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1Call2Build—Our Blog

Here are some thoughts and insight on our business and the construction industry in general. We update our blog regularly to keep you informed and entertained.

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November 9, 2017

9 Milestones of A Successful Transition

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Mark’s three-part succession planning series will examine why a succession plan is important, questions business owners must ask themselves before planning, and elements of a succession plan.


Succession plans are not “one size fits all”. In fact, there are many different types of succession plans depending on the objectives of buyer and seller. Like establishing your values and culture, setting the course of your succession plan is a deeply personal process that should reflect your history, leadership and vision for the future.

It takes time to transfer your business – even to family members or other insiders. Successful transitions span 3 to 8 years on average to prepare, plan and execute. Moreover, when the transition involves the transfer of cash over an extended period of time, that fiscal plan will require significant due diligence. Without careful forecasting and financial analysis, payouts to the exiting leader (typically a combination of investor cash and company profitability) may hinder cash flow and debilitate the business. Successful transitions gain stakeholder consensus early, with a mutually beneficial and financially viable plan. Working together without conflicting motivations, outgoing and incoming leaders have more time and energy to focus on a smooth operational transition and future continuity.

Good succession plans are distinctive to each company, but the milestones within the process are fairly similar:

1.  Define your financial objectives to create clarity. This requires some personal soul searching, but is essential to establishing financial security for the company as well as yourself. Owners should quantify a timeline for exit, a sale price based on appropriate valuation, and rewards for key employees.

2.  Get a business valuation done by a professional business valuator. Only a seasoned professional is qualified to objectively apply a variety of valuation methods to determine a fair price for the business. Using a third-party expert will eliminate bias and keep buyer and seller motivations in sync.

3.  Develop solid, credible financial models which could include any combination of individual funding, bank debt funding, company cash flow funding and share transfers. Develop multiple scenarios for the planned payout schedule. In short, determine how and when to pay out the exiting stakeholders.

4. Develop a strategy to assess the new leadership’s professional and emotional growth opportunities. Understanding the current cultural, operational, and emotional drivers within the company helps identify any possible voids that could become apparent when key leaders exit the organization. A clear strategy which identifies what roles and responsibilities will be assumed by whom needs to be established. Follow with a corresponding transition and training plan to address these gaps and ensure smooth continuity.

5. Determine a plan to minimize transactional taxes. Organizations and individuals can get double-taxed when the transfer of a business takes place. Different types of corporations have different tax implications, and it is important to work with the company’s accounting firm to determine the smartest way to transfer shareholders.

6. Establish succession protocol within the Business Continuity Plan (BCP). Similar to managing risk in times of emergency or disaster, the BCP should allow exiting leaders to react and engage if company performance falters during the transition. It should identify what happens in the event of an untimely death, disability or departure of key leaders, and also define voting and/or decision-making control. The BCP ensures that business can continue and management maintains functionality, credibility and vision during this potentially traumatic time. As the essential company playbook, the BCP will drive communication to all interested parties, identify threats, define areas of responsibility and outline recovery measures.

7. Institute post-sale agreements on employment, consulting and competition. For group clarity, these agreements are a must and will define the roles of all stakeholders after the sale. Those remaining within the organization after the transition should execute employment agreements covering a defined term in order to secure the company’s stability and success. While exiting stakeholders should also have a plan for continued services, these arrangements generally take the form of consulting agreements or board assignments. Real business knowledge has likely never been written down. Learning from, and retaining their strengths is essential in managing risk while new leadership is established.

Non-compete agreements may seem unnecessary in many circumstances. However quite often, former business owners long to return a few years down the road. Should they decide to re-enter the market, a non-compete agreement establishes the boundaries and limitations of using proprietary knowledge.

8. Clearly communicate the plan to employees, your trusted advisors (bankers, attorneys, accountants), and key clients. Corporate transitions can initiate fear and uncertainty in the minds of customers and vendors. Draft sample communications for each of the possible audiences that outlines the details and vision that the successor has for the company. Addressing the change proactively via clear communication strategy dispels most rumors and assumptions.

9. Monitor the plan at least quarterly and institute course corrections as needed. Just as companies aren’t static, neither should the succession plan be. Objectives, goals and roadblocks are constantly changing and shifting. When these changes happen, the succession plan should be updated to assure that the team works together fluidly and in sync.


