# Exit Stategy



## woodmagman (Feb 17, 2007)

Planning an exit strategy, will it differ from those contractors from the past? Park the truck and never touch the tools again!
Does everyone really have an exit strategy…..what are the options?


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## Putty Truck (Oct 6, 2007)

Exit? To what? This must be a carpenter thing because I've never seen a plumber exit except via a coffin.


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## woodmagman (Feb 17, 2007)

Selling your business before you end up in a plumbers coffin, would that be a septic tank?:laughing:


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## KillerToiletSpider (May 27, 2007)

Putty Truck said:


> Exit? To what? This must be a carpenter thing because I've never seen a plumber exit except via a coffin.


If I continue to grow my racecar business to full time, I will leave plumbing behind, or do it very part time till my boss either trains his son to replace me or finds a replacement.


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## thom (Nov 3, 2006)

One more house to build, this one's for my son so I'll loose money on it, and I'm retired. My retirement income is 16 rental houses. The remaining debt, $80,000 will be paid off by this time next year.


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## Putty Truck (Oct 6, 2007)

woodmagman said:


> Selling your business before you end up in a plumbers coffin, would that be a septic tank?:laughing:


hurmmmph



KillerToiletSpi said:


> If I continue to grow my racecar business to full time, I will leave plumbing behind, or do it very part time till my boss either trains his son to replace me or finds a replacement.


If I had a dollar for every plumber that did it, I'd be a carpenter.


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## woodmagman (Feb 17, 2007)

Come on guys EXIT STATEGY, The thing we all plan to do when we first started the companies. "yeah right"
Is no one mentoring a individaul to buy out your portion of the company. Or have plans to put the companies affairs in order to attached a new owner..Is everyone just working to survive, not looking to the future.


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## Putty Truck (Oct 6, 2007)

Again...this is a new concept to me. Why would I want to "exit"? Where would I go? Why would I go there?

Are you speaking of retirement? If I live too long to be unable to work, I guess I'll think of something else to do. Maybe I would sneak across the Canadian border and pound sand, I mean, nails?


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## Joasis (Mar 28, 2006)

I posted this before, that what if scenario....


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## woodmagman (Feb 17, 2007)

Lets see, what should you do, Golf-every morning and afternoon, fire the pool boy and hire cleaning gal. You could walk around the yard all day in your hawaiian shirt and bermuda shorts pulling weeds. You could get a life and stop hanging around the contractor forums. You know retire with grace and not be that old dusty fart that sits in his office from sun up till sun gone to bed. You know pass on the torch while the flame is still bright.


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## GregS (Oct 1, 2006)

Please add an r

Thanks.


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## Putty Truck (Oct 6, 2007)

woodmagman said:


> Lets see, what should you do, Golf-every morning and afternoon,


 Golf is gay


> fire the pool boy and hire cleaning gal.


 Swimming pool in Washington State? That's kinda like having a.c. here...totally not needed. A cleaning gal when I have a perfectly good wife? We get services when needed, but not on a weekly basis, so that's out.


> You could walk around the yard all day in your hawaiian shirt and bermuda shorts pulling weeds.


 Great Gods! I'd rather be digging ditches than stuck in that hell.


> You could get a life and stop hanging around the contractor forums.


 Better here than in front of the t.v. yelling at some puppet newscaster. Carpenters react waaaay better. :w00t:


> You know retire with grace and not be that old dusty fart that sits in his office from sun up till sun gone to bed. You know pass on the torch while the flame is still bright.


There's plenty of time to die after my heart stops beating. My family gets the business when I die and what they do with it, I don't care. 

"Retiring with grace" means dying with my boots on. This whole retirement thing is overrated. Before the Industrial Age, everyone hepled out and nature took care of those who couldn't keep up. But in the late 19th century (1875-1900) 85% of 70-year-olds were still working and working good.

One thing I have noticed is that the people who "exit" are those who are doing contracting as opposed to being contractors. Real contractors do it until they are stiff.


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## aWorkaHolic (Oct 1, 2007)

woodmagman said:


> Come on guys EXIT STATEGY, The thing we all plan to do when we first started the companies. "yeah right"
> Is no one mentoring a individaul to buy out your portion of the company. Or have plans to put the companies affairs in order to attached a new owner..Is everyone just working to survive, not looking to the future.


