Sell Your Plumbing Business with Pacific Business Brokers 

Selling your plumbing business is a significant decision, and when it comes to negotiating the best deal, having the right strategies in place is crucial. At Pacific Business Sales, we understand the intricacies of successfully selling  plumbing contractor businesses  and are committed to ensuring our clients  get the maximum value and favorable terms for their business. In this comprehensive guide, we’ll delve into the negotiation process between sellers and buyers, sharing insights and strategies that can help you maximize the value of your plumbing business.

Step 1 Determine Your Timeline to Sell Your Plumbing Business

The timeline for selling your plumbing business will determine your next steps.  If you intend to sell your business within the next 12 months, then now is the time to start planning for the sale of your business.  If your timeline is further out, then now is the time to start developing your Exit Strategy and laying the groundwork for the future sale.  

Step 2 Finding the Right Plumbing Business Broker 

Choosing the right business broker is critical in the sale of businesses such as plumbing contractors. It is key that the broker understands your business and the plumbing trade, as well as CSLB C-36 licensing requirements for prospective buyers.  The broker should have experience in having sold plumbing businesses in California and be familiar with determining the market value.

Step 3 What’s My Business Worth? Market Value Analysis Before making the decision to sell your business and take it to market with a business broker, you need to know the company’s market value and what to expect for offers.  

Pacific Business Sales offers a free Market Value Analysis for our clients and prospective clients.  Our firm uses PeerComps professional business valuation software for our market value analysis.  Peercomps market data is from closed SBA financed transactions and the business appraisals for those transactions resulting in highly reliable market data.  

The steps in preparing the Market Value Analysis are outlined below: 

1. Financial Statements: We review your financial statements, including tax returns, P&Ls , balance sheets, and cash flow statements, to calculate the DE (Discretionary Earnings) and EBITDA (Earnings Before Interest Before Taxes Depreciataion & Taxes). 
2. Calculating Add-Backs: Add-backs are business broker jargon for owner’s salary, benefits, and expenses that are run through the company.  The sum total of these owner’s benefits are added to the Net Profit on the tax return to calculate the DE.   .
3. Market Value Analysis: We prepare the Market Value Analysis to determine what your plumbing business is worth and meet with you to review the results and our recommended listing price as well as the expected range for selling prices.  

Step 4 Confidentially Marketing Your Plumbing BusinessMaintaining confidentiality of the prospective sale of your business is paramount. Business owners are understandably concerned about employees, customers, and suppliers finding out the business is for sale.  

Pacific Business Sales business for sale ads are written to be compelling and generate inquiries, while maintaining the confidentiality of the business and location.  

Prospective buyers do not receive any confidential information until after they have signed a Confidentiality Agreement (NDA) and provided a detailed Buyer Profile with their financial information and experience.  

Our marketing program for businesses includes posting the confidential ad on the top business for sale websites, sending email blasts to both our buyer email list and the BizBuySell buyer database, and for larger businesses posting the business on Axial.net which targets Equity Groups and Institutional Investors.  

Step 5 Crafting a Compelling Confidential Information  Memorandum (CIM) 

The  Confidential Information Memorandum  (CIM) is a comprehensive document that provides potential buyers with a detailed overview of your plumbing business. It includes financial information, operational details, customer demographics, and growth potential. Our team at Pacific Business Sales excels in creating compelling CIMs that showcase the value and potential of your business. A well-prepared Offering Memorandum not only attracts serious buyers but also sets the stage for favorable negotiations.  SBA lenders use our CIMs as part of the business review process and use the information in underwriting.  

Step 6 SBA Lender Pre-Approval 

Obtaining SBA pre-approval is a unique step that Pacific Business Sales takes for all of our businesses.  SBA financing is our preferred financing structure and our firm uses SBA financing on over 90% of our transactions each year,  

SBA financing is a great deal for both buyers and sellers because SBA lenders will finance up to 90% of the transaction which means the buyer only needs a 10% down payment.  SBA financing also offers a 10-year term.  