Mark Schwei is an equity partner and member of Consolidated Construction’s executive team, which designed and implemented its own succession plan strategy. He is an engineering graduate of Marquette University and imparts his love of details, practicality and ingenuity on matters related to company leadership. Mark continued his executive education through the University of Wisconsin on the subjects of Business Planning, Mergers and Acquisitions, and Sales and Marketing Management, and received specific training in the area of succession planning from national experts. Mark is a leadership mentor and business coach to chief executives as current Chairperson at The Executive Connection (TEC).

November 2, 2017

Q. How do I Decide Between Renovation and New Construction?

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Q.  How do I decide between renovation and new construction?

A.  Both renovation and new construction can be cost-effective and sustainable solutions to your building project. There is no “right answer” to this question, but the circumstances of your project, timeline and budget may make the decision more complicated.

You might want to renovate: if the building meets code and systems are up-to-date. Then, weigh the value of your building’s history and structural integrity. Removal of hazardous materials will likely outweigh its character and historical significance. Although, this type of work can also drive up renovation costs. Finally, consider whether the building will be in use during renovation, which may lead to additional losses in revenue or added costs.

You might want to build new: if your team has agreed it needs less restriction. With new construction, your team can benefit from incorporating cost-efficient, modern technology and sustainable building practices. This choice also gives the team more control over the building’s layout. Note that building new may be more expensive than renovating, or could result in losing out on a prime location.

To make the decision, we suggest discussing these factors with all parties. Outline priorities for the use of the building, the budget available, and any additional limitations.

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October 3, 2017

Business Owners, It’s Time to Get Real.

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Mark’s three-part succession planning series will examine why a succession plan is important, questions business owners must ask themselves before planning, and elements of a succession plan.


Thinking about the life of your company after you is hard. We’d all like to believe that one day each of us will ride off into the sunset, confidently bestowing the sweat, sleepless nights and responsibility to a capable successor who will continue business as usual while we enjoy the financial dividends of our lifetime achievement. A clean, simple transition. Later. When you’re ready.

Leaders, it’s time to get real. Three in five small businesses do not have a succession plan in place and even large corporations have been known to operate on the ledge without an identifiable succession plan. Historically, successions have not been well done. The lack of preparation – for planned and unplanned circumstances – may account for a number of business stumbles and failures following transition.

Start the succession planning process now by first answering a few tough questions. Give yourself time to reflect on the past and visualize the future:

  • How much money do you personally need for your own financial independence in retirement?
  • Have you enlisted the help of a certified personal financial planner?
  • At what age do you see yourself divesting from daily activities of the company?
  • What does retirement look like for you and your family?
  • Do you want to reward key employees for their support, loyalty and performance?
  • Are there likely successors in place with the knowledge and capability to be leaders?
  • Are they ready now, or do you need to cultivate their knowledge and capability further?
  • Will you consider an external successor?
  • Do you wish to preserve a family legacy?
  • Have you enlisted the help of an attorney?
  • What happens to the business in the event of your untimely death or disability?
    • Who will fill the leadership void? Is their assignment temporary or permanent?
    • Who will communicate with employees and “calm the storm”?
    • Who will make financial decisions?
  • Do you have a strong cash flow and balance sheet to maximize valuation?
  • Have you enlisted the help of a certified public accountant?
  • How is the value of the business determined?
  • Have you enlisted the help of a certified business appraiser?

I’m an advocate for professional assistance from a certified financial planner, attorney, accountant and business appraiser. Professional expertise is critical to a successful transition plan. Once you’ve answered the questions above, you’re ready to enlist professionals and build the team that will lead you to a successful transition.

 

In the final installment of Mark’s three-part succession planning series, he will share the steps and key elements of an effective plan that maximizes financial independence for the business owner, and provides stability for the company. 


Mark Schwei is an equity partner and member of Consolidated Construction’s executive team, which designed and implemented its own succession plan strategy. He is an engineering graduate of Marquette University and imparts his love of details, practicality and ingenuity on matters related to company leadership. Mark continued his executive education through the University of Wisconsin on the subjects of Business Planning, Mergers and Acquisitions, and Sales and Marketing Management, and received specific training in the area of succession planning from national experts. Mark is a leadership mentor and business coach to chief executives as current Chairperson at The Executive Connection (TEC).