There are only four reasons I can think of for a business owner to think of an exit strategy: 

1. After making $Millions$=Retirement

2. Your company is an LLC and you or your investor wants out.

3. Your company is not making any money and is ready to shut down the doors.

4. Your burned out


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## woodmagman (Feb 17, 2007)

When you plan a trip to funland USA, do you not plan to get home? When you purchase a Bucket of what ever for a customer do you not expect something for time spent and the cost of the bucket.
We all work to work, or work makes us work! Why not work to sell the abilty to work to someone else at a profit so you can buy that boat, or that car collection you always wanted. Then sit in the garage or go to the track and see how many low 9s you can get before you turn a 8.9. Work is just the thing we do so we can do the things that make us happy. Just because you are happy working does not mean you can not turn a profit selling the business.


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## dougchips (Apr 23, 2006)

Hopefully I will turn my business over to one of my daughters.


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## KillerToiletSpider (May 27, 2007)

woodmagman said:


> Just because you are happy working does not mean you can not turn a profit selling the business.


I could easily sell my chassis business for a decent profit now, even though it is a part time business for one employee, because of the partnership I have with a much larger chassis business, as well as the design patents I own. The company I am partnered with would buy me out for six times what I have invested just for the patents, and would let me keep all of the equipment.


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## woodmagman (Feb 17, 2007)

That is not really and exit stategy, it is just business...


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## Bob Kovacs (May 4, 2005)

woodmagman said:


> Just because you are happy working does not mean you can not turn a profit selling the business.


99% of contractors will never turn a profit on the sale of their business, as there's nothing to sell. Unless you build a well-oiled machine that offers a top-notch product that's not tied to "you" being there either to sell the job, produce the product, or baby-sit the client, the business essentially ceases to exist without "you". Therefore, all that's left to sell is a pile of tools and a beat-up truck or two.


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## KillerToiletSpider (May 27, 2007)

woodmagman said:


> That is not really and exit stategy, it is just business...


The patents are worth half a mil, I could live on the interest of that for awhile. If I stick with my trade for another five years, I will have a pension from that also.


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## woodmagman (Feb 17, 2007)

Bob Kovacs said:


> 99% of contractors will never turn a profit on the sale of their business, as there's nothing to sell. Unless you build a well-oiled machine that offers a top-notch product that's not tied to "you" being there either to sell the job, produce the product, or baby-sit the client, the business essentially ceases to exist without "you". Therefore, all that's left to sell is a pile of tools and a beat-up truck or two.


Amen to that....but knowing the pit falls why is everyone tring to be the next Mr. Chipper LLC or whoever. What should the 99% do to make it as a legitimate businessman in the real world then. There has to be a format everyone can follow to give a contracting buisness the value it requires, to be sold when Bob the Builder drives his last nail.


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## Putty Truck (Oct 6, 2007)

woodmagman said:


> Amen to that....but knowing the pit falls why is everyone tring to be the next Mr. Chipper LLC or whoever. What should the 99% do to make it as a legitimate businessman in the real world then. There has to be a format everyone can follow to give a contracting buisness the value it requires, to be sold when Bob the Builder drives his last nail.


Contractors aren't selling shoes or gasoline, ya know?

What does a contractor sell, then? He sells skills. His and his employees' skills and that's all. He puts value on skills.

Added to the trade skills, a successful contractor must be a businessperson, too, but that is a learned thing. OJT coupled with a college degree fills that bill in this complicated business for simple men.

As for making a jillion dollars, do you know how many small businesses there are in the whole world? I am one of 'em and proud of it. I could go to India and shake the hand of a plumber and we will totally relate. The same for Russia, England, France (well...) and anywhere else that has indoor plumbing.

As for retiring, who says I actually work now....:clap:


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## woodmagman (Feb 17, 2007)

Putty Truck said:


> Contractors aren't selling shoes or gasoline, ya know?
> 
> What does a contractor sell, then? He sells skills. His and his employees' skills and that's all. He puts value on skills.
> 
> ...


Then you do have the answer for those building a exit stategy.....Thanks for sharing


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## Putty Truck (Oct 6, 2007)

I done been canucked.


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## fez-head (Mar 15, 2005)

Our plan is to sell Handyman Solutions and Leisure Time Travel. We have been putting the systems in place so that someone can step in and take over if our Daughter decides not to. 

None of Handyman Solutions new clients would know I was gone, and the older clients would not notice much of a difference. 

Leisure Time Travel has been slowly hiring independent agents in other towns working at 50% commission - so those clients have no idea who we are anyway. If things keep going well we should do OK.


