How To Pull The Plug

T

TromboneAl

Guest
Please help me brainstorm my exit strategy.

I'm semi-retired, all of my income is from my software product, which brings in a net of about $60K per year. I'm not doing any new development or marketing, and the sales are handled by a third-party company. So currently, my job consists of answering an average of three tech support calls per day and a few tech support emails. FIRECalc gives me a 95% success rate with $50,000 annual withdrawals if my income were to stop now.

The only reasons to completely retire are:

1. I currently need to be home to answer the phone during the week.

2. Although 999 out of 1000 customers are really nice and a true pleasure to deal with, there are a few unpleasant ones that can spoil my day.

3. I always have a slight worry about a possible frivolous lawsuit.

Options

A. Keep going as I am now.

B. Sell the product to another company.

C. Continue selling the product, but without telephone tech support.

D. Continue selling the product, but with no tech support at all. That is, with a big disclaimer at time of sale that says "WARNING: No tech support." I'd have an online forum, and I'd probably monitor it and help with unanswered questions periodically.

E. Just stop selling the product.

Note that options A, C and D would allow me to continue to deduct all health care costs including insurance premiums.

Thanks for your thoughts on this!
 
As an aside, the 95% rate means you didnt make it through the great depression or the 1965-74 'bad sideways miasma'. We're entirely likely in the next generation to have another such event. So in this context a 95% success rate doesnt mean if you did it 100 times you'd make it 95 of them, it means if we hit a bad financial period you wont make it.

I can help with #2 and #3.

#2: tell your unpleasant customers "Blow Me".
#3: Get an umbrella liability policy for a couple of hundred bucks a year.
 
1. Consider training a couple folks who want to work at home to provide the usual and ordinary level of tec support, referring the complex issues to you?  

2.  Force customers to leave a message, 'call back' tec support within 24 hours.
 
Have you looked at what you can sell your product for? Too hard to judge this option until you know whether it might be worth your while. Given the stream of income it generates, it might have some real value. Overtime, this value may disappear. Inotherwords, maybe it is the time to get while the getting is good.


I assume you have a software license that limits your liability and limits warranties to a short period of time?
 
Alternately, I have bumped into a half dozen companies that do nothing but tech support for other companies. One of those might be useful.
 
If you stop developing the product, inciome will dwindle over time. Maybe a sale to another company would be appropriate . . . and structure the payout so that you are paid to consult enough so that you can keep sufficient income to offset health insurance etc.
 
T-AL,

Sell it now for as much as you can get with a 1 or 2 year paid association. Separately keep your corporation going so you can qualify for group health insurance.
 
Selling can consume more time than you're currently spending on the venture unless you already have a buyer lined up. But if you can sell for enough to replace that $60K/year income stream for a few years, that's definitely the way to go.

Short of that, I'd try to automate support as much as possible. In addition to the online support forum you mentioned, create an online knowledge base for support issues. The two combined should mean that your overall support burden goes down, and you drop the real-time support demands.
 
create an online knowledge base for support issues.
Click to expand...

Every time we got a new CEO, this was his brilliant idea. My company worked on this for 20+ years. The problem was that the new development caused the most questions and problems. New Development was mostly responsible for new sales.

Customers that did not upgrade did not need much customer support.

I was VP of Customer Support. - I 'understand' these problems.
 
Well, in this case, Al says there is no new development, so I assume that most of the incoming problems are "frequently asked questions."
 
Thanks for the ideas.

The problem with the online knowledgebase and forum, is that the users who can access something like that generally don't need support. The ones who call are the ones who don't know the difference between a file and a window, or don't understand the concept of "greater than."

The tech support companies usually want a high startup fee (as in many thousands). An individual might work, but they'll certainly need to have something else going as well since I don't want to pay too much for three calls per day.

You've convinced me that I should look into getting another company to acquire the product. I've had trouble locating business brokers that are interested in something like that. Most of them seem interested in selling dry cleaner stores, etc. I'd expected to easily find software acquisition brokers on the net, but no luck so far.
 
T-Al
If you want to sell it, I think you will get more and be happier if you will do a bit of research (if you do not already know) and identify those products out there which are complementary to yours. Directly contact the principles and see if there is interest in either direct purchase or some type of structured workout.
They get another "arrow for their sling", new source of revenue, and you will avoid a ridiculous broker fee and probably realize a higher value.
nwsteve
 
Hey Dory...pumping up that post count or are you secretly John Galt and forgot to log out and back in as your alter-ego? ;)
 
Al,
I'd say keep it and call yourself early semi-retired. Pocket the 60k a year, maybe saving it to add to your nestegg, and get a cellphone with good voicemail support. Hire a college student to help cover the easy calls for you when you go on vacation or just feel like having some time away from it. Pay the student $30 per call or $50 per hour or something and everybody will be happy.

My logic?
A product is not going to fetch you more than about 3x cash flow or 180k if you are lucky. (Selling a real company with a team etc may get you 5 or 7x cashflow, but a product is not as attractive.) You'll spend a fair amount of time and expense/fee and be fortunate to sell at that, and all you'll have is a one-time 150k or so, end of story.

You can make that back in less than 3 years and still own the product.

If you spend a half-hour a day on this, it works out to about 120 hours a year. 60k is pretty good pay for that -- call it $500 an hour, far more than you could get at pretty much any other part time work you might want to ever do.

Besides, you can blow off tech support for a day or a week and you'll just have a handful of disappointed people, who sound like they are pretty clueless as is.

