search
cart
facebook twitter linkedin youtube instagram Spotify Podcasts Apple Podcasts Spotify Podcasts Apple Podcasts
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • TOPICS
    • Cool Roofing
    • Event News
    • Latinos in Roofing
    • Low Slope
    • Legal
    • Metal
    • Project Profiles
    • Roofing Supply Pro
    • Roofing Safety
    • Steep Slope
    • Sustainable Roofing
    • Technology
  • EXCLUSIVES
    • Best of Success
    • Contractor Profile
    • IRE Show
    • Roofing Contractor of the Year
    • Top 100
    • Young Guns
    • State of the Industry
    • Century Club
  • MULTIMEDIA
    • Videos
    • Podcasts
    • Interactive Spotlights
    • Roofing Quizzes
    • IRE Videos
    • Webinars
    • Photo Galleries
  • PRODUCTS
    • New Products
    • Featured Products
  • COLUMNS
    • Editor's Note
    • Exit Planning
    • Legally Speaking
    • Safety Advice
    • Technical Details
    • Guest Column
  • EVENTS
    • International Roofing Expo
    • Webinars
    • Best of Success Conference
    • Industry Events
  • DIRECTORY
    • Associations
    • Distributors
    • Manufacturer/Supplier
    • Business Services
    • Get Listed
  • MORE
    • Roofing Contractor eNews
    • RC Store
    • Roofing Supply Pro
    • Custom Content & Marketing Services
    • Market Research
    • Sponsor Insights
    • Company Spotlights
    • Classifieds
      • Auctions
      • Business For Sale
      • Business Opportunities
      • Equipment For Sale
      • Positions Available
      • Products
      • Safety
      • Software
      • Services
      • Training
    • Contact Us
  • EMAGAZINE
    • eMagazine
    • Advertise
      • Media Kit
      • Editorial Calendar
      • Contact
    • Archive Issues
  • SIGN UP!
ColumnsLow Slope RoofingSteep Slope RoofingExit Planning

My Roofing Company Managers Can’t Afford to Buy Me Out!

By Kevin Kennedy
exit planning
August 3, 2016

I hear this over and over again from roofing company owners: “My managers don’t make enough money to buy the company!” I get it.

The most common exit for roofing contractors is a management buyout (MBO) as there are very few successful sales to competitors or consolidators.

MBOs tend to be the most common transfer method due to the inherent nature of construction companies. The lack of recurring revenue and connection to cyclic economic conditions make construction companies a risky investment by outsiders. 

This means a roofing contractor’s most probable opportunity for monetizing the business will come from senior managers and family.

The largest obstacle in executing an MBO is that managers often don’t have the financial ability to pay for the business. This requires the business owner to structure a plan that will allow the business to pay for the transition.

Despite the financial risk, MBOs are flexible and can have significant tax advantages. In certain situations, a properly structured MBO will reap a better bottom-line result than an outside sale because of the tax savings. Remember, it’s not how much you get, but how much you keep.

Key considerations include:

  • Knowing the value of your company and exiting without being clobbered by taxes.
  • Sales price can be negotiated as opposed to a computed amount in accordance with IRS ruling 59-60.
  • Understanding the various tax liabilities.
  • Understanding risk-management strategies to protect what you have built.
  • Preparing the managers for succession ASAP because it takes time.
  • Future cash flow pays for everything, and your managers will drive the profits.

Visualize Your Financial Future: Owners cannot commit to retirement until they can visualize their financial future with an exit plan. This plan calculates the value of the company, before and after taxes, so the proceeds can create the income to maintain the owner’s present lifestyle in retirement. Only then is the owner motivated to pick and lead the team into the MBO process.

Outside Savings: While the owner is still in control, he or she should contribute as much as possible to savings and retirement accounts.

Benefits: The owner can still receive benefits during the sale and have those benefits phased out over time.

Win-Win: An MBO is a win-win for the buyer and seller. Management has the opportunity to build significant personal wealth, and the owner benefits by cashing in on the investment built in the company. Sellers also leave a legacy with trusted stewards who bring a new energy.

Shareholders: The new shareholders must understand that their stock ownership does not necessarily make them the boss. There can only be one boss. Yes, you’re a senior manager and work collectively for the company’s success, but you’re an employee first and a shareholder second. As a shareholder, you benefit directly from the success of the company.

The Golden Egg: The company is the goose that lays the golden eggs. The company must remain fiscally healthy during the buyout and endure economic cycles. During our buyout we kept the payments flexible even though I had annual notes from the buyers. Why? Because the company came first. We were paid out early, even though we reduced payments through 2008, and overpaid during the great years.

Financing: The sale is many times funded by seller financing, the redemption of the owner’s share over time or by outside financing via a leveraged buyout.

Financial Partners: Be transparent with your key financial partners, including your bank and bonding company, as they should be kept in the loop with your transition plan. The company still needs to keep healthy financial ratios and the necessary working capital, but it will look different as money is transferred to the owner in the buyout. Your financial partners will understand and benefit from a well-thought out transition plan.