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## Tmrrptr (Mar 22, 2007)

*!!!*



thom said:


> One more house to build, this one's for my son so I'll loose money on it, and I'm retired. My retirement income is 16 rental houses. The remaining debt, $80,000 will be paid off by this time next year.


Good for you, Thom.
Wish I were in your position.
It's great when you can do something nice for your kids.
r


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## woodman42 (Aug 1, 2007)

Exit strategy, retirement.:laughing: What are these things you speak of?:blink: Hell I haven't even taken a vacation in 15yrs. Don't think I could take not running in three directions at once.


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## Mike Finley (Apr 28, 2004)

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## Patrick (Apr 12, 2006)

It seems that most small contracting businesses aren't worth more than the tools and other fixed assets. With the exception of plumbers, landscapers, and electricians who may have large customer accounts


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## Floordude (Aug 30, 2007)

If you have a brick & mortar store front, it makes your business more "sellable"


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## fez-head (Mar 15, 2005)

Service type businesses with several hundred repeat bi-monthly clients are much easier to sell than a business where you only see a client 3 or 4 times in their lifetime.

IMHO a handyman division linked to a building or remodeling company (with all of the turnkey systems in place) would make it much more appealing for a buyer.


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## fez-head (Mar 15, 2005)

Service type businesses with several hundred repeat clients (ours are monthly and bi-monthly) is much easier to sell than a business where you may only see the client 3 or 4 times in their entire lifetime.

IMHO a handyman division linked to a building or remodeling company (with all of the turnkey systems in place) would make it much more appealing for a buyer.


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## airborneSGT (Feb 19, 2007)

I would consider purchasing a service business for the clients alone. Repeat customers equal money in the bank.


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## Grumpy (Oct 8, 2003)

My exit strategy is simple, without going into the nitty gritty details. In addition to other retirement investments... I will build this buisness into something that someone will want to buy. I will do this by developing systems which work and are easy to follow. I will then either sell the business to one of my offspring, if they are interested, perhaps to the employees, or to some private investor. It doesn't really matter to me... however I wouldn't seek out a private investory until after I had offered it to my children, and then to my employees. 

I might offer my services as a part time consultant after I have sold it. I'm not the kind of guy who can sit around doing nothing.

To me this is the only logical exit strategy. However there are quite a few other strategies which simply don't make sense, like turning off the phone and quitting.


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## Mike Finley (Apr 28, 2004)

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## Grumpy (Oct 8, 2003)

No I wouldn't take a pinto, but I would take installments with some form good monetary down payment and PERSONAL collaterol. Infact I don't think it's very likley to sell a businessto ANYONE without some form of installments from the buyer. However if/when I am to accept installments, as I said I would want collaterol incase it goes under but also some form of clause where all assets equal to the ammount due revert to me if they close up before I am paid my full monies. Or perhaps their initial purchase buys them X% of the company, and then each installment is basically them buying more shares of stock in the company. Basically first lien rights is how you can think about it. All stuff for the lawyers to argue about when the time comes... but I have obviously already put alot of thought into this as it is my exit strategy.

Don't assume that the employees would be broke just because they are employees. Would they have $400k sitting around? Nobody does. I do expect my key people to be making over $100k a year however. You were an employee once too. I would hope they are stable and wealthy enough in 20-30 years from now to buy it. I want them to be wealthy and successful. I want them to think of themselves as partners in the business even before they buy it because really all key-men (women) are partners to some degree, and it's not like a laborer would even consider buyign the business... only the key men. 

If I am ONLY getting $400k for my business I have failed in my plan to grow the business. I see businesses where it's the owner, an assistant and some subs selling for that price range. Hardly worth it but the point being $400k is piddly money now and will be worth even less in 20-30 years. If the business is generating multi-million$ in revenue per year, as it will easily accomplish very soon (within 4 years), there no reason to accept half a million sale price.

I want to address children taking over businesses. I'm sure we have all seen the successful multi-million dollar company run into the ground a few years after the kids took it over. Often I have learned these companies were GIVEN to the children... so the kids had no real stake in it's success. That's why I said I would sell it to my children. Heck, they get their money back after I die anyways.


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## Grumpy (Oct 8, 2003)

Duplicate post.


