Five years ago, Gregg Eisenhardt, president and third-generation family owner of Good Electric Inc., a Waukesha-based electrical contracting firm, realized he needed to craft a plan to sell his business.
At the time, Eisenhardt was in his mid-50s. He had just learned that his son was not interested in taking over the family business, and he was pretty sure that he would eventually sell the company. But he needed to find a buyer.
Eisenhardt attended a seminar sponsored by a national investment banking firm. He fielded a call from a competitor. But he did not want to sell his company on the general market or to a strategic buyer.
Ultimately, the right buyer found him.
A few years earlier, he met Dave Drummel, vice president of another electrical contracting firm. Drummel left that firm in the early 2000s, and called Eisenhardt in 2003, to see how they could work together.
The pair eventually reached a buy-sell agreement. Drummel would be Good Electric’s vice president for several years, until Eisenhardt retires by age 63. Drummel would buy the company at that time.
“I intended to go at 61 or 62 anyway,” Eisenhardt said. “I’ll turn 60 this year, and I intend to go next year.”
Eisenhardt declined to disclose the sale price of the company, but said the arrangement is packed with incentives for Drummel.
“For the work that he (Drummel) brings in, a percentage of the profits helps fund his down payment to me,” Eisenhardt said.
And judging from the company’s performance since Drummel joined Good Electric, the down payment was a good start, Eisenhardt said.
Since Drummel was hired, the company has added a new data and communication division, which has more than 10 employees. Most of that division’s employees used to work with Drummel at his former employer.
In recent years, Good Electric’s annual sales have doubled to more than $10 million.
“Certainly, a portion of that is Dave,” Eisenhardt said. “The rest is the economy and the new division, which indirectly is Dave.”
The buy-sell agreement calls for Drummel to pay at least one third of the business price up front, with the balance paid out over a 10-year period. When Eisenhardt retires, he will relinquish management of the firm.
“I will have no control or say,” Eisenhardt said. “I’ll get quarterly statements, and we’ll have meetings. I might even work for him, doing some networking and getting some accounts. We will talk about that.”
Other business owners who are thinking about a potential sale should start early, Eisenhardt said.
“Don’t rush through it,” he said. “Start three or four years out. And talk with your close friends that own businesses before you talk to accountants and attorneys.”
Eisenhardt also said he was lucky to find a buyer such as Drummel, who was willing to work in his company for a number of years before taking the reins.
“Overall, I’m glad I did what I did,” he said. “If I had to choose a person, he’d be the one. Sometimes I think it was divine intervention.”