Those that retired from their own Business

[phil1ben]

My question is directed to those that sold a privately held business. I am in the process (early stages) of doing so after 30 years. It is a small business I started and now has about 30 employees. I am the sole shareholder. Please explain how you "extricated" yourself from the business. Not looking for any monetary answers or legal structure ( I can deal with those issues) but whether it was a clean departure on a particular day (i.e. you walked away) or whether there occurred a transition period over a period of time and how long that period was.

Also, how did you deal with not having "the business" run your life for so long? My question is more focused on the emotional side of "letting go" of a venture that controlled your life for so long. Thank you.

 

[pb4uski]

BIL recently sold his business and will stay on as a consultant for ~6 months to help with the transition (acquirer is moving the factory from Texas to Illinois) and then he'll be done... clean break. That's the plan anyway.

 

[braumeister]

I think it probably depends on two things: how the purchaser sees your future role and how you see it.

A good friend sold his small (ten employee) business to a much larger company with the provision that he remain as a salaried president for at least one year. The sale price made him wealthy (over 10 million in today's dollars), but he found he still enjoyed it so much that he remains in that role today, many years later. He was quite surprised, as he had honestly planned for complete retirement, but just couldn't give it up.

 

[imoldernu]

Can't speak to the specific of what I'd consider a large .."small" business, as my own small business consisted of myself and two sons... building a framework for a franchise. The dynamics were much different, but the personal part of extricating from a commitment was in same ways similar.
In my case, a health (colon cancer) scare forced the separation because I didn't want to leave my DW with the substantial debt associated with a start up.
We were in business for three years which effectively meant full dedication to the many extra hours of developing and planning. In effect, an all in, personal commitment.
As I was incapacitated for three months, my sons were left with the task of phasing out, and closing down. Definitely an emotional situation, with much anxiety.

The good part...
A look to the future. A life changing event. A mental closing of the door to where we had been and where we were going. This is BIG.
Since we weren't sure of our future (future recurrence of the cancer) it was a fresh start, with no assurances of how long we'd be here. The decision to retire wasn't easy. Always the worry about not having enough to be able to stay retired. At age 53, it was a chance. Many money scenarios, but the saving grace was the idea that if all didn't go well, we were young enough to go back to work... full or part time. The safety net that gave us the courage to make the decision.

About the mental angst:
Most of my own working years were spent in relatively high stress jobs. It was a challenge to shift from that, to the idea of a more free lifestyle. To shift from running the show for others, to the idea of making the most of the years we would have left to live.
It took a little while, (perhaps 3 or 4 months) but we made the change... and the results were great. Sudden freedom from anxiety and a whole new life to be built from scratch. We channeled the energies into planning for happiness. That was 27 years ago, and now, in our 80th year nothing has changed.

Advice?... not mine to give, but a guess?.. A very short time to adjust to the new norm. Looking ahead is inspirational.

Best wishes for your new life!

 

[Rickt]

Imoldernu: Thanks for sharing your experience & wisdom which are both invaluable.

OP: Good luck to you. Please share your experience as well. Am planning to sell our small business in 2017 as well and would be looking forward to hearing your advise & exerience.
Cheers.

 

[bizlady]

I sold mine and a consultant contract was in place for one year to help as needed.

 

[Ronstar]

Our engineering/surveying business started out with 2 owners in 1979. Then me and another guy each bought 15% of the company in 1992 at an agreed upon price. The 2 primary owners financed our purchase over 5 years. Our share of profits covered the finance costs.

Company structure was initially C corp, then converted to S corp. Each owner had an employment contract and was subjected to a company buy-sell stock agreement.

My boss and I went to seminars and researched how to sell the company in the late 1990's. In 2000, with two 35% owners at 55 yo, and two 15% owners at 45 yo, we came up with a plan to sell stock to 6 key employees. Our corp lawyer was against the plan, citing internal control issues. But we went ahead with the plan anyway. IIRC, the 6 employees each bought 3%, mostly from the primary partners. Their purchases were funded by bank loans.

From 2000 - 2012, the new partners eventually purchased more stock that reduced the original owners' share to 0%. The original owners retired. I sold some stock to a new partner. We voted in a new slate of directors, being 3 of the new owners, and elected one of the new owners as president. During this time, some younger partners quit, with the company buying their stock back. Company size grew to 60, then diminished to around 30 in 2008.