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## Mike Finley (Apr 28, 2004)

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## woodmagman (Feb 17, 2007)

Mike is right, it will be hard to find a qualified buyer. There are no guarantees when it is time to sell, that there will be a buyer. Hence the word statagy, would it not make sense to the gretter building population to bring into your business a couple of young bucks with good heads on their shoulders and supply them with a 5 year plan that they take on the business as full partner then you starting removing youself from the daily things enough to protect you investmest. 
This is really stripped down and has no details but a good account and a lawyer could easily make this work so there is was real value in selly your little buisness. Start selling to the new buisness owner now, so that in 5 or so years you have that qualified buyer......just one of many thoughts.
Contractors create real works of art from sticks and nails and a little creativity, take a little creativity and the thing you do with you hands and give it value by selling the the right to make a living using your taught processes.


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## Grumpy (Oct 8, 2003)

Oh jeez no. 3 months? I am not even considering that to be a serious or realistic option. Sure I wouldn't turn something like that down, but I think if we are talking about a business worth a million, you are going to be getting monies for 5-maybe 10 years. Nobody buys a million dollar house with half down and pays the rest off in 3 months. That just doesn't happen.

Either that or if your terms are half down and then half due in 3 months, the person is going to need to get some kind of loan from a lender to pay for that, which is highly possible. Basically you are saying, "I don't want to be the lender. I want you to find another lender. I just want my money." I just see that as very very limiting. I'm assuming the buyer, who ever it is, puts down a chunk of their savings, then gets a bank loan for the rest of my down payment and then pays me monthly installments. 

Your joke about the lear jet isn't that far off, now substitute "lear jet" for "house".

Sure the right of lien thing is something that would need to be worked. I am not a lawyer, all I know is I wouldn't sell the business unless I had various guarantees of getting my money. Maintaining some percentage of owner ship does offer that guarantee if the business wee to liquidate. Like I said that's for the lawyers to figure out. Perhaps you have the buyer put you on his house title or something. There are tons of ways.


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## Mike Finley (Apr 28, 2004)

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## woodmagman (Feb 17, 2007)

I think to estibish guide lines for the value of the company would need to be established first
say 3-5 times the gross profit, plus assets?
A one man show can do 30K profit, realisticly if run like a business....am I wrong.....


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## woodmagman (Feb 17, 2007)

My post from 7:48, is it gone?


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## woodmagman (Feb 17, 2007)

wow that was wierd........there is still something freaking happening with the site......


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## LNG24 (Oct 30, 2005)

Mike Finley said:


> Then as I already said, I sure as hell hope part of your exit strategy involves taking a 1978 Pinto as down payment and installment payments of $565.98 a month for the next 30 years! :laughing:
> 
> You got employees and with $400,000 in cash sitting around to give you as an initial cash buy out?
> 
> Please elaborate on this strategy.


Mike,

I am really surprised at you of all people. 

First: You have a sellable business! Why? Because you did not put YOUR NAME on the truck (or trailer) Doing that is a sure way to kill a future sale for once your gone, the name goes with it. 

Second: Competitors are usually the First to Buy out another business. Just your phone number alone is worth money. If any portion of your business is from Referrals... You will have a buyer.

Third:. Every Franchise Business I have ever looked at costs at least $500k and usually much more. Dunkin Donuts...$1mil! Plus you have to commit to opening at least FIVE. How does someone do this... HOME EQUITY LOANS. 

Most businesses that are sold have a three tier structure. Tier 1) Inventory (tools), Tier 2) Good Will. That is the referrals and name recognition you have established. Tier 3) Staff & Systems. This is why honing your business to be a money making machine is the key to a successful business.

Now there is also the Consultant Fee, which depending on who you sell to will want for at least the first year to insure a smooth transaction.

I sold my first business when I was 18. I had been mowing lawns all through High School. Instead of simply closing up and working my new full time job. I took out an add and sold my "accounts" for 3 months worth of income. 

I repeated this with a snow plowing rout and eventually my biggest...A Cardboard & Paper Recycling Route. I was forced to sell that one, though I didn't complain as I was still able to walk after our "meeting"

Anyway, You can not go to a bank for a loan without a Business Plan and Every Successful Business Plan has an "Exit Strategy" 

We will not live for ever, worse yet, our bodies will not be able to do this for ever. Unless you have been able to create some other type of Income Producer, whether it be from Rental Income, 401K's Pensions or the sale of your business...YOU NEED AN EXIT STRAGITY.

That is why a good lawyer will tell you NOT to put your name on a business. It is not marketable.

