For this week's blog post we're sharing one of our business sale case studies. (You can read all of our case studies in the Resources section of our new website.)
The case study features one inspiring client, Luke, a NSW businessman and electrician who started his own high-voltage electrical contracting company in 2004.
From 2004 to 2013 Luke and his team developed the company into a multi-million dollar business, servicing the Hunter, Central Coast, New England and Mid-North Coast regions of NSW.
When Luke decided it was time to ‘unlock’ some of the value he had created by selling the company, he sought assistance from JPAbusiness.
Luke kindly agreed to participate in a Q&A about how he developed his business and what contributed to his successful sale...
When did you start your own business and what motivated you to do so?
LUKE: I’m an electrician by trade and before I started my own business I had been doing industrial, commercial and residential electrical work.
I was doing a lot of mining work and had had enough. I decided to go out on my own and work in a different area of the industry.
I started the business on September 15, 2004.
What services did the business provide and what geographical area did you cover?
When I went out on my own I had about three or four staff and continued working as a high-voltage electrical services provider to the mining and maintenance industry. I had a bit of civil experience, so I took that line as well.
In 2006 we were granted a Level 1 Overhead and Underground Electrical Works Licence, which allowed us to work on overhead and underground networks operated by Essential Energy and Ausgrid.
From 2006 we mainly targeted infrastructure work which included URDs (Underground Reticulated Developments) for industrial sites and residential sub-divisions. We also worked on commercial developments, such as shopping centres, and government-funded infrastructure projects.
How did you manage the business’s growth?
We started off with three or four staff and every year for the next five years we doubled our staff numbers.
In those early days, as we were growing, I used to try and average $1 million turnover for every guy I put on – so if we had eight guys we needed to be turning over $8 million.
In our final year we had about 20 guys working for us, which included sub-contractors. The majority were labourers with two or three electricians.
The structure at the top was basically the general manager, then an estimation manager and project manager, then regional supervisors, followed by site supervisors.
In our final year of trading we did $15 million turnover and were hitting about 25% EBITDA.
What were the key ingredients in your business’s success?
- Trustworthy and hardworking staff: The main reason the business succeeded was the staff – the guys who ran it and the guys who did the work on the ground.
When we were growing we wouldn’t double staff numbers for the sake of it – we were very careful in who we selected.
Once we had 20 blokes it was a bit different, but you still had to have a careful process when selecting the guys to put on.
You need staff you can trust to do the job well.
- Generous pay rates: We always paid well above the standard pay rate – about $5 to $10 an hour more – and in the early days the staff got a lot of bonuses.
We just looked after the employees. Whatever you put into them they give you back.
- Good customer service: In order to be successful you have to apply yourself and be prepared to take on all different aspects of the work.
We weren’t selling a product, we were selling a service and if you delivered the service then you continued to get work. We had a lot of repeat clients.
You’ve unlocked some of the value you created by selling the business. What were some of your reasons for selling and where to from here?
I sold to give my wife and I an opportunity to do something different. My wife has always had an earthmoving business, so now I’m working with that, but we’re about to go travelling around Australia for 12 or 18 months.
What were the specific ingredients for achieving a successful sale?
We took the business to the market 12 months prior to engaging James, using different consultants, but it didn’t work out.
We then met with James and he felt pretty strongly that he could move the business. To be honest I had my doubts at first, but he is very good at what he does.
We agreed to let him take it to the market and within the first two parties he introduced it to, he got expressions of interest and was able to sell it.
We engaged James in March and settled in December, so the whole process took eight months.
James succeeded because he got out there and approached people in similar industries to ours. He actually targeted people and put it right in front of them. He did a good job and just kept following up and following up the whole time.
JPAbusiness’ view:
Comments by James Price
JPAbusiness Managing Director
Meeting and working with Luke was inspiring and very satisfying.
Luke was in his late 20s when we first met and he had already built a successful business, achieving many things that other business owners strive to achieve in a lifetime.
In my opinion, his business was successful because:
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He had a plan: Luke’s every move was deliberate and planned. At the day-to-day level he planned everything from the way he put his team together, to the way he serviced clients. Longer term, he put a lot of thought into how he would extract value from his business and he had long-term strategic and business objectives.
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He put the customer first: Luke never lost sight of what made his business, which was being able to service the customer and make life easier for them. Luke told me of a number of occasions where he had bought a new piece of equipment and/or added an adjacent service, just to ensure his business could holistically meet his clients’ needs.
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He created a great team culture: Luke always played the conductors’ role in terms of dealing with his people, clients, delivery, financial management, risk management and so on. However he built a team of people, both in the business and advisers outside the business, which worked harmoniously together. He was a master at mustering the right team to deliver a quality result. Customers were happy to put their trust in this team and the business which meant he had repeat business, a diversity of work and a strong business value.
If you would like support with any aspect of buying, selling or running a business, contact the JPAbusiness team on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.