27 - How to Structure and Execute an Ownership Transition

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". Highlights include:  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  Worse 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 worse 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. Links Doug Reitz Website Doug Reitz LinkedIn Doug Reitz Twitter Mark Wilson Construction: Website    This episode is brought to you by the Bullet Proof Succession Assessment Are you ready to step away from your business? Or are you stuck indefinitely? Which statement describes you best? I'm secure. My hard work will pay off. My plan is solid; things are looking good. I'm challenged. I need to keep working in order to achieve my goals.  I'm nervous. What if I have to work until I'm 70? I'm scared. All my hard work might go to waste.  I'm sinking. My business is a ball and chain.  Take this FREE assessment. In just 5 minutes, find out if you should be confident or worried about your company's future. Click this link to take the assessment: https://www.ericanderton.com/five