A one man operation, such as myself, will only be able to sell the goodwill (phone numbers and name) It will not provide me with the Retirement I will require. Then again, Construction is what I do for fun. Real Estate is where my retirement will come in. From both the Sale of my real estate company as well as the real estate investments I have made.

Funny thing about this thread is that I have had to talk to Real Estate agents because of the same issues. They build up this huge following (agents, not the brokerage office) and then the just retire and turn off the phone! INSANE! Everyone around me knows that I will buy out any ANY agents Goodwill. The top producers will make a nice penny from it while the average agents will make enough for a nice trip once in a while.

Same thing Here. even if you are a SUB. If you have contractors calling you for work, that is of value to someone getting into the business. You can make a deal with that person, then have them work under you for a year to get to know your clients and then they take over.


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## player2watch (Sep 22, 2007)

to exit a job starts at the begining of the job making sure quaility stays good though out the job and you won't have any problems it when you run into that oops.


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## Grumpy (Oct 8, 2003)

Mike Finley said:


> I think it would be more telling if you applied some numbers to what you are saying. If you've put as much thought into this as you keep saying it should be relatively easy for you to show me the error in my thinking. Till then, I think everything you are saying is unfortunately wishful thinking at this point. Well intentioned, but not based in reality.


Mike simply put the error in your thinking is that any one person will flat out buy the business. If employees buy it they will likley buy it as a group. In addition if anyone buys it, it's not likley they will buy it flat out. It is more likley you will have to do some sort of seller financing. Numbers are not necessary to show you the error. 

Just go do some research into buying a business and you will know more about how you are ging to sell yours. See what similair businesses are worth (maybe not worth but selling for) and see how they are basing their payment structure. I have passivly been recieving emails every week with "trade" businesses for sale. I don't recall a single one that didn't say something to the effect of "seller financing available" or "installments are welcome". www.bizquest.com www.sunbeltbrokers.com

Businesses are bought and sold every day in this country. Just stop for a minute and think about any company that advertises on TV. Do you really think those comapnies are being run by their founder? Do you really think those companies are owned by a single person, and that person is the founder? I don't know statistics, but I do know most of my very large competitors have been bought and sold repeatedly since the day they were founded.


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## fez-head (Mar 15, 2005)

Digger1799 said:


> Mike,
> 
> I am really surprised at you of all people.
> 
> ...


Great post Digger :thumbup:


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## Mike Finley (Apr 28, 2004)

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## Giovanni (May 16, 2007)

I am someone who has sold their construction business and within the bounds of the confidentiality agreement here is how it worked:

The company was sold to a Real Estate Investor who needed a Contractor's License to do projects on properties he had purchased. He discovered that starting up a construction company to instantly handle the volume of projects he had would be very expensive. Just the insurance premium alone that got quoted for his first year was so high that it didn't make sense.

Instead he purchased my company and got a bonded, insured and licensed company that been growing steadily and profitably for 18 years. A company with the experience and systems to handle a couple million dollars of complicated remodeling per year. He got a company with all the critical trade and supplier relationships in place. He also got a customer list of more than 60 people who all had come by referral, some in referral trees up to 12 projects long.

Wat did I get? First the satisfaction of executing my business plan and successfully exiting my construction company for a profit, something that many didn't think was possible. Second, the ability to go onto my next career(s) with no debt other than a small mortgage on my personal home and some nice rainy day money. The upfront money was not enough to retire on but it would have bought a nice car. The balance of the payments are being paid out over time, the first year's worth were tied to me being available on a consulting basis when needed.

Here's what I can say about my experience; We may delude ourselves by saying we are only tradespeople working for a living but we are paddling down the big river in Egypt. When we pay for insurance, bond and licensing; invest in tools, equipment and trucks we are in business. When you have employees whose families depend on your company for their living you have a serious business obligation to fulfill. To take all that on and not go the extra step to achieve the rewards that come with owning a successful business is a crime we commit against ourselves and our families.

Now there's nothing wrong with being a one-person show, just set aside a little from every check you get for retirement, that is your exit strategy. "What's all this retirement B.S." you say? Well I was one of those guys who said I love this and I'll quit when they pry the hammer from my cold, dead hand. But time moves on, your brain learns new things and your body wears down. The fun and challenge of building a home transformed into the fun and challenge of building a profitable business. All the old timers you see started out as young bucks and someday you'll be there too; ask me how I know The choice you have is what kind of old timer do you want to become?

