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BUSINESS SOLUTIONS Exit Strategies: Buying and Selling Most remodelers believe they will sell their business and retire, but it's rarely this simple By Rob Heselbarth M any remodeling business owners are Baby Boomers, a group whose effects on the nation's economy have been extensively written about the past several years. Thousands of them will retire each day for years to come, but to retire they must have an exit strategy. Selling the business is one option, which requires plenty of prep work and the right mix of seller and buyer. Remodelers who assume they will sell their businesses and ride into the sunset might be surprised at how difficult it can be to close the sale. "Many remodelers are told, and believe, that their remodeling businesses are worth a lot of money, but they have no proof and no plan to extract whatever value actually exists," says Larry Meadows, founder of American Exteriors in Littleton, Colo., which he sold in 2008. American Exteriors is a specialty remodeling firm founded in 1993, concentrating on high-performance window and siding replacement, which as a category has a low barrier to entry. This can be a problem when the end game today too often is to be the low-cost provider. "Anyone can get on the Internet and let their fingers do the shopping for the lowcost provider. To sell, we knew we needed to have a value proposition to sell the company, and it was to be different, and the best way was to have our own product. 18 July 2013 QR ForResidentialPros.com So, we built a factory in 2002, expanded into the West and Midwest, vertically integrated the company, and drove up the value and created a unique value proposition," Meadows says. Meadows was facing a lifestyle change and needed to achieve significant liquidity, while remaining involved in his business. he was selling, not retiring. Meadows retains equity in American Exteriors and remains involved, and is helping the company nourish and grow while maintaining leadership continuity. To accomplish this, he began the process of choosing an investment banking firm to help identify a private equity partner aligned with his goals, not necessarily one with the highest dollar offer. "I had a lot of families' livelihoods riding on this transaction and I'm intent on outlasting our competitors. Going with investors whose ideals align with mine was very important, and it allows us access to strategic consulting and capital if we need or want it," Meadows says. The deal gave control to the investors along with Meadows' strategic advice in an executive role. He retains a significant stake in the success of the business, so the investors are not afraid he will abandon them. "I did my homework, and talked with companies that have done business with the investors and are still in business. I knew the investors could not coach those owners enough to answer my questions adequately," he says. After staying on board for four years as CEO, naming a successor who set an all-time revenue record in April of 2013, Meadows says he's on his way to calling his deal a success. "I have a great relationship with my investors and the leadership team. I have flexibility where I can start another company, which might even be loosely associated with this [remodeling] space. When all my equity gets bought out, that will be when I'm officially able to call this a grand slam." Growth Through Acquisition Tom Kelly's experience transferring a remodeling business from one owner to another has been from the opposite perspective of Larry Meadows. Kelly has been buying rather than selling several remodeling firms during the past few years as part of a growth-through-acquisition strategy. Kelly, CEO of Neil Kelly Inc. in Portland, Ore., is in a rare position of being able to buy businesses and having family members to pass his business to when he eventually retires. If selling is a remodeler's most attractive exit strategy, it's important to under st a nd that remodelers a re not always the best targets because of how easy it is to enter the market, and that the owner typically is the center of information and knowledge, Kelly says. "Another problem we remodelers have is in some ways based on the past four or five years; this business is so cyclical. It hammers us hard in downturns, and we are not fountains of cash year after year," he adds.