I gave notice to retire in 2012, and sold my remaining shares back to the company in 2014 when I retired. I believe there are 6 owners now.

This method worked for us, but it took a long time. It only worked because there were sufficient profits to fund the stock purchase loans. And all of the partners got along with each other reasonably well.

Letting go was not much of a problem for me, as I started with only 15% ownership that gradually reduced to 0%. And I had multiple partners that helped keep my work stress to a minimum.

 

[YeahNo]

I handed the keys over to two of my guys 2 years ago. Company is currently 9 years old with 14 employees. About 2 years prior to the deadline, I notified the two chosen guys about my plan, they both accepted, and then I used those 2 years to train them on the responsibilities that were still under my belt at the time.

Currently we have monthly meetings where I come in and they bring me up to date and pick my brain if need be.

I still own 100%. I am 34.

 

[outdoorgirl02]

I sold 2 of my small businesses within a month of each other in the fall. For one business, it was just me but I had a great shared studio space with it. The other business had 3 full time contractors plus a few part time contractors. I thought it would be hard emotionally but it has been really easy. Before selling, I was really clear that I accomplished every possible goal I had for both businesses and was ready to move on. As part of both sales agreements, I included a set number of consulting hours from me that were included in the sale. I am almost done with consulting for the one business and it looks like I will still do some consulting for the other one for 2-3 more months (about 2-3 hours per week).

While I cared an immense amount about those businesses, I made the right decision and have no regrets. I have an online business that I still do and really enjoy that. I had one business for 10 years and the other for 6 years.

 

[pb4uski]

I handed the keys over to two of my guys 2 years ago. Company is currently 9 years old with 14 employees. About 2 years prior to the deadline, I notified the two chosen guys about my plan, they both accepted, and then I used those 2 years to train them on the responsibilities that were still under my belt at the time.

Currently we have monthly meetings where I come in and they bring me up to date and pick my brain if need be.

I still own 100%. I am 34.

What motivates them if you still own 100%? I presume since you own 100% you make major decisions (major expansion, financing, etc)? Do you have an economic out in mind?

 

[Debinnov a]

Just sold my small business recently after almost 30 years. It all depends on the buyer and what they require of you. Depending on the type of business, if there is "earn out" etc., you could be out within a few weeks up to a year or more.

I was lucky. My buyer only wanted me to stay on for about three weeks. He felt (even though he had no industry experience or knowledge) that he didn't
need me for any training, other than training staff during that time. I was thrilled to not have to stick around longer.

It is strange, after almost 30 years of being the boss and growing my "baby", to not have to deal with any of it, but I was so ready to retire that other than missing the connection to the business occasionally and my clients, I got over it pretty quick.

Do you have the buyer yet? They will likely let you know what they expect.

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[rodi]

A friend recently sold his business. He was required to stay on for 1 year after the sale.

 

[phil1ben]

Thank you for your responses. I have worked out a structure with my two senior people who have been with me for 20 years that will commence in June. I have been OMY for 3 years now, not because of financial issues but because I procrastinated in working this out. I think I am finally getting there. I cannot describe the excitement I felt last night when describing the process to my wife.

For the past 30 years I have never been away from the business for more than 5 business days. Many 6 day trips to Europe and the Caribbean. We even surprised ourselves how much we saw and did in 6 days even with children (now 18 and 22 both in college). Can't wait to experience a two-week (and shall I venture to say a 1 month) trip to Europe. Personally this Board has been helpful to me not so much for the "do I have enough questions" or "budget questions" but for the continual reminder that we are on this earth only so long. Between those reminders, certain of my friends slowing down and the fact that my father worked until 76 immediately got altzheimers and passed at 80; I think I will finally get this done. Thank you.

 

[highlow65]

I am in a similar but different situation, I own 4 chain coffee shops, I am mostly ready to leave but am trying to build my two kids up to being able to effectively run them. I hope to feel comfortable doing this eventually, right now I have taken a few steps back, I used to work a part time job for insurance which stopped a few years ago with obamacare, and I leased out the plowing and landscaping. I still oversee each shop many times daily but am taking baby steps.