Here's the payoff for wading through all this: Buy the building and land you need for your business. That's the advice I wish I had gotten (or listened to if some old timer did tell me) Even if your business turns to dust that property will fund a good hunk of your retirement. As soon as possible move up to one that can house four or five other businesses, their rent will buy the building for you and you will retire nicely.

Oh yeah, what are my next careers? Consulting, and buying buildings!


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## woodmagman (Feb 17, 2007)

Love it, two good stateties...I like the idea of socking some money away and buying your self out......


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## acarrothers (Oct 24, 2007)

The majority of contractor business die when the owner leads as the owner has all the power in the customer relationships. I doubt most contractors could get much if any money for their businesses.


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## LNG24 (Oct 30, 2005)

Giovanni said:


> Here's the payoff for wading through all this: Buy the building and land you need for your business. That's the advice I wish I had gotten (or listened to if some old timer did tell me) Even if your business turns to dust that property will fund a good hunk of your retirement. As soon as possible move up to one that can house four or five other businesses, their rent will buy the building for you and you will retire nicely.


Finally someone who can speak from experience and back up what we have been saying. Giovanni: You don't know hopw right you are it the statement above. My father created a Retail Business back in 1957. In the early 90's we were discussing the idea of my receiving the controlling interest and stepping up to CEO. Business was pulling in 1.1mil at that point. I did not want it.I had been working there for years and other than helping him out, it was not what I wanted to do. I did renovate it for him before I left though.:thumbup:

We downsized it a bit and made it easier for him to run alone and easier to sell. Same year, we bought out his partner as part of the downsizing and restructuring. He wasnt interested in the direction we were taking the company. Following years revenu was only down $100k, but profit was way up due to a number of business decisions. 

I left and a year later I get a call. A national Mega store was about to move in 1/4 mile down the road. The owner of the building was nice enough to warn my parents about it. 6 months into their Grand Opening and my Dads business was down at a tune of $600k. I was called back in to help. I stopped what I was doing and headed back. Unfortunatelly, I had to let an entire staff of people go. The family headed out to the retail floor and I ran back room ops. Still not working out. No way to sell the business now.  He had No 401k, No Pension, just the income from the biz.

One day I decide to see what the real estate was worth. It was quite a bit, but even better I found out what commercial retail space was going for. Rewind bakc to the 60's. The buildings currnt owner wants to head to Florida. My Dad was wanting more space. The owner says to him "Why don't you just buy the building from me and take all the space you want." HE DID. Mortgaged to the hilt! But He Did it:clap:

Fast Forward to 1999, Building is Paid In Full:thumbup:, Retail Rents are high. I begin marketing the building and in a few short months I secure a tennant that is still there to this date (in fact that business was just sold to his manager) The rental income was greater than both he and my Mom were bringing in working 6 days a week! Today they still work, but now for fun (and health insurance) But its only part time stuff and they are enjoying themselves. 

If it was not for his decission to buy that building, my parents would have lost everything and be working full time long past their 75th birthdays.:notworthy

So, yes, if you have a small business. A Great Exit Strategy is to acquire real estate. 


Mike: I don't think anyone is thinkign they are going to get rich off the sale of their business. I didn't read one person stating that. But each and everyone of us has seen contractors, and other businesses just close up. Never realizing what they had. One thing I do kick myself with is that I could have sold our phone number to that mega store or another competitor. When I lost my excavating business due to a motorcycle accident, thats all I had to sell, but I sold it.


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## Mike Finley (Apr 28, 2004)

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## ruskent (Jun 20, 2005)

Good thread here!

Mike we all know that your going to grow to be a such a bathroom giant your proably just going to go public! That will cover your retierment.


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## Giovanni (May 16, 2007)

Digger,

Man,what a story! I'm glad it has a happy ending:clap: If I'd been paying attention at all I would have learned from my uncle who was a RE agent when he wasn't skippering his commercial fishing boat. 

Over the years 10 of his deckhands ended up living nicely in retirement. In return for not drinking all their earnings in Alaska he would help them buy a duplex, then move them up to a fourplex and so on until they owned a 12-14 unit building. Once the loan was paid off they lived in the nicest unit and had a growing income. Not a bad retirement for a deckhand.

But I was young buck and didn't want miss all the summer fun (chasing girls) so I turned him down when he asked me if I wanted to fish. My loss. I didn't start getting a clue until I was about the age where his guys started retiring.


