What is the buyer actually purchasing?
A buyer needs to keep serving customers and collecting cash when the seller leaves. Trucks, equipment, a known name, and a busy phone help. They cannot replace staff who complete profitable jobs or a company able to obtain needed permits. Show how these parts work together under the proposed new ownership.
Separate residential and commercial service, installation, drain and sewer, and construction revenue. A blended total can hide different payment cycles, labor needs, and customer risks. Show sales and gross profit by line. Reconcile reports to the ledger. Explain the treatment of discounts, callbacks, subcontractors, and membership visits so comparisons use the same basis.
Which relationships depend on you? You may sell repipes, supervise hard jobs, deal with builders, and hold the qualifying license. A buyer must replace that work or plan a handoff. Strong reported earnings do not remove this need. Describe the roles early so the price discussion includes the work required after you leave.
How do you establish earnings that survive the sale?
Prepare monthly profit and loss statements, balance sheets, taxes, and bank support. Explain important differences between billed sales and collected cash. A December installation still matters if payment arrives in January. A deposit for unfinished work is not proof of completed-job profit. Match timing and obligations rather than choosing the report that looks best.
An add-back proposes removal of an expense that will not recur under the assumed ownership plan. Proposed is important. A documented personal expense differs from truck maintenance the company still needs. Family payroll requires evidence of duties and replacement cost. The relationship alone is not a reason to delete the full expense from earnings.
The Four-Number Plumbing Valuation Screen separates earnings, replacement work, investment, and valuation assumptions. Keep disputed adjustments in their own schedule. Give the buyer ledger detail and explanations to test each item. A larger recast number is less useful than a supported one. Preserve unresolved costs rather than presenting every proposed adjustment as already accepted.
Which operating issues can delay closing?
Review licensing before the buyer signs an LOI. Identify people, the entity they qualify, renewals, insurance, and places served. Texas responsible-master requirements show a person's supervision and insurance duties there. This state example is not a national rule. Check the actual authority and relationship for each service the company expects to continue.
Use the License Continuity Map to plan by jurisdiction. Obtain the authority's answer for the proposed structure. Asset and equity deals can raise different questions. Neither label proves all approvals continue. Keep confirmed findings, pending filings, and remaining decisions clear before promising that the buyer can perform regulated work immediately after closing.
Check the lease, titles, liens, software, claims, customer contracts, and open permits. Which consents can be obtained quietly? Which require disclosure to a third party? A dispatcher or service manager may be as important as the owner. Give each dependency a responsible person, deadline, and fallback plan. Record the actual consent rather than assuming cooperation.
How should a confidential sale process work?
- Establish the seller's goals, minimum acceptable economics, and transition constraints before selecting buyers.
- Prepare an anonymous overview that describes the business without exposing the name, address, distinctive projects, or staff identities.
- Screen potential buyers for relevant operating experience, capital, licensing capacity, and conflicts with the company.
- Require an appropriate confidentiality agreement before providing identifying or sensitive information.
- Release detailed records in stages, track access, and define when direct employee or customer contact may occur.
- Compare written offers, negotiate a letter of intent, and organize diligence around the issues that can change price or timing.
Control circulation of sensitive records while allowing review. A platform, competitor, and individual may need different evidence at different times. An NDA does not prove closing ability. Ask for funding evidence and an operating plan. Log access and direct-contact permissions so employees and customers do not receive unplanned approaches while the seller is still running the business.
Treat exclusivity as a valuable concession. Define start, length, progress requirements, and exit rights with counsel. Keep operating through diligence. Poor service or collections can make a workable deal harder to finish. Track requests and deadlines with the buyer, so unresolved review does not become an unexplained extension while the seller's options remain restricted.
How do you compare offers on the same basis?
Use one comparison sheet for each offer. Is the quoted price enterprise value, equity value, or asset consideration? List debt, liabilities, cash, working capital, escrow, notes, earnout, rollover, fees, and taxes. Identify who controls future-payment measures. Keep the same assumptions across offers before deciding which nominal price produces the best supported outcome for your goals.
| Offer element | What the seller needs to establish |
|---|---|
| Cash payment | Amount, funding source, and payment date |
| Seller note | Interest, security, subordination, and collection risk |
| Earnout | Formula, accounting policy, operating control, and dispute process |
| Rollover equity | Security class, dilution, governance, and exit restrictions |
| Working capital | Definition, reference period, target, and adjustment mechanism |
| Employment | Role, compensation, duration, and termination consequences |
Assume a hypothetical $2,400,000 enterprise-value offer. Debt payoff is $300,000, costs are $80,000, and escrow is $200,000. With no other adjustments, immediate cash before tax is $1,820,000. Escrow is deferred under claim terms, not automatically lost. These teaching inputs show a proceeds bridge. They establish neither a market multiple nor a real sale result.
The Plumbing Deal Proceeds Bridge shows timing and risk. Avoid subtracting debt twice or calling a working-capital shortfall an extra operating expense. Compare future wages separately from price. A promise to pay for ongoing work has its own duties and conditions; it should not silently inflate the amount received for selling the company.
What do taxes and buyer financing change?
The IRS business-sale guidance treats the sold assets separately. Allocation affects seller tax and buyer basis. Fleet, inventory, receivables, goodwill, and equity need not have the same result. Obtain a CPA estimate for the actual entity and structure. Keep its assumptions tied to the agreement before treating projected net proceeds as spendable cash.
A seller note can delay payment without deferring every tax item. IRS Publication 537 explains installment treatment and exceptions, including inventory and depreciation recapture. Applying one percentage to the full price is only a planning placeholder. Ask the CPA to review the allocation and payment terms rather than assuming tax follows each cash receipt in the same way.
The SBA 7(a) program can fund eligible ownership changes, subject to current policy and lender review. A guarantee is not approval of this buyer or deal. Ask about equity, repayment, valuation, licensing, seller-note terms, and outside reports early. Give the lender the proposed structure so funding conditions are resolved before relying on a closing date.
How do you protect the company through the handover?
Define handoff deliveries: secure access transfer, vendor contacts, open jobs, permits, memberships, warranties, and escalation duties. Separate instruction from employment. Brief orientation may not replace the seller's production, management, or license role. Assign each delivery and confirm the buyer can use it. A list of passwords does not prove all needed rights and permissions have transferred.
Plan staff and customer communication with the buyer. Confirm who can approve discounts, sign contracts, resolve complaints, and commit spending on day one. Staff need a clear route for questions. Keep promises within agreed terms. Record who communicates each change and when, so the handoff does not depend on everyone learning the new chain of authority informally.
Use the 90-Day Transfer Plan to connect closing papers with daily work. Keep a baseline for collections, callbacks, departures, and open permits. The seller exits under agreed terms while the buyer continues service. Review remaining legal, tax, and licensing issues with the responsible advisers. Confirm completion of open actions rather than describing the handoff as done solely because ownership changed.