Shifting Ownership of a Construction Company to the Next Generation
Doug Reitz and his partner are currently 2 years into a 5-year process, purchasing Mark Wilson Construction from the founder.
In this episode of Construction Genius, we discuss Doug’s successes, challenges, and lessons learned as he’s embarked on the process of becoming a partner in a successful construction company.
Throughout Doug’s career in the construction industry, he has been fortunate to have worked in positions that span from Project Clerk to President. He has completed or provided oversight through all delivery methods in projects related to the Medical, Educational, Public Works, Industrial and Religious fields. During this time he has worked closely with Clients, Contractors, Inspectors, and Design Professionals seeing all sides of a construction project giving him valuable insight into the entire construction process.
In addition to teaching courses at Fresno State in the late 1990’s and early 2000’s, Doug has also had the opportunity to speak with local contractors, design professionals, and at industry events about the leadership concepts of “Listen. Plan. Build.”, “Communicate & Collaborate”, and “Safety, Quality, Time and Cost”.
- How the ownership transition drove volume
- The tension between volume, risk, and profit
- What to look for in a second-generation partnership
- The importance of sharing a common business philosophy
- How Doug got to know his partner by building a project together
- How the “earn out” model affected bonding, debt, and cash flow
- Why communication and collaboration is essential to a successful transition
- Defining and aligning each partner’s “why”
- The importance of leaving your ego at the door in order to have productive conflict
- How to divide up responsibilities between the new partners
- Using the “S.O.A.P” model to build a successful construction company
- The importance of understanding financials and accounting, including cash flow, bonding capacity and debt and how they relate to ownership transition
- Worst-case scenario planning
- Who makes the final decision in a 50/50 partnership?
- Handling conflict using the “listen, plan, build” method
- Start the transition as early as possible and have the new partners dig into the financials
- Communicate and collaborate to ensure success
- Action items:
- Openly discuss the transition and write everything down before bringing in CPAs and attorneys
- Then consult with CPAs and attorneys on the legality of the transition and new structure
- Get the transition contracts in place as early as possible
- Do worst-case scenario planning and clearly spell out risks and how each party will be protected
- Allow conflict, find a balanced approach, don’t go to your corners.
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