New... Should I or should I not

[Knight]

Hello to all and thanks in advance. I'll make it short and simple. Scared but can't wait. Been looking at rvs, already own a yacht. Started out looking to retire by 55 but things have went well and been very smart with my money over the last 10 years. I could keep working, adding to my income without much effort. Not sure if the money is all that important now.

I'm 44, business owner and burnt out after 18 years. Definitely affecting my health and mental state. Already ruined my marriage. Seriously considering retiring within 6 months. I have two employees that want to buy the business. 90% owner financing which scares me a little but doable. Should I go for it?

Income
14500.00 rental per month
10 to 15k per month salary
Payment from selling 12850.00 per month for 10 years
200k in savings
2.5 million in assets

Payments per month
Combined 7k
Easily could get it to half that in less that a year

 

[Bamaman]

Giving an honest opinion would be difficult given the info provided. Do you feel that the new owners are going to continue to run the business at least as good as you've run it? If they're especially successful, are you going to be paid off faster? And are this industry's services/sales going to be steady and reliable in future years? Will they be expanding the business prior to your being paid--and requiring additional capital from somewhere?

It's nice that you really know the buyers. But you should only consider doing such a transaction on your terms. Sell them 10% of the business but retain ownership of the rest of the stock. They would be put on a salary that's not too high and not too low--a basic living wage. What's left over would be split 50% into buying your stock in the company and 50% going into your pocket--and the profit distribution is to be done monthly. The accounting practices should be set up on front end, and you given complete access to all company records, including audited financial statements.

You need to give the buyers incentives to be profitable so they can pay you off very promptly. By all means, have a lawyer experienced in partnerships guide you and have good detailed buy and sell agreements. And it's always best in any partnership to have the ability for one partner to buy out the interest of the other partner on a specific date--5 years or 10 years later. You need to cover all bases.

I know these terms seem harsh, but they're meant to motivate new buyers to be successful and get rid of you. I've been involved in many deals being done this way.

 

[DrRoy]

Bamaman had very good thoughts on it all.

 

[nwsteve]

Bamaman had very good thoughts on it all.

+1

 

[The Cosmic Avenger]

I know nothing about entrepreneurship, but the other comments seem to have covered that very well. What I am concerned about is the dearth of information on your budget. Is "payments per month" your total current spending? Does that account for health insurance? Because between the rental and ownership payments, you probably won't qualify for a subsidy, but the only thing more expensive than private health insurance is not having health insurance.

If you haven't already done so, I suggest going back over your last 2-3 years of spending and breaking everything down into necessary and optional spending. And it's not all or nothing -- for us, about half of our grocery bill is necessary, half is optional. (We could survive spending half of what we do on food, but we like good meat, cheese, etc.)

Of course, plans may and often do change, but figuring out how much money you need and want is just as important to retirement planning as knowing how much you have.

But my gut feeling, based on my best guess, is that you're ready. I could live fairly comfortably on half that rental income alone, in a HCOL east coast city, too.

 

[drums]

Hello to all and thanks in advance. I'll make it short and simple. Scared but can't wait. Been looking at rvs, already own a yacht. Started out looking to retire by 55 but things have went well and been very smart with my money over the last 10 years. I could keep working, adding to my income without much effort. Not sure if the money is all that important now.

I'm 44, business owner and burnt out after 18 years. Definitely affecting my health and mental state. Already ruined my marriage. Seriously considering retiring within 6 months. I have two employees that want to buy the business. 90% owner financing which scares me a little but doable. Should I go for it?

Income
14500.00 rental per month
10 to 15k per month salary
Payment from selling 12850.00 per month for 10 years
200k in savings
2.5 million in assets

Payments per month
Combined 7k
Easily could get it to half that in less that a year

OK been there just recently and truthfully your information is so sketchy I could not begin to offer an opinion. I sold my business but had covered a ton a bases before I sold. Based on what you showed there are some obvious question on the math, For starters:
1) Is the rental income your business facility, if so will it continue after the sell or is this roughly $175K annual amount going to continue for your life?
2) Will the $10K to $15K per month salary/ income continue after the sell?
3) What are you selling the business for and how is it structured. Seems you are selling it for roughly $1.5MM?
4) is the $2.5MM in assets liquid or is this the business and home?

If you add up all the income you mentioned you will make over $500K per year for the next 10 years and could easily add a few mill to your bank account with just $7K in monthly expense. So, no idea ( as a business owner) whether this is a wise move or not. From a math standpoint you got a good thing going so why not hold on for as long as you can.

Now if you are burned out just know this happens to nearly every small business owner over time. Anyway, I am new to this forum but your post caused me to read. Good luck with the decisions.

 

[socca]

90% owner financing which scares me a little but doable. Should I go for it?

0% owner financing lets you walk away from the business with no worry regarding the future performance of the business. You can offer to become a 1099 independent contractor / consultant for the new owners on a part-time basis. You can make it clear to the new owners that you reserve the right to walk away from your new consulting gig at any time if it stops being "fun". Problem: can the new owners cough up enough money to buy you out?

Case study: my family used to do business with CPA A who had bought CPA B's business with seller financing. Unfortunately, CPA A was convicted of embezzlement related to a previous job he had and lost his license. I imagine that this turned into a real headache for CPA B, although I'm not privy to the details. My personal bias is to keep things as clean and simple as possible.

 

[catii]

Sold my 32YO consulting business to the employees under almost-identical terms that Bamaman suggested. Worked out just fine for the past 5 years, the business is still growing, & I'm happily FIRE. Go for it!