Contractors in Transition - But Are They Ready to Sell?

Many contractors are nearing retirement age and businesses are transitioning to family members or other business people.

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As we continue our look back over the 25 years Pavement Maintenance & Reconstruction has been publishing there's another trend to note: Those who started their business in what was the infancy of the industry are nearing retirement age so they are either turning the business over to family members - in many cases children who have attended college - or they are selling the business to other business people who want to enter the industry with an established company.

"The biggest change I'm seeing is there's definitely been a transition of handing off the baton from one generation to the next, and that will probably continue for at least the next five or six years as the Baby Boomers reach retirement age," says Brad Humphrey, Pinnacle Development Group.

The key change there is the perspective of the new owners: Business people looking for a business or, in the case of children, people who are often graduates with degrees in marketing, business, or finance. So where these contracting companies were begun and operated by hands-on technicians who grew them via the in-the-field work, many will now be run by people who have some understanding of the technical aspects of the job but are more interested and are more skilled in the business management aspects.

But Jeff Stokes, Next Level Contractor System, says that while many owners might want to sell, they have not developed their business to the point where it can be sold.

"While owners are aging and desire to sell, many still do not have a marketable firm because they have failed to create and sustain repeatable components (marketing, operations, human resources etc.)," he says. "Contractors that have created sustainable systems have a great opportunity to sell their business or turn it over to family. And while it is true that the greatest transfer of wealth will continue, new startups are taking market share away from established companies who have failed to keep up with change.

"There is no doubt the industry has been attracting more entrepreneurs who see pavement maintenance like any franchise business. I have definitely seen a more educated and professional type owners in the last few years entering the pavement maintenance business. This influx has been good for the industry as the bar for quality and customer satisfaction is raised," Stokes says. "But like any industry, they soon find out that marketing savvy only goes so far before they must learn the technical side of the business. I actually see more professionals entering who value both the technical and business side though they may not have come through on the job experience."

Pavement's February issue takes a look at how clients have changed - and how those changes have brought changes to contractors. It mails next week so keep an eye out for it - or read it online.