Btw, if they are that clueless, you might be able to find a college student who would cover for you whenever it suited you. The questions sound like they are simple enough, at least most of the questions, that you don't need a fancy tech support contractor to do the support for you.. For hard questions, they'll need to wait until you feel like answering them.

Think of your 60k a year, at least for now, as the equivalent of the SWR on the entire balance of your portfolio. (close enough 60k vs 50k) Thus your product and its revenues are almost worth to you what all your other savings are worth combined. I guarantee you no one will pay you that much. So hang in there, milk it as long as you can, and look for little ways to make it easier on you to take time off etc.

I actually think you are in an enviable position for someone in ER.
 
I think you should sell the product to somebody like ESRBob :)   A lot of people would kill to be semi-retired with that kind of cash flow from 3 phone calls a day.   Personally, I understand how you can consider it to be an albatross.   Work can be fun, but it can also feel like slavery.

Anyway, if you want to skip the broker and try selling direct, try this site:

http://www.bizbuysell.com/
 
wabmester said:
I Personally, I understand how you can consider it to be an albatross. Work can be fun, but it can also feel like slavery.
Click to expand...

I'm in a similar situation. I worked 3 mornings this month and grossed just under $3K. I only took the jobs because I was available. Cant get away this month, so what the hell. I tried to sell my business but I was too late. By the time I had time to think about selling the biz, the assets were too old. So I'm essentially abandoning it and selling off parts. But next month I hope to be long gone with the real albatross'es.

How to pull the plug is a good question. However you do it make sure that you can disengage at anytime. Beware of long term commitments.
 
th said:
Hey Dory...pumping up that post count or are you secretly John Galt and forgot to log out and back in as your alter-ego? ;)
Click to expand...
One of those, or maybe I am doing my usual Columbo, "just one more thing...".
 
#3: Get an umbrella liability policy for a couple of hundred bucks a year.
Click to expand...

Just talked to the insurance guy who said that the umbrella on the personal insurance would not cover a business-related issue. To get the business insurance for that would be $800/year.

Do you know something I don't on this?

Thanks,
 
Al,
Re the liability insurance, I think that is right -- personal liability won't cover business. However, the miracle of 'the corporation' was invented expressly to limit personal liability. In rare cases, the corporate veil can be 'pierced' but it should not be a problem if the product is owned and operated by a bona find company (perhaps an LLC). Then only the assets of the company would be at risk. You make sure the company's only real assets are the software itself.

I know it isn't perfect, but business people have been dealing with this issue for centuries and that's what the corporation is for. If you get really worried, shell out the $800 for business liability peace of mind. Worth a couple trouble calls a year?
 
Thats correct. If someone comes after you personally though, you want the umbrella liability. Anyone who is ER'ed or has considerable (over $250k) in liquid assets that doesnt have at least a $1M liability policy is simpy crazy.

Considering the income level you're getting from your product, the $800 to cover liability suits on it also seems very reasonable.
 
Al, the type of insurance you likely need as a software company is errors and omissions insurance. After all, you aren't likely to cause personal injury to someone. E & O insurance can be pretty inexpensive. Talk more to your agent about what you need.

Having a corporation or LLC might not protect you from personal liability if you personally designed the software and it was your error that caused the problem. People are always liable for their own negligence. [edit--the E & O insurance will insure for your negligence]

I mentioned before the importance of having a software license which limits liability and limits warranties. I hope you have one. Liability limitations should exclude claims for incidental or consequential damages and should be limited in amount to no more than what was paid to you under the license. Warranties should be limited in time and to a remedy of repair or replace. See someone if you don't have a license.
 
Yes, I have the standard disclaimer when they install (below).  But in this anybody can sue anybody for anything world, I sometimes get worried. 

Code: 
THIS SOFTWARE AND MANUAL ARE SOLD "AS IS" AND WITHOUT WARRANTIES AS TO PERFORMANCE OR MERCHANTABILITY. THE SELLER'S SALESPERSONS MAY HAVE MADE STATEMENTS ABOUT THIS SOFTWARE.  ANY SUCH STATEMENTS DO NOT CONSTITUTE WARRANTIES AND SHALL NOT BE RELIED ON BY THE BUYER IN DECIDING WHETHER TO PURCHASE THIS PROGRAM.

THIS PROGRAM IS SOLD WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES WHATSOEVER. BECAUSE OF THE DIVERSITY OF CONDITIONS AND HARDWARE UNDER WHICH THIS PROGRAM MAY BE USED, NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE IS OFFERED. THE USER IS ADVISED TO TEST THE PROGRAM THOROUGHLY BEFORE RELYING ON IT. THE USER MUST ASSUME THE ENTIRE RISK OF USING THE PROGRAM. ANY LIABILITY OF SELLER OR MANUFACTURER WILL BE LIMITED EXCLUSIVELY TO PRODUCT REPLACEMENT OR REFUND OF THE PURCHASE PRICE.

The above terms constitute the entire agreement between you and Responsive Software with regard to the Software, and such agreement may not be modified except in writing and signed by both parties.  If any provision of this agreement is invalid or unenforceable under applicable law, it is to that extent deemed omitted and the remaining provisions will continue in full force and effect.  This agreement will be construed and enforced in accordance with California law.
 
E & O insurance can be pretty inexpensive.
Click to expand...

It looks like this would cost me about $4,000 per year. So, since I'm only taking in about $70,000 per year, that's not so inexpensive for me.

The worst is that even if I pull the plug and retire, I'd still have to worry about that (and still pay $4,000 per year??).
 
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