 

[Milton]

About 2 years prior to the deadline, I notified the two chosen guys about my plan, they both accepted, and then I used those 2 years to train them on the responsibilities that were still under my belt at the time.

What/whose deadline?

What motivates them if you still own 100%?

+1

 

[Bored Beyond Belief]

phil1ben,

I stopped having an active role in my company on Jan. 1st. There's still a few projects I'm completing but there is no expectation that I'll be in the office on any particular day. My responsibilities have slowly lessened over the last couple of years to the point that I was "bored beyond belief". This strategy has really helped me through the transition. The stock purchase plan will take several years to complete but I brought in a great partner and feel comfortable with the structure of the exit plan. To answer your question regarding the emotional side is difficult without more detail but I will list out the issues I've been faced with during this transition period.

1. I'm a huge fan of a slow transition. It's allowed me to slowly accept my new free time and helped ensure me that the company is being left in good hands. It's also given me time to be 100% sure of my decision and after 40 days now I'm completely happy with my free time. If you decide on a longer transition then you'll have an opportunity, like I did, to slowly back away from the day to day operations. Feels literally like backing out the door. Employees had a rough idea that I was headed out and by the time I crossed the threshold they were like "what does that guy do here anyway". This has also allowed the new management time to transition into their roles which is very important to everyone's morale. If at some point along the way I felt the new management wouldn't do as good, if not better job, then I probably wouldn't be moving forward with the plan.
2. I've battled with feelings of guilt and that I've abandoned the people that have helped me along the way. Leaving them in a good position financially and with a strong support system has helped lessen those concerns.
3. For me, there wasn't really an issue of my identity being tied to the company. My personality and background was outside the companies core business so leaving has not left a whole in my life. If anything, I'm happy to be moving on and feel that I can pursue something that I truly love. If you loved what you did, then the transition may be more difficult.
4. What drives you? What is your personality type? Do you feel that the success of the business was directly tied to your feelings of self worth? If so, then the transition may be more difficult for you.
5. Are you making a clean break or is there a loan with stock pledge attached. Obviously a clean break makes things simpler but if you're loaning the money for the purchase to the new buyers then there will be an opportunity to stay at least somewhat mentally involved.

We all have different personalities and some of the issues you may be facing I haven't dealt with. If there's something specific then I'd love to hear your thoughts. I have two school age kids so there is plenty to do. I used to take two week vacations to unwind but now everyday is a vacation . I'm planning more shorter trips until the kids move on to college.

BBB

 

[thepalmersinking]

Is it possible to buy a business near retirement age as a supplement to retirement?



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[pb4uski]

Yes. It is also possible that a spaceship may land in the parking lot in 10 minutes and little green men walk out of it.

The more likely scenario is, unless you are an experienced entrepreneur, that you will pour your retirement nestegg into a business and lose that money as that has happened to many budding retirement age entrepreneurs with no experience building a business.

 

[Ronstar]

Is it possible to buy a business near retirement age as a supplement to retirement?



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Quite possible, but not something that most retirees want to do. One can make money from businesses in 2 ways. One from income. One from the sale of the business. Retirees may not have enough time left to get a good return on business investment in a short time period.


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[Senator]

As someone that has owned several businesses, although none as large as 30 employees at the same time, maybe some of my advice can help. Keep in mind, I also had rentals and a full time job while starting and running these businesses.

I owned a bar/restaurant. It was owned with a partner. After 5 years, the time vs. money aspect was no longer there. Or never really materialized. I gradually let my partner take over the business. We traded some real estate to make each of us in the same financial situation. He owned 100% of the business property, I took a different parcel that he owned.

I stayed and continued to do the back-end work, but let him take over the front end. It eventually was sold about a year later.

I also had a lawn/snow business. I gradually started hiring sub-contractors for the summer work. I could have made that business grow quite a bit if I wanted to. There was always issues with customer service and extra jobs that come up and needed to be bid out. If you are in that business, or any business, you need to keep growing it if you want to be successful.

I had planned on doing everything by subcontractors at one point, but they are often unreliable. It would not have been fair to any customers that were paying.

