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

[Joe Marconi]

Step 8- Don’t Rely on the Sale of your Business for your retirement

I know this sounds contradictory, but the proceeds from the sale of your business may not be enough to financially support you into retirement.  Your business must be profitable while you are in business and must financially support the things you want to do and need to do, while you are in business.  However, to expect a big payout from the sale of business to secure your financial future in your retirement years is not advisable.

Here’s what I suggest. Build wealth while you are in business. Whether that’s investing in real estate, through an investment portfolio or by establishing a retirement account.  In other words, you need to sit down with a qualified financial advisor and plan out what you will  need in retirement and build up the cash needed to support that.

The proceeds from the sale of your business should be a bonus for you. Something to feel proud and will allow you to enjoy the years of hard work and dedication you had to your customers, employees and your community.

One last thing, if you own your property, this opens up different opportunities. You can sell the property or lease it back to the buyer.  For this, you will need to sit down with your accountant, a real estate attorney and your financial advisor.

Stay tuned for Step 9!

[xrac]

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[Joe Marconi]

44 minutes ago, xrac said:

Joe, I have been able to save approximately $25,000 per year for the last 15 years plus lesser amounts before that.  It was very hard to do that some of those years but I did it religiously.  We also own the property where our business is located which is prime real estate.,  I am now 69 years old and trying to exit the business.  If I I had not saved and invested and if we did not own the property I would be in deep trouble.  The proceeds from a sale of the business at asking price would not be something to live on.  I would basically be in a position of probably having to work till I can't work anymore.  Now I may continue to work at something different if I exit the business but it won't because I have to but because I want to.     

Frank, at 69 you need a plan.  But, thankfully you have investment money and the property.  I know shop owners that have not saved and rented their entire business career. They end up with nothing, and it is sad.  This is a hard business, and anyone in it should enjoy the fruits of their labor. 

WORK ON A PLAN- ENJOY LIFE. I will be 67 years old in a few weeks.  41 years in business was enough.  And I will still do my coaching, this site and other things to keep busy. 

[rpllib]

"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

 

[Joe Marconi]

1 hour ago, rpllib said:

"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

 

Wow! Talk about words of wisdom!  Thank you for sharing. You gave a credible and critical argument for building wealth for your retirement.  Shop owners, please listen. 

[Transmission Repair]

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[Joe Marconi]

1 hour ago, Transmission Repair said:

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

Nice! Good you you!  This is a lesson for other shop owners, that's why this is such an important topic! Thank you for sharing, and what an amazing looking shop in a beautiful area! 

[Transmission Repair]

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[Joe Marconi]

13 hours ago, Transmission Repair said:

Thanks Joe.  Like I said, I just got lucky.  Tripling my money in only 7 years of owning real estate is more the exception than the rule.  Just to be clear, I only cleared $1.9M.

J. Larry Bloodworth

Draper, Utah 84020

Only? I would say you did good!  And luck is when preparation meets opportunity.  So, you need to give yourself some of the credit too. 

[xrac]

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[Joe Marconi]

1 minute ago, xrac said:

Lucky or l smart that is a tremendous achievement.  Congratulations!

Strongly agree!!!

[Transmission Repair]

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[xrac]

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[Joe Marconi]

1 hour ago, Transmission Repair said:

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] 

You gave  lot of great advise. I am sure the readers will benefit from it.  Owning the real estate does put you in a better position and with more options, especially when retiring. If buying the property at the shop is not possible, then investing in other real estate properties should be considered.  Again, great story, great advise. 

[Transmission Repair]

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[Joe Marconi]

13 hours ago, Transmission Repair said:

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.

More words of Wisdom!

Your story is common with so many shop owners. The thing that other shop owners should take notice to is that you realized when it was time to exit and you did something about it, and that you built a business worth selling.  As I tell ALL shop owners, "You are never too young to plan your exit stratgey, and build your business as if you are going to sell it tomorrow."

Thanks for sharing! Great information! 

[Transmission Repair]

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[Joe Marconi]

5 hours ago, Transmission Repair said:

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

Wow! BBB complaint, not good!

 

[Transmission Repair]

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[Joe Marconi]

21 hours ago, Transmission Repair said:

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.

Yes, Agee.  As a landlord, it's your responsibility to qualify the tenant.  Plus, never assume that the tenant will take care of the building and property the way they should and obligated to do as per their lease agreement.

Trust But Verify! 

[Transmission Repair]

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[Joe Marconi]

16 hours ago, Transmission Repair said:

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.

I have seen this before, and yes, let this be a lesson for all! 

[xrac]

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[Hands On]

I am looking for a building to lease I  north west Colorado. My reviews are excellent. Hands On Auto Tech 80504

[Transmission Repair]

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[Joe Marconi]

5 hours ago, Transmission Repair said:

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. 

Great advise!  I agree, you need to perform your due dillegence, and also speak to the right professionals.  Put the plan on paper, it becomes real at that point.