Key Takeaways
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Buyers pay for a business that keeps trading after the owner leaves, so the licence, the quoting and the key client relationships need to sit with people who stay.
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Licences held personally by the owner can be a major obstacle in a trade sale. Plan the licence or nominee arrangement before you list.
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Vehicles, plant and equipment need a clear list showing what is owned, what is financed and what is included in the price.
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Recurring maintenance agreements and a broad client base can give a buyer more confidence than a pipeline of one-off jobs.
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Work in progress, deposits and warranty obligations should be dealt with in the contract, not left to sort out after settlement.
Plumbing, electrical, building, landscaping, air conditioning and similar businesses sell on the same fundamentals as any other: provable earnings, transferable assets and a reason to believe the work keeps coming. What sets them apart is how much of the business depends on the owner's licence, van and phone.
The preparation below separates the business from the person running it. That separation is what a buyer, their lender and a trade business appraisal will look for.
A broker for selling a trade business will usually look at the same points a buyer does: who holds the licence, who wins the work and whether the jobs keep coming without the owner.
Reduce Owner Dependence
Many trade owners still do the quoting, the scheduling, the hardest jobs and the client relationships. A buyer looking at that may see a job, not a business.
The fix is gradual and operational. Move quoting and job allocation to a supervisor or office manager, put a leading hand in charge of site work, and introduce key clients to the people who will service them after you go. Each task you hand over can add value a buyer is prepared to pay for, which is the same principle behind raising value before listing.
Licences and Who Holds Them
In Queensland, building work, including many trade contracting categories such as plumbing, generally requires a licence from the Queensland Building and Construction Commission (QBCC). Electrical contracting is licensed separately under Queensland's electrical safety laws. A buyer needs to know on what basis the business will be allowed to trade the day after settlement.
A licence is held by an individual or a company. A QBCC company licence depends on a nominee who holds a contractor or nominee supervisor licence in the same class. Where you are the only licence holder, the buyer may need to hold the equivalent licence, employ someone who does, or ask you to stay on as nominee for a transition period. Each path has conditions, so confirm them with the regulator and your solicitor before you market the business.
The stronger position is to have licences held by staff who intend to stay. Where that is not the case now, consider supporting a senior employee to obtain the relevant licence as part of your preparation.
Vehicles, Plant and Equipment
Trade businesses often carry significant hard assets. Buyers want a schedule that shows:
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Each vehicle, with registration, condition and whether it is owned, leased or under a chattel mortgage.
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Major plant and tools, with age and condition.
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Any finance that must be paid out or transferred at settlement.
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Which items are included in the price and which are excluded or sold separately.
Registered security interests on vehicles and equipment need to be released or transferred so the buyer takes clear title. Have a solicitor search the Personal Property Securities Register (PPSR) and plan the discharge, since a lender's release can hold up settlement.
Contracts and Maintenance Agreements
A trade business with signed maintenance or preferred supplier agreements, whether with strata managers, property managers, facility managers or commercial clients, has revenue a buyer can rely on. Gather these agreements and check whether each can be assigned to a new owner or requires the client's consent.
Also look at concentration. Where most of the work comes from one builder or one property manager, the buyer will ask what happens if that relationship ends. Broadening the client base before you list may reduce that concern.
Completed work carries obligations too. Defects periods, warranties and retentions on building work need to be identified so the contract can set out who is responsible for claims that arise after settlement.
Staff and Subcontractors
Qualified employees, apprentices part way through their training and a stable crew are assets. Buyers will ask who holds which qualification, how long each person has been with the business and whether they are likely to stay.
Employees do not move to a buyer automatically. The buyer may offer them employment, and transfer-of-business rules affect how leave and other entitlements are handled. An employment adviser can confirm the balances and how the contract should treat them.
Subcontractors are different. They are engaged under their own agreements, carry their own insurance and may work for other businesses. List the subcontractors the business relies on, confirm their agreements and insurance are current, and be clear with the buyer about how much of the delivered work depends on them.
Work in Progress and Deposits
At any point, a trade business has quoted jobs, jobs under way, deposits received and invoices not yet raised. The contract needs a method for each:
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Jobs in progress, where the contract states whether the seller completes and invoices them or the buyer takes them over at an agreed stage with an adjustment.
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Deposits held, which are either refunded through the adjustment or passed to the buyer with the obligation to complete the work.
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Materials on hand and in vans, counted and valued at settlement.
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Outstanding quotes, handed over with the buyer free to accept or decline them.
Your accountant and solicitor can draft the adjustment mechanism. Agreeing it before contract can reduce disputes at settlement.
Present the Business to Buyers
A trade buyer, and especially their lender, wants evidence, not assurances. Prepare these records:
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Financial statements and BAS lodgements that reconcile, with every job invoiced through the books.
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Job management software reports showing job volume, average job value and client mix by category.
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The maintenance agreements, major contracts and the forward pipeline.
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Safety management records, insurance certificates and licence details.
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The asset schedule described above.
Do not present unrecorded cash work as a selling point. A buyer generally cannot finance income that does not appear in the accounts, and will price only what the books support.
Buyers for a well-prepared trade business can come from inside the trade and outside it: a competitor expanding into the area, a senior employee with backing, or an investor who will keep the current crew and manager in place. A business that runs without you can widen that field.
Start the Licence Plan
Work out who will hold each licence after settlement and what the regulator requires for that to happen. Begin there, because it can take longer to resolve than any other part of the preparation.
Bond Business Brokers can work through that licence plan alongside an appraisal of the business.
Common Questions
Can my trade licence be transferred to the buyer?
A QBCC licence is held by a particular individual or company, so a buyer of the business assets generally needs its own licence, with a qualified nominee if it trades as a company. Where shares in a licensed company are sold instead, the company licence may continue, but QBCC must be notified within 14 days if the nominee stops acting. Confirm the position with QBCC and your solicitor before agreeing the sale structure.
Do apprentices transfer with the business?
A registered training contract can continue with the buyer, but the change of ownership must be notified to the Department of Trade, Employment and Training or the apprentice's Apprentice Connect Australia Provider. A buyer who does not want to continue a training contract needs to say so before the sale takes effect, so raise apprentices early with your employment adviser.
Can I keep working in the trade after I sell?
The sale contract generally includes a restraint of trade that limits where and for how long you can compete with the business you sold. Whether a restraint can be enforced depends on its reasonableness, so agree the area and period with your solicitor before signing.
This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.