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## Mike Finley (Apr 28, 2004)

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## Tiger (Nov 21, 2007)

I think Mike has a pretty good handle on this issue. You may have a good business, but you may not find an interested buyer. I spoke with a friend with an MBA recently about selling my business. Her key words were "repeatable sales". If you have a steadily growing business with good systems in place and a history of growing sales and steady profits an interested buyer may be found. I don't translate that to mean a willing buyer will be found. 

Real estate, on the other hand, always has value. My take on it though is that selling the property isn't much different than selling the tools or trucks. You're selling it for the material value, not the business value. Personally, I think it's a good idea to invest heavily in your retirement. There's nothing quite like money in the bank for retirement.

On another note, I see what my Dad and Uncle have done in retirement & it looks REALLY BORING!!! I think early retirement would prolong the agony.

Dave


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## RooferJim (Mar 6, 2006)

The phone numbers, existing custumer base is all worth money regardless if you family name is on the business. competitors are the most eager to buy it.
I almost bought another roofing company once but it fell through and someone else did, it had been in business since the early 1900s . If one of my sons screws up he can have my business some day, but im hoping they find somthing else.


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## woodmagman (Feb 17, 2007)

Tiger said:


> I don't translate that to mean a willing buyer will be found.
> 
> There's nothing quite like money in the bank for retirement.
> 
> ...


When developing your stratagey, would creating a buyer, rather then hunting for one not be smart. 
The value can be in future sales aswell, if one can show that the business has greater potential in the future, the value for projected profits has to come into play.
A company, even a small company, will show yearly profits. If you follow a rule of thumb and evaluate the companies worth, so the new purchaser or purchasers can afford to pay it off in 3-5 years with a 10% down payment. Both the seller and the purchaser would benifit. The key would be not to over or under assess the value of the buisness today or its future potential.....


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## thom (Nov 3, 2006)

KillerToiletSpi said:


> The patents are worth half a mil, I could live on the interest of that for awhile. If I stick with my trade for another five years, I will have a pension from that also.



Not going to get far on half a mil. Interest at 5% (and good luck finding that without significant risk) less 3% (loss for inflation) less 1.5% (loss to taxes) leaves you with .5% interest to live on (if you are looking long term) 1/2% of 1/2 mil = $2,500 per year.

Good luck retiring on that. 

Put it in the market with moderate risk and earn 10%. Again deduct 3% for inflation and now 3% for taxes and you've got a 4% return to live on. 4% of 1/2 mil = $25,000 per year. I can't come close to living on that, can you?


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## Mike Finley (Apr 28, 2004)

I would -.


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## WNYcarpenter (Mar 2, 2007)

An established company, 25-30 yrs large clientel, loyal workforce, good sytem seems like a good buy! I'm obviously a tradesman not a businessman so I agree with what M.Finley says. I found this site a year ago looking for the same answer as an employee offered to buy from my employer.

There are four candidates picked by our employers. I was a little too star struck to see the reality at first, but I've learned a lot here.

1. your company may be running smoothly now to sell on a financing plan. And that looks good to you as well as who you decide to sell to. But, you're competing most likely with the same few contractors. You're clientel base is not going to be doing $1/2 million jobs every year so you depend on their references to bring in new "big Money". IMO, if a potential client heres new ownership they would most likely go to the competitor.

2. No matter who buys the company there will be employee fall out or a misguided attempt to weed out or keep valuable/non-valuable employees. Current loyal employees will have a better idea who to keep and who to lose, but may not have the business sense. A new owner with business sense may destroy moral and lose valuable assets from a lack of understanding. 

3. What is impotant to you...some want to sell, take the profits and move to Hawaii, I like to think some would like to keep their blood sweat and tears alive and keep the business headed in the same direction as when they left.

4. The owners of my company are dangling a carrot in front of us but are making no real attempts to sell realistic. Again IMO, a trusted buyer should be announced well ahead of time and integrated to learn the chemistry of the company for it to continue to succeed at the same rate it was when the purchase became interesting. Having knowledge of the existing system empowers you to make decisions with the least amount of impact to implement needed changes for a more efficiently run company. Most importantly the new owner must have a working relationship with some % of the current clientel to continue reference based work. 

5. As an employee I'm fattered as hell to be approached in the capacity as a potential buyer. We all dream of what we'd do if we were the owner, but after looking at the reality of the situation....I just don't know. The fact is that the owners of my company aren't going to hold on for long has me looking at many different options.


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