In the end, I gave the accounts to the sub-contractor. I sent a letter to my customers indicating my retirement and let them know the sub-contractors contact information.

You may want to take on a partner, or sell the business outright.

Is it possible to buy a business near retirement age as a supplement to retirement?

Yes it is, although somewhat foolhardy. If you want to do that, you are better off to keep working your real job. You are not ready to retire.

If you want to start a business to keep busy, that is different. You can start small, and keep it in the hobby range. Making an extra $10K+ on the side, doing something you like/do not mind doing, is not that difficult.

 

[YeahNo]

What motivates them if you still own 100%? I presume since you own 100% you make major decisions (major expansion, financing, etc)? Do you have an economic out in mind?

What motivates them? Well, $$$, autonomy, getting to control the show, etc. We changed the way they were paid once they took over. One of them doubled his salary and the other increased by 50%. These are life changing amounts for them. I have full control which is nice so yeah I make major decisions (few and far between these days). I don't really have an economic out in mind. I do think the more years that go by the more I wouldn't mind selling a minority share to some one, essentially to pull some cash out.

I just never had the mindset of selling going into it so it wasn't a high priority. Now if someone handed me a couple million for say, 10% of the company, that might be hard to deny.

I've never really looked into selling a share of my company so I really don't know where to begin.

What/whose deadline?

+1

My mental deadline. It helped me keep OMY syndrome at bay.

 

[pb4uski]

Interesting YeahNo. A neighbor friend sold his used car business to two of his long-time employees a couple years ago but still goes in regularly part-time. He owns the building and leases it to them and also finances the inventory. From what I gather he provides input but they make the final decisions but the appreciate his counsel and experience. It works for them.

It is sort of like they are co-COOs and he is their banker/landlord.

 

[thepalmersinking]

I was tossing it out there to see what the responses would look like. I did start a company at 25 that was a service bureau to banks. We went from 0 to 57 employes. The business was profitable and was sold in 1997. We sold it because we were afraid bank consolidation would kill the business. Eventually it did about 5 years after the deal closed. I worked out a 3 year employment agreement during which time I built 2 fast food franchises and put a manager in place to run them. After 5 years I sold them as that was not my thing and took a couple of years off to be with my little kids. During this time, one of those old customers called and offered me a job. I still have the job. Good pay, an actual pension and stock grants. I have some $ in the bank in addition from the past ventures. House is paid off and have a beach place.

My question is this, how practical is it to jump into buying a business using some cash and debt and then not taking out a salary until the debt is paid off. I don't need a salary from the business . I just turned 51 and early retirement starts at 55 so i think I could get it paid off in time to retire early. I'm just talking out loud, I guess...


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[YeahNo]

Interesting YeahNo. A neighbor friend sold his used car business to two of his long-time employees a couple years ago but still goes in regularly part-time. He owns the building and leases it to them and also finances the inventory. From what I gather he provides input but they make the final decisions but the appreciate his counsel and experience. It works for them.

It is sort of like they are co-COOs and he is their banker/landlord.

It's always interesting to hear details of others exit strategies. I think it would be fun to experience at least once.

 

[phil1ben]

What motivates them? Well, $$$, autonomy, getting to control the show, etc. We changed the way they were paid once they took over. One of them doubled his salary and the other increased by 50%. These are life changing amounts for them. I have full control which is nice so yeah I make major decisions (few and far between these days). I don't really have an economic out in mind. I do think the more years that go by the more I wouldn't mind selling a minority share to some one, essentially to pull some cash out.

Thank you for your thoughts. The way my mind works I am either fully in or fully out. I just can't do things half way. That is probably why I have never had a vacation longer than 5 business days in 30 years. I have no desire to maintain control. I am selling because it is time to move to another chapter and I have no desire to take the business back. I am going to sell to my two senior people that have been with me for more than 20 years. They will pay me out over 5 years. I do not need the income or proceeds for retirement but very much do want them to succeed. So in addition to the sales price we will have a consulting contract. I will work 3 days per week until December and then I will stay on for a year on an as needed basis.

The "business" has been very good to me and I hope it will now be very good to them. They have earned it.

Already shopping for woodworking equipment and planning a 1 month vacation in Europe. It is still somewhat surreal to me.