Sold my business

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Jerseytunahunter

Dryer sheet aficionado
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Hey guys still fairly new to the forum but enjoying my stay. I'm a business owner and did a search on this topic but did not find any threads. This surprised me as I would assume a fair amount of people who FIRE are business owners that built wealth over time. My wife (56) and I (57) could retire today but we both enjoy what we're doing. We're looking at selling the company in 2022, I would have to stay on for 1 year. A little back round I'm a contractor with 70 employees. This is our 38th year in business. I've been building the company to operate without me as much as possible so I'm no longer grinding every day. The reason I want to sell is to cash my chips. This has literally been my life's work and I need to make sure my exit goes well or I'd be very disappointed. I'd like to hear from other owners, what did you learn, what surprised you, what would you do differently? I have selected a good M&A company to represent me and we both think we could get 5-6x EBITDA. Not looking for advise on that end more what's it like to no longer be "the boss".
 
I started working at a small business at age 18. Bought it at age 22 and sold it just before turning 51, 5 years ago.


It was a service business and requires constant attention. I hired and started training my replacement 3 years prior. I worked full time the day before I sold. On the day I sold I moved 350 miles away. I wanted the new owner to have full ownership and responsibility. I think it is best if the former owner get out of there and only help when asked.


I was in a small town and when you own a business it is truly your identity. I needed to break that and reinvent myself. I am completely FIRED with no desire to return to the industry I worked in. I dropped membership in several trade organizations and professional associations. I let my certifications expire and do not keep up on the trade at all anymore. Feels good.


I sold my business on a 10 year contract. It's over 5 years now and payments have arrived on time each month. Business is good for the new owner. If I could have sold it for cash I would have, I would have eaten the taxes and invested the lump. I am money ahead selling it over time (spreading out the taxes and collecting 4.5% interest on the principal) but the peace of mind would have been better with a cash deal.


Realizing I had the funds to ER took some time, but the plan really worked. Net worth has grown considerably in the last 5 years.


Don't over extend yourself volunteering or promising to help out....this is your time.
 
There are several board members that have sold a business and are now retired. They should pop in and provide some advice. I am not one of those, I was a megacorp engineer. I do have a small home based side business that I run, been doing it for the last 13 years now. Mine has no plans for me to get out, it's realtively easy to do and provides nice tax benefits as well as some hobby fun money.



Congrats on having a successful business and looking to for a way to cash out and enjoy your hard work over the years. Even better that you are already reducing your daily input so it will make a transition easier. I know in some businesses it is common for the selling owner to stay on for some period of time. Just make sure those terms are clear for expectations for both you and buyer. good luck with a sale and steipping into retirement.
 
The DW and I have owned our business (Card and Gift store) for 19 years. We bought it from DWs A & U, who opened it 43 years ago. We have 5 employees, not including the DW and I. I have been meaning to start a thread on Small Business owners and the specific issues that we deal with as apposed to the mega corps.
We are in a small town and as Stormy mentioned, it really does become your identity. We bought when our business was doing very well, but unfortunately since then, has been in steady decline. The entire industry has changed and we no longer have the energy or drive to change with it. Unfortunately, it is very difficult to find a buyer for our type of business. Unless something changes, we are looking to get out when our register leases are up in 2024. This is sad, because have have helped generations of families with all of their life events through he years and many have become like extended family. Unfortunately, the frustrations continue to increase, while the compensation decreases.
As for when that time does come, if we are fortunate enough to find a buyer, then I wouldn’t mind having a decreased role while helping with a smooth transition. Otherwise, I see a clean break and moving to a new location for the next chapter in our lives.
 
Stormy Kromer said:
I am surprised that there aren't more business owners on this forum.
Click to expand...

Well, it's hard to know the numbers - did they see the post, do they care to comment?

But still, I'd imagine in general there are a lot more career types than there are small business owners. Small business can be tough, many won't succeed well enough to retire early. Many are wrapped up in the business, so don't think about early retirement. While someone in a career, if they just stay out of trouble (what's the quote? "90% of my success is due to just showing up"?) and live below their means, has a shot at ER.

I'm just not sure any conclusion can be drawn at all, especially from an 11 hour old thread!


-ERD50
 
Jerseytunahunter said:
Hey guys still fairly new to the forum but enjoying my stay. I'm a business owner and did a search on this topic but did not find any threads. This surprised me as I would assume a fair amount of people who FIRE are business owners that built wealth over time. My wife (56) and I (57) could retire today but we both enjoy what we're doing. We're looking at selling the company in 2022, I would have to stay on for 1 year. A little back round I'm a contractor with 70 employees. This is our 38th year in business. I've been building the company to operate without me as much as possible so I'm no longer grinding every day. The reason I want to sell is to cash my chips. This has literally been my life's work and I need to make sure my exit goes well or I'd be very disappointed. I'd like to hear from other owners, what did you learn, what surprised you, what would you do differently? I have selected a good M&A company to represent me and we both think we could get 5-6x EBITDA. Not looking for advise on that end more what's it like to no longer be "the boss".
Click to expand...

