How can I prepare for a successful sale when family succession isn’t an option?
In this last article of the series, we will look at what it takes to transfer a business to the next generation. But for many lumber dealers, that simply isn’t realistic. Sometimes the kids aren’t interested. Sometimes they aren’t ready. And sometimes the business is better suited for a larger platform.
When that’s the case, a sale to a strategic buyer—or in some situations, private equity—may be the best outcome for the owner, employees, and customers.
Like family succession, selling your business is not an event. It’s a process. And the best results usually go to owners who start preparing years before they plan to exit.
Here are the key questions every owner should be asking.
Who are the likely buyers?
In our industry, strategic buyers often include competitors, regional chains, or larger national dealers looking to expand their footprint, product mix, or customer base. Some are after locations. Others want your customer relationships, vendor programs, or management team.
Private equity is different. They typically look for strong cash flow, solid management, and room to grow—either organically or through add-on acquisitions. Depending on your size and sophistication, private equity may or may not be a good fit.
Understanding who your likely buyers are helps shape everything else—from how you run the business to how you structure the sale.
Is my business actually “ready” to sell?
Most businesses are not as ready as their owners think.
Buyers will focus on normalized EBITDA—your true operating profit after adjusting for items that won’t continue post-sale. Those adjustments are far more credible when they are already reflected in your financial statements, not added back at the last minute.
Common examples include:
- Owner compensation above or below market
- Rent on company-owned real estate
- Family members on payroll
- Personal vehicles, travel, entertainment, or club expenses
- One-time or non-recurring costs
If you plan to sell in five years, start cleaning this up now. It can materially increase value and reduce friction during due diligence.
How will the sale be taxed?
This is where many owners get unpleasant surprises.
If your company is a C corporation with appreciated assets—such as real estate or goodwill—an asset sale can trigger double taxation: once at the corporate level and again when proceeds are distributed to you personally.
Stock sales are usually more tax-efficient for sellers, but buyers often prefer asset deals. How this gets resolved has a major impact on what you keep after closing.
Other tax issues matter too:
- Is the real estate inside or outside the operating company?
- Have state and local tax filings been handled properly?
- Are inventory methods consistent and defensible?
- Are there any historical payroll or sales-tax exposures?
A pre-sale tax and financial review, done well in advance, is often money well spent.
What about the real estate?
For lumber dealers, real estate is frequently one of the most valuable assets in the transaction.
Ask yourself:
- Does the buyer want the property, or just the operation?
- Is the highest and best use still a lumberyard—or something else?
- If you retain the property, what is fair-market rent?
- What lease terms make sense for initial term, renewals, and purchase options?
- Does the property need major upgrades to remain competitive?
If the real estate is owned outside the company and you’ve already achieved economic independence, transferring it to the next generation before a sale may make sense in some situations. But the tax consequences must be modeled carefully.
Do I have the right team in place?
Buyers place enormous value on people.
An aging workforce, weak middle management, or heavy dependence on the owner can all reduce value. Buyers want to know:
- Who runs the business day-to-day?
- Who manages purchasing, pricing, credit, and operations?
- Who are the key relationships with contractors and vendors?
- Will those people stay after the sale?
If you’re unsure, consider retention plans or long-term incentives well before a transaction. Waiting until a letter of intent is signed is often too late.
Can the business survive without me?
This is one of the hardest questions for founders to answer honestly.
If you disappear for 90 days, does the business still run? Are decisions made? Do customers get served? Do vendors get paid? If not, value will suffer.
Developing your replacement, delegating authority, and documenting key processes takes time—but it directly affects what buyers are willing to pay and how comfortable they feel stepping in.
Is there customer concentration risk?
Many dealers have a handful of large contractor accounts that drive a significant portion of revenue.
That’s not necessarily bad—but it must be understood.
If losing one customer would materially impact profits, buyers will discount value or structure earn-outs to protect themselves. Diversifying your customer base over time reduces that risk.
What about technology and systems?
Outdated accounting software, weak inventory controls, or poor cybersecurity can derail deals.
Buyers expect modern business systems, accurate reporting, and reasonable protection against data breaches and fraud. Upgrading systems before a sale is far easier than trying to defend outdated ones during due diligence.
A few lessons from owners who have been through it
Over the years, a few themes come up again and again:
- Transition—done right—takes time
- Enterprise value is built long before the sale process begins
- Groom your successors and your management team
- Know your personal financial number
- Start accumulating assets outside the business
- Plan for taxes early
- Reduce dependence on yourself while staying in control
- Keep a contingency plan for the unexpected
Most important, don’t wait for a health issue, burnout, or market downturn to force your hand.
A sale can be one of the most rewarding—and complex—financial events of your life. Like everything else in business, the outcome is usually better when you plan for it before you need it.
Finding time to work on your business, not just in it, and involving the right advisors early can help ensure that when transition comes, it happens on your terms—not someone else’s.
Mike Ferraro is a director at Conifer Hill Advisors. He has more than 45 years of experience providing financial, tax, and management advisory services to companies in various industries. Mike sits on several boards and assists clients with establishing corporate governance, advisory boards, evaluating and growing enterprise value, and crafting exit strategies for business owners and their families. He can be reached at mferraro@coniferhilladvisors.com or 617-877-5800.
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