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Exit Strategy-step 8- Don't Rely on the Sale of your Business for Retirement

Joe Marconi
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  • Joe Marconi changed the title to Exit Strategy-step 8- Don't Rely on the Sale of your Business for Retirement
rpllib Enthusiast

rpllib

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"but the proceeds from the sale of your business may not be enough to financially support you into retirement"

If you are a shop owner in your 30's or 40's, I hope you listen well to Joe's words. My wife and I worked most of the first 30 years in our business with less then $100k in owner salaries, wages, perks, discretionary spending, ect. 

Much of that time I was not even sure we would survive as a viable entity till our retirement, so saving was not an option, we considered it crucial to having any chance at life after the business. 

Now that we are in our sixties, have no debt, own the real estate and still managed to have a 7 figure retirement account, with only minimal family wealth as part of that figure, we feel we are in the best position of all. 

For me, that position is the opportunity to chose good health and freedom of choice in what we do on a daily basis, over stressing about having to sell the business, to have a life.

The most liberating part of the whole thing, is the knowledge that even if we chose liquidation as our viable exit plan, we would be just fine. Even if the building had to lay empty for a few years, we will be just fine, even if we had to sell 350k of non real estate business assets for 50k, we will be just fine. Even if we got nothing out of the business/assets at all, and the real estate went back for delinquent property taxes, even then we would be just fine. 

I believe many can accomplish the same/similar to us, or better, if you have a plan and work the plan from the youngest age you can. 

Thank You Joe, wise words

 

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Transmission Repair Experienced

Transmission Repair

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I got really lucky.  I retired 7 years ago after selling the business and leasing the real estate.  Joe's right about that not being enough to retire on.  However, last year I sold the real estate and that ended up being my retirement.  One year ago I sold the property for 3 times what I paid for it in 2013 for $2.3M.  THAT was enough to invest and retire comfortably on.  Once again, unlike our president, Joe's right.

Here's what I sold.  3/4 acre parking with a double fence and 243K/day traffic count.---> https://youtu.be/V89FJzM7KCg

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Transmission Repair Experienced

Transmission Repair

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I retired 7 years ago at the age of 60 after 40 years of transmission repair.  I'm currently 67 and my wife is 69 and an accountant w/2 degrees.  Let it be known that she was as much a part of our success as I was.  She was a single mom raising 3 boys while working 2 and 3 jobs at a time.  Although I was a production transmission rebuilder for the first 15 years of my career, I've been self-employed for the majority of my life.  We sold our business in 2015 to a local multi-shop competitor.

Another stroke of luck for both of us is that we met in 2007 on Match.com.  Crazy, huh?  She invested most of the real estate proceeds into high-yielding mutual funds to give us a nice monthly income.  The house and cars (including her 2021 RAV4 Hybrid) are all paid for.  Before we met, I didn't plan, save, or set goals much.  I just lived week to week with a management style I call "management by checkbook".  Enough can't be said for the women in our industry.

If I had to offer some advice, I would say to own your own shop real estate.  We bought ours from our landlord on an owner-financed deal.  We rented the first 5 years.  Call it luck or destiny, I still think it was more luck than anything.

J. Larry Bloodworth, CMAT

Draper, Utah 84020

[email protected] 

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Transmission Repair Experienced

Transmission Repair

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When do you sell?

In my 40-year career, I've owned 3 different shops, all with the same name, and in the same business of transmission repair.  In the first two, the top line was growing, but the bottom line kept shrinking.  I thought I could "turn things around" and hung on to the bitter end.  I ended up with nothing to sell because who wants to buy a job?  I had nothing but equipment to sell.  

My 3rd shop was the charm.  However, I saw the same pattern start to happen all over again.  Instead of hanging on to the bitter end, I chose to sell why I still had something to sell.  I was 60 and had enough.  It took me 7 months of doing mental gymnastics  to finally decide to pull the trigger and sell.  I called my 3 largest competitors and told them I was selling.  They all knew our shop was the highest grossing transmission shop in the state.  My competitor with 6 location came over the next day.  A week later he sent his CPA in to audit the books to make sure I wasn't blowing smoke about our numbers.  From the time I decided to sell to the day we signed the papers with the multi-shop owner and I got my money was only 6 weeks because I had something to really sell other than equipment.  I had cash flow and an accountant for a wife and business partner.  Having impeccable books is key, especially if you choose to sell.