Step 7 Identifying Qualified Buyers

Not all inquiries are from serious buyers. Pacific Business 

Sales employs a rigorous screening process to identify qualified buyers who have the financial capacity and genuine interest in purchasing your plumbing business. This minimizes time wasted on unproductive buyer meetings  and ensures  we are focus on serious buyers that are likely to consider offers.

Step 8 Preparing a Purchase Agreement & Skillful Negotiations

While the selling price is at the forefront of every owner’s mind there are other important terms to be negotiated in the purchase agreement.  Is there a Seller Note (Seller financing) in the offer, how long is the Due Diligence period, what are the contingencies, what is the training period in the offer, does the buyer want a consulting agreement, does the buyer want the seller to act as the RMO and if so for how long? These are just a few of the terms to be negotiated in a purchase agreement for a plumbing company.  

We have successfully negotiated hundreds of purchase agreements including complex stock sale purchase agreements and transactions with Private Equity Groups.  

 Here are some strategies we employ during negotiations:

1. Market Value Analysis Supports Business Value: Buyers generally have no idea how to value a business. The Market Value Analysis we prepared supports the asking price for your business and provides comparable sales data showing earnings multiples for similar businesses.  
2. SBA Financing: Pre-approval by our SBA lenders gives buyers confidence in the business cash flow being sufficient to cover debt service and that it qualifies for financing. SBA financing also gives buyers more favorable financing terms and lower debt service costs. 
3. Multiple Buyers and Offers: Creating a competitive environment with multiple interested buyers can lead to better offers and allows you to select the most qualified buyer and the buyer most likely to successfully close the transactions
4. Negotiating Terms: Price isn’t the only negotiation point. We also negotiate favorable terms, including payment structures, Due Diligence timelines, contingencies, RMO if required, and transition periods.

Step 9 Due Diligence  

Due Diligence is an important contingency in every purchase agreement.  Buyers will conduct a  due diligence  review of the company’s financials, tax returns, bank statements, and other records to verify the revenue, profitability, and earnings of the company as well as the company’s operatoins.We work with buyer and seller, and their advisors to facilitatea smooth and timely due diligence process. We help sellers prepare for Due Diligence in advance by providing them with a customary Due Diligence list so they can prepare the information in advance. 
Questions arise during the Due Diligence process. We work closely with the buyer, seller, and their advisors to address these questions along the way and keep the process on track.  

Step 10 Escrow and Closing 

Once the Due Diligence contingency is removed in writing by the buyer we open escrow.  Pacific Business Sales uses an escrow company specializing in business sales transactions that is capable of both Asset sales and Stock Sales as well as working with SBA lenders and their loan documents for closing.  

The escrow company performs lien searches, obtains releases from California state agencies including the FTB (Franchise Tax Board), EDD (Employment Development Dept), and CDTFA (formerly SBOE or sales tax agency). Escrow handles the closing process with the lender, signing the SBA loan documents, final closing documents, funding, and closing. 

During escrow we work closely with the escrow officer, SBA Lender, Buyer, and Seller to keep the process on track.  

Our commitment to our clients doesn’t end at the closing table. Pacific Business Sales provides post-closing support to ensure a successful transition. This may include helping with employee communication, customer retention strategies, referrals to professional services, and post-closing questions. 

Negotiating the best deal for your plumbing business requires expertise, preparation, and a deep understanding of the market. Pacific Business Sales possesses all these qualities and more. Our commitment to our clients is unwavering, and we go the extra mile to ensure favorable terms and a successful sale. If you’re considering selling your plumbing business, contact Pacific Business Sales today, and let us guide you through the negotiation process to achieve the best possible outcome.
Remember, the sale of your plumbing business is a significant milestone, and having the right team on your side can make all the difference. Trust Pacific Business Sales to negotiate the best deal for your plumbing business and help you embark on your next journey with confidence.