What does that check need to say for you to sell your business?
If you’re a few years away from pulling the trigger to sell your heating and air business, you have time to think through what the sale needs to look like to help you walk away.
Maybe it’s counterintuitive, but I think you shouldn’t start with what you think your business is worth. I recommend you start with the numbers you’ll use to know when the time and the offer are right. Here are some numbers you should be thinking about.
- At what age do you want to retire? Will you be willing to work in the business for a while, or will you want to walk away right after the sale?
- What comes next? Playing golf? Another career? How long do you want to work full time? What about part-time? What’s the right balance between work and leisure for you?
- How much do you have invested or saved for retirement? How much income do you need for the next 5 years or 25 years? How much debt do you have? Where are you on your financial plan and goals?
- How much risk tolerance do you have in you? Would you prefer a sure deal, or do you still have some willingness to take a risk on the chance of a bigger payoff?
Once you have these numbers in mind, you can start to decide how you’ll evaluate a potential deal. I tell people all the time: it’s not just about the biggest number someone will offer for your business. The sale price matters, but the sale structure matters almost as much.
If you still have a passion for the business and feel like your contribution will help its success, you might consider a consulting clause. This can be beneﬁcial for you because you will continue to receive a salary on top of the proﬁt you make from the sale. You’ll be able to make a soft landing, earning a salary, mentoring employees, and serving customers, all without the pressures of ownership.
You can also choose to take the sale payout over a few years based on the success of the business. Upside: no actual work, so you can play more golf. The downside: you’re betting that the new owner will grow the business and be able to pay you more based on his success.
Which deal sounds more appealing is based on your personal plans and goals, not necessarily on the size of the offer. Your tax position, debt and other obligations, and your family’s situation (spouse working, kids headed to college, etc.) will all play an important part in your decision.
If I can help you think through these issues, I’m happy to get together with you. Having your numbers in place early means you can evaluate what it will take for you to sell and walk away. Or what it will take to get the value you want and how you’d like your exit to look. Then, when the right offer comes, you’ll be able to make a decision quickly and with confidence.
About the author: Patrick Lange
Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the Vice President of the Business Brokers of Florida (North Florida District.)