My advice?  Don't hang on thinking you can turn things around.  Sell your business while you still have something to sell.

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Transmission Repair Experienced

Transmission Repair

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Thanks Joe.  I've always rented and didn't start owning until 2013.  Better late than never.  The guy I originally sold the business to just turned 80 and is still in the daily grind with no relief in sight.  He once had as many as 10 transmission shops.  He's now down to only 4 shops.  He has a stack of customer complaints, law suits, and  an 'F' rating with the BBB.  I have an $85K judgment against him that isn't worth the paper it's written on.  He's in a sad, sad, sad position.  I feel sorry for him and his wife.  Even his son quit and went to work for somebody else.  

Here's a lesson on how to single-handedly wreck your own retirement:  https://www.bbb.org/us/ut/salt-lake-city/profile/transmission/tanner-transmissions-inc-1166-85050006

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Transmission Repair Experienced

Transmission Repair

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18 hours ago, Joe Marconi said:

Wow! BBB complaint, not good!

 

I'll say!  It's terrible, sad, and pitiful all at the same time.  I don't really like talking bad about anyone, but this guy takes the cake.  I've been taken to court by a customer ONE TIME in my career and that's where I met this guy.  He had 2 customers in a single day.  He goes to court regularly, usually monthly.  He usually wins because his R.O.s and warranty have so much "fine print" and conditions.

Half his shops don't even have lifts, they have oil change pits with drive-on ramps.  How'd you like to R&R a FWD transmission without a lift?  Most of his installers are novices and don't know any better.

I've never been a landlord before selling my business and leasing my building to this guy.  I couldn't have picked a worst tenant if I'd tried.  Lucky me, huh?  I sold my building to a young plumber with a fleet of 40 trucks that was a pure pleasure to deal with.  I only wish I could have had him as a tenant.  

If I had to offer some advice to others, I would suggest to do a background check on tenants and not just take money from the first guy that has it like I did.  Investigate the buyer.  Be selective.

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Transmission Repair Experienced

Transmission Repair

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I only half-assed qualified him.  I saw he was years behind in property tax on 3 of his other locations.  So, I set the rent with an extra $1K/mo. more at $11K/mo. which gave me enough money to pay the property tax.  Everything else, like you suggest, he let go to hell in a handbasket.  In 5 years, sales went from $1.2M/yr. to $400K/yr.  That now made his rent 33% of his revenue and was the reason for him skipping out of a 10 year lease.  I should have exercised more due diligence.  Let this be a lesson for all.

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Transmission Repair Experienced

Transmission Repair

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The best way to find out if they pay their rent on time is to ask their current landlord.  Look at how they pay their property taxes; it's public record in most states and readily available.  I would think twice before I sold or lease to someone who has never been in business before.  List you business/property on BizBuySell.com and LoopNet.com.  They work really well.  I had a buyer for our real estate within 3 weeks on LoopNet.com.  You can also find buildings/real estate to lease on LoopNet.  Today, in 2022, it's much easier to find something to lease or buy than ever before.  It sure beats the old fashion method of just driving around and looking.

Another thing to consider is the daily traffic count.  We were blessed being on I-15, the only north-south interstate in Utah.  The daily traffic count was around a quarter of a million vehicles a day.  A good location with a high traffic count is very important to the success of any shop.  No matter what, do your due diligence whether you buying, selling, or leasing a shop.  Don't do like I did and half-ass it. 

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      The Toolbox is Last to Leave, First is the Heart
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      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
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      One last thing; the cost of technician turnover can be financially devastating. It also affects shop morale. Do all you can to create a workplace where technicians feel they are respected, recognized, and know that their work contributes to the overall success of the company. This will lead to improved morale and team spirit. Remember, when you see a technician’s toolbox rolling out of the bay on its way to another shop, the heart was most likely gone long before that.

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