About three years ago, father and son Andrew and Josh Gunia realized the time had come to do something with A Advanced Septic and Construction Inc.

Based in Auburn, Washington, part of the suburban area that runs south from Seattle to Tacoma, the company had grown and expanded under Andrew. Josh says he was chafing against the limits of not being the owner. 

“As we get older, we measure the amount of risk we’re willing to take on differently based on where we are in life,” says Josh, 39, now owner and president of the company. “For me, I’m willing to take on lots of risk financially in many different areas because, worst-case scenario, if it all disappears, I’m young enough that I can rebuild and have years of life on my side hopefully.”

As a result, Josh says, their growth strategies, their acceptance of risk, and their willingness to partner on projects were different for him and his father in the past few years. 

Growing the business

Andrew, now the former owner, had started and expanded the company to seven divisions including civil construction, residential construction, plumbing, electrical, pumping, installing and home rehabilitation. 

“Home rehab, that was my fantasy, but Josh couldn’t stand it,” Andrew says, and Josh laughs softly. “On top of that, it lost money for several years in a row.” 

Also, Andrew says, he was passionate about civil construction while Josh had more liking for residential work. 

“One of my problems is that, still to this day, I have to fight my own self to see my boys as 38 and 39 and leaders in the industry, when in my mind’s eye they’re still 17 and 18,” Andrew says. “We got to the point where Josh said, ‘Hey, either I’m leaving, or you’re leaving.’ By that time it wasn’t fun for me anymore either.”

Andrew says he realized the company was already larger than anything he’d envisioned, and he wasn’t interested in taking the company to another level. 

“The good news in all of that process, is the key values and morals stayed intact in spite of feelings,” Andrew says.

When they got past the emotions, he says, they were able to come up with a plan. Through a referral, they connected with investment bank JD Merit. In about 90 days, the Gunias received an evaluation of the company. The value was not what the Gunias needed for Andrew to retire, but they learned how to adjust the value so Josh could get financing to make the purchase. 

It takes a team

Ideally, business owners should start planning for an exit when they start the business, and a few do, says Sean Ostrander, vice president with JD Merit in Gig Harbor, Washington. He is the mergers and acquisitions adviser who helped the Gunias reach their solution. 

“This was a father and son who loved each other deeply, and the business was a sticking point in the relationship,” Ostrander says. 

A mergers and acquisitions specialist should assemble a helpful team of professionals, he explains: They coordinate with certified public accounts, attorneys, wealth advisers and others so a deal moves smoothly. They also look for buyers. A portion of his time, he says, is spent on the phone maintaining relationships with private equity companies that may be interested in buying a business. 

One of the biggest pitfalls for any business owner seeking to exit is to listen to the first potential buyer who knocks on the door, Ostrander says. Never assume that first person will end up buying the business, he adds. The difference between that and a managed sale with multiple buyers could mean millions of dollars, he says. 

Many business owners don’t understand how to value a business, he explains. Typically they believe value equals assets, which may undervalue the company, or they believe the business to be worth more than it is, he says. Cleaner financial statements often result in a higher valuation, he adds. Someone who treated a business like a personal bank account, running thousands of dollars in personal expenses through it, may find that it makes a difference of a couple million dollars in a sale. 

“The critical part is to identify the life situation you want when you exit, and chart the steps needed to accomplish that goal based on your life situation now,” Ostrander says. 

Remain flexible

For anyone with a business, Josh says, plan ahead because whether you’re selling to a family member or another company, buyers will be looking at financials for the most recent three years. But beyond the accounting, establish the values or principles from which you want to approach the transaction, he advises. 

“It’s very important to guard yourself from other people’s opinions and influence. It’s a very emotional time,” Josh says.

Some of his advisers disagreed with the way he and his father worked things out, he says.

“Had I listened to them, and not protected the core values we agreed on at the beginning, we wouldn’t have had a deal,” Josh says. 

At the same time, you must be flexible, he adds. Too many people get stuck in their preconception of how a deal must happen instead of realizing that a different process could generate the same outcome. 

Have your team in place — your banker, accountant, lawyer, and the people in your office, Josh says.

“Our team, inside of my building, is what made this deal come together,” he says. “It was their hundreds of hours of document requests, of meticulous attention to documents.” 

Learn EBITDA, Andrew says. That’s a financial measurement: earnings before interest, taxes, depreciation and amortization. 

“I really didn’t think it was going to happen, and there were so many components in this process that I would have never thought of, but also really didn’t have any control of,” Andrew says. “The message I would openly share for anybody who is a business owner is: Prepare, prepare, prepare, and spend some time around the topic because, quite frankly, this is your identity, your purpose, everything you’ve been doing for a lifetime.” 

A successful outcome

Josh and his father remain partners in a couple of other businesses, one a property management company that owns the land A Advanced Septic and Construction is on, and another that owns land containing a $23 million plant that produces clean water and fertilizer from municipal wastewater and is owned and operated by Generate Upcycle and Sedron Technologies.

But transfer of A Advanced Septic and Construction, the primary company, is complete. 

“Was it worth it? Absolutely,” Andrew says. “I now spend every other month in Arizona enjoying the fruits of a lifetime of showing up every day whether I wanted to or not.” 

There is more to think about. Just five months after finishing the business transfer, at age 60, Andrew had a heart attack. There are three stents in his chest now. There was a period of time, he says, when he had to attend to the details of his life as if he would not be around anymore. 

“There’s no guarantees on how it all works out and plays out, and how long you get to enjoy what you’ve earned,” he says.