It sounds like you are in a good position to sell being that you have put a plan in place so less of your involvement is needed. I have a little experience in this area. I am a small business owner in a small town and my business is currently for sale. The day after it was listed for sale about 6 months ago we had a very serious buyer contact our broker. Everything went smoothly and we were within a few days of closing and the buyer bailed out. In my business I carry the master license, the new owner will have to either hire a master or get a license of his own. I did volunteer the use of my license as long as it was needed but he still was uncomfortable with the situation. If I had an employee with the proper licensure it would have made this sale much easier.

I will say that this is has been an incredibly stressful situation and creates a rollercoaster of emotions. Thankfully we have a very capable broker hired who is doing an excellent job. We have since had a number of potential buyers come forward, we are hoping something transpires with one of them soon. My wife and I have decided whether we sell it or not we are going to quit in one year and 11 days from today. Like you this has been my life's work and if I don't get out soon that life may be cut short.

How are you planning to sell your business? do you have employees who show interest in business ownership? Possibly a competitor?

As far as what does it feel like to not be the boss... I don't know yet but I am REALLY looking forward to finding out. What are your plans once you extract from the business?

I wish you the best of luck with your escape plan.
 
I worked for a small civil engineering/ land surveying business, and bought in in 1992. Took me a few years of profit disbursements to pay off the note.

I gave notice in Oct 2012 that I was retiring in April 2013. I struck up a deal with the company where I sold my stock partially to employees and partially to the company in exchange for me working 1-2days a week until April 2014. I trained my replacement during that last year.

The sale of my company stock and transition into retirement went very smoothly. No tax surprises, no difficulty.

Congrats to OP on transitioning into retirement! Sounds like you have laid the groundwork and have a solid plan in place. Keep us posted on your journey.
 
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I did not own a business, but want to say this: Even though you like what you are doing, being FIRE'd is wonderful, and I recommend doing it while you are young enough to get the most enjoyment you can from the freedom.
 
Our construction business sale closed Dec 31. It's a payout over time. And yes it is my identity. The saying is business sell because of the 3 D's. Death, divorce & disability. Although our sale was in progress my wife passed in the early stages of getting ready for sale. It really affected my motivation. Plus while more money would be nice I have "enough" and that is good. I originally wanted to sell to 2 employees. But they showed little motivation to go out and hustle business. So i found a young un & he jumped in. I did have to hire a business coach for the things that I was not able to teach the new owner. I was caring for my wife & just could not spend enough time with him.

It's still early & I'm still connected. I go in a few times a week & hang out. (not looking over his shoulder!) When Covid opens up I will go to networking events as that was part of my social life. One of my big stressors was liability. One of our trucks right hooked a cyclist about 2 years ago. Probably inches from killing him. We have good insurance but that really bothered me.

He shares his numbers with me every week. January (his first month as owner) is typically slower than the other seasons. He had not only the best January ever but might be the best month ever. He has been pulling in some bigger projects & after we started them in the summer/fall they started paying. We have a bit of a lag time from when we start to when we bill/get paid I am super happy for him

Although it was too late for me I listened to a podcast called Built to sell. He has a book also. Pretty decent podcast. If you've got a M&A firm I would listen to them

https://builttosell.com/radio/
 
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Hmmm, What’s it like to no longer be the boss. I’m afraid I can’t answer for myself, since we are still working 6 days a week, but we do have good friends that were in the same business as ours that successfully sold their business and retired.
They already had a vacation home in SF Florida, so they knew they were going to move and where. Actually, after they sold the business, they sold their FL home and had another built in a new gated community, close to where the old house was.
The wife picked up a side job that is flexible with the hours and only 2 days a week. She enjoys being active and having he flexibility of the hours and not having a direct boss or employees. They have a boat and enjoy taking walks with their dog. Basically, their time is there’s, without the stresses that come with owning your own business.

I hope all of us owners get to this point one day. It sounds like the OP has laid the groundwork for a smooth transition and I wish u well. Keep us updated on the transition.
 
Scrape,
My condolences on your loss. It’s so hard to lose your spouse and especially at such a transitional time in your life. I wish you the best.

Congratulations on the sale of your business. One of our concerns is finding a buyer with the business “smarts” and drive to run our business. You have shown, that once you do, the motivated “fresh” new owner can take it to greater heights.