Personal Guarantees: Get the new management — especially the comptroller — engaged with your financial partners. Banks and bonding companies depend on the owner’s personal guarantees, which will have to be transferred to the new owners near the end of the buyout.

Character Matters: The company associates are your key asset. Promote the best people in the right chairs for the company to perform. The empty chair must be replaced with a person of integrity. Leaders put the company, customers and associates first … not themselves.

Succession: Succession is key as the owner is being paid by the management’s performance. First, managers need to get to the next stage by growing and performing as champions. During this time, they must begin to think like owners and always put the company first. They then will move into leadership, deal with their blind spots, and put their associates and teammates first.

Succession takes time: It is a continuous process, not a single event. The process is about the development of talent and not the typical replacement of talent. Your best players are developed in your internal culture, and owners must provide the curriculum, training and leadership development.

With so many moving parts, a carefully designed exit plan should help overcome many of the barriers that owners will confront. In this process time can be your best friend, so start early and implement slowly.

KEYWORDS: business management exit planning

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Kevin Kennedy is the founder and CEO of Beacon Exit Planning. He is a former roofing contractor, construction industry voice and thought leader for exit planning and succession. Kevin is also a co-author of the Amazon #1 Best Seller “The Contractor’s 60 Minute Exit Plan.” Reach him at kjkennedy@BeaconExitPlanning.com or www.beaconexitplanning.com.

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Roofing Contractor Group Publisher Jill Bloom

    Physics, the Power of Authenticity and You

    In February's Publisher's Note, Jill Bloom describes a...
    Editor's Note
    By: Jill Bloom
  • The Family Food Fare supermarket in Midland, Mich.

    ‘Rooftop Ninja’ Discovered Living on Roof, Inside Grocery Sign

    A bizarre tale out of Midland, Mich.: a woman dubbed the...
    Roofing News
    By: Bryan Gottlieb
  • A before and after heat measurement comparison

    How Hot is Too Hot in the Attic?

    If the ventilation is working, how hot should the attic...
    Columns
    By: Paul Scelsi
You must login or register in order to post a comment.

Report Abusive Comment

Manage My Account
  • eMagazine Subscription
  • Sign Up for the eNewsletter
  • Online Registration
  • Manage My Preferences
  • Subscription Customer Service

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Roofing Contractor audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Roofing Contractor or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • An overhead view of a residential block
    Sponsored byCBIZ CompuData

    From Spreadsheets to Strategy: How Roofing Companies Can Transform Financial Operations

  • Snow Guard Solutions for Metal Roofs by S-5!
    Sponsored byS-5!

    Safeguard Your Building: How Snow Guards Prevent Costly Roof & Property Damage

  • A hand holding a wooden block that reads 'EVOLVE'
    Sponsored byWatercress Financial

    Embracing Change: A New Era for the Roofing Industry

Popular Stories

Florida has become the focal point for construction-site raids, attracting national attention and altering labor dynamics throughout the industry.

Florida Emerges as the Epicenter of ICE Raids

Agentes de ICE arrestaron a casi una docena de empleados de una empresa de techos en Lowell, Massachusetts. Los arrestos son parte de una redada federal más amplia contra la contratación no autorizada y las violaciones migratorias en Boston.

ICE Redondea a Equipo de Techos Afuera de Boston

Kingspan’s planned 100-acre roofing campus in Oklahoma is under consideration as the new location for asphalt shingle production.

Kingspan Flirts with Disrupting the U.S. Shingle Market

Roofing Contractor Webinar

Events

December 3, 2025

The Premier Roofing Conference: Best of Success

Join roofing professionals from across the nation at the 2025 Best of Success conference, the ultimate destination for roofing professionals seeking the latest industry insights and networking opportunities. Pick up strategies for critical challenges like workforce shortage with innovative solutions, explore the latest advancements in roofing technology and sustainable practices, and gain valuable insights from industry leaders on navigating the evolving roofing landscape.

View All Submit An Event

Related Articles

  • A neon sign that read, "FOR SALE"

    10 Keys to Selling Your Roofing Company in 2025

    See More
  • Kennedy's Notes on Roofing Exit

    Your Sale Options in a ‘Roofing Exit’

    See More
  • Is your company a target?

    Why a Roofing Company Becomes a ‘Target’ for Acquisitions

    See More

Events

View AllSubmit An Event
  • December 3, 2025

    The Premier Roofing Conference: Best of Success

    Join roofing professionals from across the nation at the 2025 Best of Success conference, the ultimate destination for roofing professionals seeking the latest industry insights and networking opportunities. Pick up strategies for critical challenges like workforce shortage with innovative solutions, explore the latest advancements in roofing technology and sustainable practices, and gain valuable insights from industry leaders on navigating the evolving roofing landscape.
View AllSubmit An Event
×

Be in the forefront of the roofing industry!

Join thousands of professionals today. Shouldn’t you know what they know?

JOIN NOW!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing