Only 20% of respondents have had their business professionally valued. That means 80% of owners don't actually know what their company is worth and the number they're counting on for retirement may not match what the market or a potential buyer is able or willing to pay.

When it comes to feeling prepared for their eventual exit, only 16% said they are very prepared and 45% feel somewhat prepared. That means a significant 40% said they are not very prepared or not prepared at all. There are a lot of remodelers not prepared for their hoped-for retirement within the next five years.

David Lupberger spent 25 years as a remodeling contractor in Washington, D.C., before founding Contractor Transition Strategies in Denver. He focuses on helping remodelers plan their exit from their company, and he’s found that they often don’t start early enough, are unsure how to start, and haven't thought about what happens afterward. His starting point with every clients involves the same three questions: 

1. When do you want to leave? Be specific because a vague intention to exit “in a few years” is not a plan and a proper exit strategy typically takes three to five years to execute. Think of it in terms of the design-build process, Lupberger says. “We're going to design an exit, and then we're going to implement the exit.”
2. Is there an asset gap? This is the difference between what owners are currently earning and what they’ll need to live on post-retirement. If there's a gap, the transition window is also a value-building window, and you need to know that before you start, not after.
3. Who is your successor? If you don't have a clear answer, this is where the work begins. Lupberger suggests using a vesting process of 24 to 36 months for any potential successor—family member or employee—with regular evaluation checkpoints. The goal is to determine whether someone has the entrepreneurial drive to actually run a company, not just the willingness to own one. More often than not, he says, the drive isn't there because most people want security rather than the risk that comes with ownership. Better to find that out during a structured vesting period than after the transfer.

Know Your Selling Options

Moving on from that starting point, Lupberger walks owners through three possible exit strategies.

A sale to a strategic third-party buyer can produce a fast, clean exit, but culture is the biggest risk. What a buyer is willing to pay and what an owner believes the company is worth rarely match, and a strategic buyer may not share the same commitment to employees that the owner spent years building.

Selling to a key employee or family member is the preferred route if the right person or people are in place, partly because it allows for financing flexibility. If a successor doesn't have the capital to buy the business outright but they are qualified, Lupberger suggests a structure along the lines of a phantom stock: a promise to transfer ownership at a future date, tied to performance benchmarks and funded by putting a portion of the successor's bonuses into escrow over time until they've effectively purchased the business.

The third path is an employee-owned cooperative, which is different from an ESOP. An employee stock ownership plan is generally built for companies doing $10 to $12 million or more annually, because setting one up means creating a trust and incurring extensive legal costs. A cooperative works for smaller companies. In a co-op, it's one person, one share, one vote, and profit distribution is based on patronage, meaning hours worked. New hires typically join the co-op as a condition of employment, with a modest entry fee paid down over time through payroll.

Can Your Business Be Sold?

Lupberger is direct about the fact that not every remodeling business is sellable. For example, if a company is netting around $50,000 a year after owner's compensation, and the owner is still working 50 hours a week, the company likely isn’t an attractive option, and buyers—employees or otherwise—are unlikely to be interested. The fix is building real profitability and a business that runs on systems rather than the owner's personal effort. “You should always be building a business that is not dependent on you,” Lupberger says. “If it's not dependent on you, it's transferable.”

Time is Not on Your Side

Forbes has projected that 2.5 million businesses will be for sale by 2030 as baby boomers retire. The estimate is that 80% of those businesses will never sell, because the owner is the business and never did the work of separating from it. Lupberger compares the lack of planning to procrastinating on a will. “There's no urgency until there is,” he says of how most owners approach the issue.

One more thing most owners skip entirely: A business continuity plan. Lupberger says most of his clients come to him without a plan in place, and that leaves most small businesses exposed. Consider, if you're five years from your exit and something happens to you, what does your company do? Who is the banker, the attorney, the insurance agent? Are those relationships and passwords documented somewhere that your team can easily access?

Have a Post-Retirement Plan

The Exit Planning Institute reported that around 75% of business owners experience “profound regret” within 12 months of selling their company, which does not surprise Lupberger. “Can you let go?” is a question he asks all of his clients. Owners are turning over everything they’ve worked on and lived with for the past 20 to 25 years or more, so they need to figure out what’s going to replacing that. “Where does that passion go to next?” is what every business owner needs to consider before making their exit, says Lupberger.   

Attorney D.S. Berenson has spent more than 30 years focused on the remodeling sector. Here's what he says everyone should understand when buying or selling a company in the home improvement space.