For those who did use a business broker to help you with the sale, what were the terms ? Do they get a commission like a Real Estate broker or a % of the sale ?
 
Phil interesting read, glad you "conquered" the great transition. When I sell I will have 40 years in. Vette there is a lot of PE money flowing into my industry, they would be the buyer. I have two friends who just sold their company (same market) and the terms were really good-the best I've ever seen. They were both given credit in an earn out for future growth (increasing the multiple and EBITDA) and were allowed to invest 30% of their proceeds into the parent company. They may make more on that than the sale of the company after the roll up and sale of the acquiring company.
 
Circling back with a follow up question. What did you do to maximize your EBITDA? I already started to clean up our financials and reduce spending that isn't essential. Was there anything strategic that you did to make the business more attractive? We're looking to put the company up for sale in the summer of '22 so I have time to pretty her up.
 
It was too late for my sell but I found this podcast interesting. Maybe scan through & find something that resonates. Since it sounds like you are selling to PE I would make sure your financials are clean. Prepare for excruiating pain as they go through them


https://builttosell.com/radio/
 
Jerseytunahunter said:
Scrapr that's a cool website. I've listened to a few already.
Click to expand...

Yes it is. I had a lot of windshield time so I enjoyed this podcast. IDK what your plans are for selling but if you are selling to PE I would have some real pros on my side of the table. Maybe ask your friends what their process was & who they used. Maybe interview a couple. Our company was too small for the Wall Street bunch. But the pros have likely seen it & done it before. And always helps to have an intermediary to be the "bad guy"

I don't think it's too early to get them lined up
 
At some point you might want to consider some sell-side due diligence. The seller engages financial pros to do due diligence which identifies in advance any potential issues that a buyer's due diligence team might identify and allows the seller to be prepared for the potential issue and possibly mitigate it before putting the business on the market. It also allows the seller to frame the materials on the company in the best possible light.
 
Jerseytunahunter said:
Hey guys still fairly new to the forum but enjoying my stay. .......I have selected a good M&A company to represent me and we both think we could get 5-6x EBITDA.

Not looking for advise on that end more what's it like to no longer be "the boss".
Click to expand...

So, you seem to be asking "what will retired life without w*rk be like, how does one prepare for such a life"? And you are wondering what your "identity" will be (can be) once you are no longer "the boss"?

I would suggest, with your wife, start thinking about some things you would like to do with your time, once the business is no longer claiming the large portion of your life---or identity. Have you had dreams of travel but never had the time? Have you ever wondered what some specific career might have been like---maybe you always had a back of the mind dream of "I could have been a great grade school teacher"? Have you ever dreamed of being Mother Teresa's successor in aiding and comforting the poor in a distant land? In other words, if you are wondering about post-business owner identity, you need to start recalling your forgotten or deferred dreams. You will need to build, take responsibility for, your own new identity---once earning a living no longer claims your time.
 
Update: signed the exit agreement with the broker and started the process of creating the pitch deck. A lot of work ahead but excited to be executing my plan. My intention from Day 1 was to build a salable business. It's been a hell of a ride since that day in 1983 but I've enjoyed minute of it!
 
Jerseytunahunter said:
Update: signed the exit agreement with the broker and started the process of creating the pitch deck. A lot of work ahead but excited to be executing my plan. My intention from Day 1 was to build a salable business. It's been a hell of a ride since that day in 1983 but I've enjoyed minute of it!
Click to expand...


Good for you, hope that the broker finds a great buyer and you can soon join the retired club.
 
Update II: The broker and his team have done an amazing job organizing our information and planning the transaction. They identified 43 possible buyers in my space and created a "top 5" list based on fit and their history of closing deals at a good price. After reaching out to each to assess their interest one said they couldn't meet my requirement of a 2021 closing, so they're out. The other 4 are interested and we went live August 9th. We met with two candidates and toured our facilities and jobs, etc. After a couple follow up calls with a large ($500M) firm they made a very aggressive offer of 8.2x multiple. Totally blew my mind. They are very impressed with our operation and want us to shut down the sales process and work toward a 60 day close. The only issue is the earn out (of course). They want a 3 year EO and for me to stay on during that time. I was planning on one year transition but if I want to take the deal I have play by their rules-stay on and grow my "branch" to increase EBITDA 15% each year. I don't think the other potential buyers are going to match this offer so looks like I'm not going to FIRE in 2022! Still a lot of work to do so who knows how this will play out in the end. The good news is I really like them. They bought my friend's company in Texas and thats been going really well. His employees are happy, his customers are happy. That's very important to me. One day at a time!
 
Congrats!

Sounds like a great deal. Especially the fact that you really like them. That would more than offset the 3 year EO for me.
 
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