How many times have you said, “When I retire, I’m going to_____?” Golf? Vacation? Hang out with the grandchildren?
And why haven’t you retired yet? Because it’s hard!
When you own a business, the question of retirement is more complicated than counting up your 401Ks and IRAs. Selling a business is a big deal, and it brings difficult questions on every level.
- Is this a good time to sell my business?
- If I don’t sell now, will I have to ride out the next downturn? Or worse—sell in the middle of a downturn?
- Is the market going up or down?
- What are the tax implications on my retirement if I sell now?
- Should I pass the business on to my one of my kids? What about the other kids? Or should I sell it to my general manager?Maybe the dealer across town would want it?
- Will the next owner take care of my employees?
- I know I made mistakes, but I worked hard to build this business. Is a buyer going to respect what I’ve built here, or just look for holes to take advantage of me?
- I can’t actually play golf 40 hours a week. What else would I do with my time?
- What if my family doesn’t really want me hanging around?
- Maybe I could just be a semi-retired owner?Could I keep coming into the office a couple of days a week?
Most days it feels easier to just keep rolling rather than stare those questions down.
I get it. I took over National Business Brokers when my own father retired 15 years ago. The weight of responsibility we both felt in that decision was enormous. Now that I’ve helped more than 750 Dealers sell their stores, I feel like I’ve personally walked the Road to Retirement hundreds of times.
Over the years I’ve identified the most common questions owners need to consider as they prepare to retire. If you’re within range of retirement age, answering these five questions should give you significant peace of mind as you consider the next stage of your life. And when the time comes to actually act, you’ll be prepared.
1. Do you have a succession plan?
If you’re considering passing ownership of the dealership onto someone in particular, even if you think that will be years from now, it’s important to talk to an Estate Planning attorney with auto dealership experience. Even a “handshake deal” will require planning and legal paperwork.
Once you’ve got this nailed down, you can start thinking about how you’d like to manage that transition. And you’ll feel free to start imagining life after ownership.
2. When should I start preparing my business for sale?
You should begin preparing your business for sale now—even if you don’t anticipate selling for several years. If you wait until you’re ready to sell (or, for some unfortunate reason you have to sell), you may lose many millions of dollars in value.
3. Will your dealership require imaging before your estimated retirement date? Should you accomplish that before you sell?
Meeting factory imaging requirements is a serious undertaking – owners pay in money, time, and stress. It also has a significant impact on the goodwill value and desirability of your dealership.
Take an honest look at where your dealership is in the cycle of factory imaging requirements, and decide if you’re willing to take that on.If you aren’t, now is a good time to reach out to a broker and start a conversation about what it looks like to sell your dealership confidentially.
4. How much do you need to make in a sale?
Although a Dealer’s financial needs do not dictate the value of their dealership, many dealership owners are counting on the value of their dealership to fund their retirement. Since financial advisors typically counsel clients to calculate their retirement needs at 25 times their annual living expenses pre-retirement, what does that mean you need to sell your dealership for? Is that realistic? (Click here to request a valuation of your dealership.)
When you have a target sale price, you can make strategic decisions to add value or protect the value you already have in your dealership. You will also be able to recognize a good offer when it comes along.
5. Do you have a broker you can trust?
As you probably know, auto dealership transactions can be volatile, emotional and precarious. Most transactions fall apart after price and terms have been negotiated. It doesn’t have to be that way.
You need an experienced broker who will appropriately value the business you built, adeptly guide you through the potential pitfalls of a sale, overcome objections as they arise and keep negotiations moving forward in a professional manner for a successful closing. When you know the sale of your dealership is in good hands, you can negotiate with confidence.
Bonus: Have you thought of a way to celebrate?
This may sound silly, but planning to celebrate your retirement can be a great way to bring closure to this season. You’ve worked hard and built more than a business – you built a legacy. Start thinking about how you’d like to celebrate your accomplishments and honor the people who helped make it possible.
Don’t wait too long.
Unless you want to work until you die, you have to face the retirement question at some point, or risk losing when you could have won.Forced sales – either due to health crises, family dynamics or financial strain– are always difficult.
From what I’ve seen, owners who control the timing of their sale are much more likely to enter retirement with a sense of accomplishment, peace and closure. I’d love to help secure a successful, peaceful transition for you.
If you’d like to talk about your situation, call me Brady Schmidt at 949-770-7451.