Construction Today - October 2009 - (Page 142)
CONSTRUCTION COACH Residential Avoid a ‘BUSINESS DIVORCE’ Proper planning and common goals can keep your business on track. BY PATRICK F. MCNALLY J Patrick F. McNally, MBA, CPA, ABV, is partner in charge, corporate finance consulting for Blackman Kallick in Chicago. Contact him at 312-980-2934 or email@example.com im and Ed are partners in a flooring contractor. They started Always Underfoot 20 years ago, when they left a company where Jim was a salesman and Ed was a field supervisor. Jim is now 66 years old and ready to retire. Ed is 57 and wants to work until he is 62. When Jim approaches Ed about retirement, Ed refuses to buy him out, but won’t agree to sell either. Since they don’t have a buy/sell agreement, Jim can’t force a sale without taking legal action. That could take years, cost hundreds of thousands of dollars and be emotionally draining. Jim is watching retirement slip away, but doesn’t know what to do. When he went into business with Ed he did not expect it to be “until death do us part.” When business partners no longer want to work together, the result can be a fight as bitter as the most acrimonious divorce. No matter how much money you offer your partner for his share of the business, it’s not enough. When you offer to be bought out instead, any amount is too much. The circumstances behind such stalemates are varied, but there’s one common cause: The partners didn’t plan. • Each partner’s areas of responsibility; and • Limits on each partner’s authority. 4. Establish a buy/sell agreement. A buy/sell agreement is a contract among the owners of a business. Its purpose is to provide for a smooth transition in the event of certain events, such as: • Death – A buy/sell agreement can provide liquidity, as well as assurance that your family won’t be stuck owning a business run by others. Life insurance can help fund a buyout, provide stability to the family of the deceased partner and keep the buyout from damaging the business. A buy/sell agreement can also guarantee that the surviving owners do not find themselves with unwanted new partners. Avoid a “Business Divorce” 1. Choose your business partners carefully. Be sure you have compatible goals and values. If your goal is to be the largest excavator in the state, you are setting yourself up for failure if you go into business with a partner who wants a nine-to-five lifestyle. Put your goals and values on paper. Discuss them annually. If you disagree later, you will have some previously agreed-on common ground. 2. Have an exit strategy. The time to decide on when to exit the business is when you start the company. You can always agree later to revise your plans. 3. Set clear ground rules. Establish company policies regarding issues such as: • Who can be an owner; • Minimum requirements for family members to enter the business—such as at least five years’ experience at a company where your last name doesn’t mean anything; CONSTRUCTION-TODAY.COM OCTOBER 2009
Table of Contents for the Digital Edition of Construction Today - October 2009
Construction Today - October 2009
Regional Spotlight: Southwest
Ledcor Construction Hawaii LLC
C.H. GUERNSEY & Co.
First Gulf Development Corp.: Meadowvale Corporate Centre
Jacobsen Construction: Workers Compensation Fund Headquarters
Novak Construction Co.
Affordable Concepts Inc.
HBD Construction Inc.: Edwardsville Crossing
Ledcor Construction: Napa, Calif.
Mared Mechanical Contractors Corp.
Myers & Chapman Inc.
Summit Contractors Group Inc.
Wilcox Construction Inc.
Special Focus: Mergers & Acquisitions
Hensel Phelps: Phoenix Sky Harbor Intl. Airport Sky Train
Circle Construction LLC
Electrical Contractors Inc.
Everett, Wash., Department of Public Works
Imco General Construction Inc.: Arlington WWTP
New Prince Concrete Construction
R.N. Rouse & Co. Inc.
Stanek Constructors Inc.
Fort Lewis: New Barracks, Army Growth Complex and Support Battalion
Torcon Inc.: Brookhaven National Laboratory’s National Synchrotron Light Source II
Bovis Lend Lease: FBI Denver HQ
Stuart Olson: University of Lethbridge Markin Hall
Bird Construction Co.: Shearwater Helicopter Base
Carbon Constructors Inc.
Consultants & Builders Inc.
Emerick Construction Co.: Rock Creek Middle School
Broadmoor/Boh Brothers Construction Co.: U.S. Coast Guard Integrated Support Command
Cahill Contractors Inc.: The Oakland Museum of California Phase 1
Flintco Inc.: Germantown Women & Children’s Pavilion
Gamma Construction Co.
Kreizenbeck Constructors: BSU Student Union
Pizzagalli Construction Co.: FAHC Radiation Oncology
Robins & Morton: Lincoln Hospital
Steele & Freeman Inc.
Tenderloin Neighborhood Development Corp. (TNDC)
W.G. Yates & Sons Construction: Armed Forces Retirement Village
BBL Construction Services LLC: The Glen at Sugar Hill Apartments
Chelsea Investment Corp.
Affirmed Housing Group
Westland Construction Inc.: Bridges at Citifront
Product Showcase: Plumbing Equipment
Hunzinger Construction Co.: Johnson Controls Headquarters
B.L. Harbert International LLC: S.O.F. 5th Special Forces Battalion Operations Complex
Duke Construction: Monarch Beverage Co. Headquarters
Irish Construction Co.
TMU LLC (Triune)
Last Look: Consultants & Builders Inc.
Construction Today - October 2009