with Roger Grochmal
What to do with the business – Part I A
Roger Grochmal recently retired from his position of CEO of AtlasCare in Oakville, ON. Email Mechanical Business Magazine’s editor, Kerry Turner, kerry.turner@mechanicalbusiness with questions about your company, business practices, or the industry in general.
The perils of maintaining a legacy In his book Every Family’s Business Tom Deans argues wealth and not businesses should be passed down to future generations. More wealth has been destroyed passing businesses on to heirs who do not have the skills or interest to operate the business but feel obligated to maintain a legacy. In Deans’ case, family wealth was passed down through four generations. In each case family members started up businesses of interest to them that were completely different from the previous generation.
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M e c h a n i c a l
fter owning my own HVAC and plumbing business for 35 years, I made the decision to sell it and move on with the last quarter of my life. It wasn’t a particularly difficult decision or a spontaneous one, as I had been planning to transition out for more than 10 years. Some say I am lucky. I define luck as preparation meeting opportunity, and was well prepared when the opportunity presented itself. Every business eventually sells, and you can choose who to sell to. Buyers can include family or employees, strategic buyers such as competitors, and financial buyers such as private equity funds. However, if you don’t make a decision the government will make it for you – when you die the Canada Revenue Agency deems your business to be sold and taxes the gain to your estate at maximum tax rates. A coffin is definitely not a good exit strategy. Your family will pay a heavy price, financially as well as personally. There has never been a better time to sell a business, and there is a confluence of buyers and sellers right now. Baby boomers are looking to sell and enjoy the balance of their lives. Private equity funds in particular are swollen with cash looking for businesses to roll up and consolidate. Over the next two issues of Mechanical Business, I will take you through my experience with the sale process, from beginning to end.
UPPING THE VALUE My journey began 10 years ago after I turned 60. I had one son in the business and one out of the business. The question in my mind was, “How do I create a structure that is fair to each of my sons, both from a business transition and an estate point of view?” We brought in a professional family advisor and over a series of meetings developed a plan to transition the business to my son working in the business. The next step was to take a good business and make it great. Even if you don’t plan to sell to a third party, a valuable business is a great legacy to leave to your family. I had built the business around my skill set as an engineer, and while that worked for me it was not going to be sustainable for others going forward. B u s i n e s s
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It is important to understand what would make a business in the HVAC space really valuable. The value mantra of business today is recurring revenue. The most valuable businesses today are the ones with recurring monthly revenues from well-served customers rather than onetime revenues from projects. AtlasCare had a large base of service memberships that produced not only a steady stream of monthly revenue, but also sales opportunities when techs were in a home regularly. HVAC is one of the few businesses with regular in-home, face-to-face contact with customers.