• Seek legal counsel from someone who understands the industry. “You hear people saying I'm not bringing a lawyer in because they're just going to kill the deal. But if you have good counsel, it can go a long way to making sure that everybody feels they're protected,” Berenson says.
• Understand the industry’s unique due diligence concerns. Again, this is why it’s important to retain a lawyer who understands the home improvement space. The biggest liability issues: customer contract compliance, telemarketing violations, lead paint rules, deceptive advertising practices, and independent contractor classification. These items aren't on a standard due diligence checklist.
• Get an NDA in place before you share anything. You need legal protection the moment you start disclosing financials, customer data, or operational details to a potential buyer. Standard NDAs in the industry run two years, but Berenson suggests pushing for a minimum of five years.
• Then disclose everything. Sellers are being sued after closing, not always for dishonesty, but for failing to document how they handled certain regulatory issues. "When in doubt, disclose it out," Berenson says. Having clear documentation that covers every sensitive area of operations is the best protection a seller has.
• Understand how your assets are classified. In remodeling, you're largely selling goodwill, meaning the customer database, the brand, and the lead generation structure, among other things. Goodwill is taxed at the capital gains rate, which is lower than ordinary income. Many buyers have paid more in taxes than necessary because their documents didn't explicitly attribute the sale price to goodwill. Get an accounting opinion before you sign.
• Know that a contractor's license does not transfer with a sale because it’s not an asset that can be purchased. It has to be approved through the appropriate contractor board, a process that can take weeks or months. Berenson says he’s been contacted by frustrated buyers after deals closed. “The new owner can’t run a single job while the board sorts it out. The license is frozen. They can't run their leads. They can't finish the work in progress. They can't do the installs.”

Alan Hendy will be the first to tell you that running a family business and transitioning out of one are entirely different things. He's spent years learning that distinction at Neil's Design Remodel, a design-build firm founded by his father in Cincinnati more than 50 years ago.

Hendy is the youngest of three brothers who ran the company through its growth years, helping it realize $12 to $15 million in annual revenue. However, for a long time, everyone was selling and nobody was effectively in charge, Hendy says. He affectionately refers to the situation as a “three-headed monster.”

John Happel didn't arrive at his exit strategy easily. The founder of design-build firm H&H Builders in Denver tried twice before getting it right, and one of those attempts nearly cost him everything.

The First Attempts at an Exit

His first attempt was a salesperson hired with the explicit intention that he'd eventually buy the business. That deal fell apart within six months. The second attempt nearly cost him everything. Happel brought on someone who would take over, and as Happel transitioned to working fewer hours he stopped monitoring the books as closely as he should have.

The individual had stopped paying vendors, and before Happel discovered the problem, the company was saddled with more than $100,000 in debt. “I have since found out that this situation isn’t uncommon,” Happel says. “Multiple owners I’ve talked with have had a similar experience or heard of a similar experience.”

That was 2019, and Happel has since rebuilt the business, recapitalized it, and came back roughly twice the size it had been. 

David Callahan will be 75 this year. He still likes unlocking the door at his remodeling firm Callahan & Peters in Glenview, Ill., every morning. But the years pile up, and his wife Renata, a company co-owner, is ready for them to retire.  

Their succession plan is taking shape gradually. Their nephew David Peters has been with the company since 1998, and it was always understood he would eventually take over. The company’s designer, Michelle Chircop has been with the company for 11 year and remains another key player alongside Peters. The Callahan’s daughter Renee, who had previously worked at the company, may also become a part of the transition plan.  

So, while the target is clear, it’s been harder to achieve their exit. 

“I'm so busy working in the business, that I'm having a hard time working on getting out of it,” David says. 

The Callahan’s retained a consultant in the fall of 2024, and they realized the checklist of things they need to complete was a big one. They admit to having felt a little overwhelmed at first but it also helped ramp things up. “It forced us to address issues, but it's actually an intriguing and fun process,” David says. “The trick is finding the time.”  

Among their tasks: transition the responsibilities associated with accounting, payroll, and bill paying; rewriting job descriptions; and scrutinizing the company’s org chart looking for gaps. Renata's target is to be out by March 2027, but David expects to stay on part-time, perhaps handling sales and being “of counsel,” as he describes it.

On the question of price: it’s not their primary concern, noting they can retire without proceeds from the business. The structure may involve residuals tied to company performance or a formula for getting income out of it over time, but they said the baseline plan is closer to a transfer than a sale. “If we walk away with no money, they've still got a company that's producing for them and their families,” David says. “That's what matters most to us.” 

He adds: “I'm not going to stress. I want to hand them something that works well for them, and I want them to be successful and happy.”

One piece of advice David wants to pass on: Don't try to make decisions for the people who'll be running the business once you exit. Initially, he considered opening the ownership opportunity to the full staff, and his consultant advised against it. David recalls being told to let the new owners make that decision and to avoid complicating the process.