October 3, 2017

Why Plan Your Company’s Future Now? Millennials Know.

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Mark Schwei’s three-part succession planning series will examine why a succession plan is important, questions business owners must ask themselves before planning, and elements of a succession plan.


For as much discussion taking place on issues facing each generation in our current workplace – Baby Boomers, Gen Xers, Millennials and now Gen Z Post-Millennials – rarely does the topic of succession planning receive much attention beyond Baby Boomers. At least, so we thought.

A June, 2016 online Harris Poll[1] survey among 502 U.S. business owners with fewer than 300 employees revealed that young business owners actually have a better grasp on the importance of succession planning than their elder counterparts. According to the survey, Millennial business owners are more likely to have a business succession plan in place (61 percent) in comparison with Baby Boomer (32 percent) and GenX (32 percent) leaders. Analysts theorize that the discrepancy is philosophical: Baby Boomers believing they’ll work in their current position until retirement, then hand the company over to a deserving family member or subordinate; Millennials hoping to run multiple companies and gauging success by how each is positioned before they leave.

Millennials get it. We may not all be on a straight line to retirement, and life happens unexpectedly. Succession planning ensures a healthy transfer of the business under a variety of circumstances and makes financial security a priority.  Succession planning also:

  • Aligns the leader’s personal financial and retirement expectations with the business enterprise.
  • Unites and creates clarity for first- and second-tier leaders.
  • Motivates employees. Within the succession plan, a performance-based profit sharing plan can attract and cultivate up and coming leaders.
  • Elevates confidence in the company from its trusted business partners: bank, legal counsel, accounting firm. Including these partners in the process from the start only improves that confidence further.
  • Provides a course of action for successors in the event of a leader’s untimely disability or death.
  • Preserves a family legacy through careful planning and design.

Like your financial planner says about retirement savings, “Start early.” Millennials who have already started succession planning in the prime of their careers reap benefits that compound over time: more clarity, more motivated staff, higher confidence from trade partners. Although it’s never too late to start, those who start early have the most leverage and long-term security.

 

 

[1] The Small Business Owner Study was conducted online by Harris Poll on behalf of Nationwide from June 10-23, 2016. Respondents comprised 502 U.S. small-business owners of companies with less than 300 employees, and included 190 Millennials (ages 18-35), 152 Gen Xers (ages 36-50) and 106 Baby Boomers (ages 51-65). Results are weighted to be representative of small-business owners in the U.S. Research participants were drawn from the Harris Poll Online (HPOL) research panel and partner sample.


Mark Schwei is an equity partner and member of Consolidated Construction’s executive team, which designed and implemented its own succession plan strategy. He is an engineering graduate of Marquette University and imparts his love of details, practicality and ingenuity on matters related to company leadership. Mark continued his executive education through the University of Wisconsin on the subjects of business planning, mergers and acquisitions, and sales and marketing management, and received specific training in the area of succession planning from national experts. Mark is a leadership mentor and business coach to fifteen chief executives as current Chairperson at The Executive Connection (TEC).

September 26, 2017

Do the Long Term Benefits of “Green” Design Elements Outweigh any Potential Higher Costs?

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Q. Do the long term benefits of “green” design elements outweigh any potential higher costs?

A. While a desire to incorporate certain green elements into a commercial construction project can sound daunting, an analysis of commercial construction data shows us that a significant number of projects report minimal or no cost increase to incorporate reasonable levels of sustainable design. So, the answer is yes.

Of course, depending on the type, scope and size of a project, there can be additional initial cost when incorporating green design elements into a project. But many studies show that the average increase in first-cost premium can be as low as 1% to 2% to include moderate levels of sustainable design.

With that being said, one of the keys to incorporating green elements into a building project is to have a greening discussion early in the design process. Many issues pertaining to initial cost overruns can be alleviated by developing a dialogue early in the schematic phase by the design and construction team, subcontractors and material suppliers. The requested green elements should be clearly outlined and detailed during the design development phase, confirming the capital and operating benefits over the expected life of the building are real. By providing that information, the building owner will have a better understanding of the true value of such an investment.

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