In 1983, after working on my own for several years, I
started Buck Brothers Construction (BBC) with my brother, Joe.
We built the company slowly: At first we did all the work
ourselves; then we started subbing out the mechanicals; then we
hired carpenters; and finally we developed an office staff. My
plan was to stay in the construction business for another 10
years or so and then go on to something else. But with the
economic boom of the '90s, the company grew and I found plenty
of reasons to remain; we were making money and I was getting to
do things that interested me.
Eventually, though, I became aware that I was ready to move
on. But how would I sell my half of the company? For most
remodelers, getting out of the business means shutting it down
or turning it over to their offspring. In my case, turning my
share over to Joe was an option, but he was accustomed to a
partnership business, and someday he too would need to find a
A Lucky Hire
was a past hire — a particularly fortunate one
— that allowed me to leave the construction business.
In 1995, we had hired Jay Stills as a carpenter; after three
years with us he went to work for another remodeler, and then
began his own company. Jay and I maintained contact, and over
time we came to realize that between his frustration at running
a company solo and my desire to move on, we had a solution in
the making: I'd sell my half of the business to him.
The great advantage to this arrangement — beyond that
it allowed a Buck brother partner to remain at the helm
— was that Jay already understood the systems and
culture of BBC; he had worked for us and built his own company
according to many of the same ideals. Our staff knew him, and
many of our subs and suppliers had also been part of his
Financing the Sale
With little research available on how to value a remodeling
business, we relied heavily on the advice of an accountant and
an attorney in creating an agreement that was fair to both
To lessen my tax burden and spread out Jay's financial load, I
sold my shares of the corporation in three yearly installments.
The cost of each installment was determined just before the
shares changed hands; we based it on the present value of
future cash flows, which in turn was based on a formula that
took into account the average net income during the three years
prior to that sale of shares.
The finances were complicated by the fact that Jay closed down
his company and came to work for us as an employee and future
owner. His "buy-in" was weighted by the risk he'd taken in
closing his shop and committing to working for BBC for two
years for future remuneration.
Jay received a base salary and financed his payments
personally and from his share of the profits. I took the
unusual step of providing financing for Jay for each
installment period and holding the shares as collateral.
Making the Transition
At the time of sale, our company had 12 employees: two owners,
Jay, an estimator, a bookkeeper, three lead carpenters, and
Even as we dealt with the sale itself, we were experiencing a
sharp increase in the number of jobs the company was doing,
which forced us to restructure core roles (sales, estimating,
production) so that they would be shared by more people.
As part of the transition, we hired a consulting firm to
identify the existing roles within BBC, establish company
procedures, and map out a plan for the changeover.
This proved beneficial in more ways than expected. The
consulting team helped us understand the roles and
relationships within the company, identify individuals'
strengths and weaknesses, and see the challenges Jay and Joe
would face in dealing with one another as principals.
The consultants also convinced us to codify our sales and
production procedures. We probably should have done this many
years before the sale; it would have made us more efficient and
therefore more valuable.
Value of a Business
One of the most important lessons we learned during the sale
had to do with the unique value of our business. It resides not
in physical assets like trucks, tools, and office equipment, we
discovered, but in intangibles.
My most valuable offering was my portion of the company name;
it had value because Buck Brothers is well-known and has a good
I was also selling my half of our current client base, and the
opportunity to compete for repeat business with past clients.
Although there's no guarantee that past clients will hire BBC
for their future projects, there's a good chance that they
Of course, that uncertainty can be a problem for some
potential buyers. Like most service businesses, a remodeling
business is based on personal relationships. If the customer's
primary relationship is with the owner, and the owner sells the
business, the customer may not come back to that company for
That's why it's ideal for customers to have a relationship
with the company, too — so that the owner has
something of value to sell.
The buyer of a remodeling business also gets the company's
operating system, which — once again — is
valuable only if it exists independently of the previous owner.
This is worth mentioning because remodeling companies are
notorious for being the private fiefdoms of their founders, and
private fiefdoms are not transferable. I was guilty on this
count myself, which is why we made an effort to develop written
procedures for running the company.
Today Joe and Jay continue to develop procedures, because
doing so increases profitability and someday will facilitate
the sale of their parts of the business.
Bob Buck is a former owner of Buck Brothers
Construction in Minneapolis.