When doing a valuation, you must consider the potential impact of industry-specific issues. For electrical contractors, these issues include workforce needs, work backlogs and underlying contracts, union pension liabilities, long-term leasing agreements, and key person risk. Another key issue with electrical contractors is bonding requirements.
Common bond: The bonding process is very important, especially in large metropolitan areas where a contractor can’t work on certain jobs without being bonded, explains Matthew Crane (Marshall & Stevens). Where it’s not legally required, it’s less of an issue but still must be considered. “If a company can’t get bonded for whatever reason and this, say, prevented it in the past from expanding into a different market, then that is a negative that heightens the risk of the company,” says Erin Hollis (Marshall & Stevens). “On the other hand, if a company could get bonding but has not so far, that might represent an opportunity that could be included in the forecast or increase its potential value in the eyes of a third-party buyer.”
Crane and Hollis are contributors to BVR’s new guide, What It’s Worth: Valuing Electrical Contracting Companies, which includes more insights, a detailed case study, benchmarking data with analysis from Pratt’s Stats, rules of thumb from the Business Reference Guide, and more.
Please let us know
if you have any comments about this article or enhancements you would like to see.