manager and then owner - whether they really expected to or not. Many did not get the luxury of creating a grand plan because … well, work got in the way.

Before you knew it, you were running a business. More often than not it might now be running you.

TAKE A STEP BACK

Today’s economy being what it is, and that most construction segments are slow-growth at best, the number of new entries into the contracting trades has likely been somewhat down. Certainly, there are many budding entrepreneurs waiting in the wings to take their places among the competitors for home services work, but for now, most seem to be biding their time. Within a few years, as the construction business gets back up to speed, HVACR contracting businesses should experience some shuffling of the ownership deck.

Consolidation, a term that was thrown around a lot more in the mid-1990s than it is today, has not been totally absent. Many small, medium, and large contracting companies have quietly absorbed phone numbers, filing cabinets with customer names, and sometimes even the hard assets of businesses that were looking for a way out. However, in a few years, this industry will be looking quite attractive again; and in fact, in the parlance of the financial community, now may be the best time to buy.

Perhaps before the shuffling begins, contractors may want to take a step back from the day-to-day grind, and evaluate just what it is they want to do with their companies, and more importantly, how they expect to exit the business when the time comes.

Lee Rosenberg, a founder of Service Roundtable and the chairman of Rosenberg Indoor Comfort, of San Antonio, acknowledged that several business owners have recently offered to sell him their businesses. However, Rosenberg said, “But many of these are not businesses. The people are simply working hard and satisfying their customers, but doing so for very little money.”

Therefore, they have not created a business that anyone else would want to buy.

Per McGuire’s thoughts about the two objectives of owning a business, perhaps the exit strategy is one that really should take shape long before the necessity of selling the business arrives.

Publication date:09/27/2010