Thinking about your upcoming retirement might bring on a mix of emotions. The uncertainty of life without your business can be unsettling and exciting in the same breath. Building your HVAC business took years of determination, hard work, and tireless hours; what is life without it?
At the same time, you may feel you’ve made sacrifices for so long, and its finally time to sell for a profit, move on, and enjoy the rest of your life. Should you sell your livelihood? It’s a tough decision, and the answer might differ depending on finances, asset liquidity, mental and physical health, relationships, and goals.
The Benefits of Selling
Some of the most significant pros to selling your HVAC company when retiring include the following:
Financial Gain to Fund Your Retirement
If selling your HVAC business will make you a nice profit, it can be the perfect nest egg for your retirement.
Decreasing Your Stress
Running any business is strenuous and can cause more physical and mental strain as you age. Selling could decrease your stress from handling day-to-day business operations and boost your physical and mental well-being.
More Freedom
As a business owner, it’s easy to feel tied down. Taking a vacation seems out of the question. You haven’t had a good night’s sleep in years and don’t even remember what a day off is like. Selling might give you back the freedom you’ve been craving.
Time for a New Venture
If you’re looking for a new project, it may be wise to sell while business is good. Sell while you have the energy and capacity to sort everything out and embark on the process before health risks or a new venture get in the way.
Remember, You Can “Sell” in Other Ways
A straightforward sale is not the only option with retirement. You might choose to:
• Pass the Business Down to a Relative
You may have a family member ready to take over. This may be the perfect way to keep your legacy alive and preserve the company’s core values, culture, and vision. A family member is likely personally invested in the business’s long-term success, offering continuity and stability for employees and customers.
This transition can also be more flexible regarding timing and financial arrangements, allowing you to step away gradually while providing mentorship. It can also minimize external disruptions and create opportunities for the next generation to innovate and grow the business.
• Retire While Maintaining Ownership
This option is often the best of both worlds because you don’t have to let go entirely, but you can still enjoy retirement to the fullest. This arrangement allows you to retain control over critical decisions, safeguard your legacy, and continue to receive income from the business without being involved in the operational grind.
It also offers flexibility, as you can gradually transition leadership to a trusted team or family member, ensuring stability and continuity. This option provides financial security through ongoing revenue and the potential for future growth while you can enjoy retirement on your terms.
• Pursue a Management Buyout Plan
A management buyout (MBO) is an excellent option for retiring business owners. It allows for a smoother transition by transferring ownership to a trusted team that already understands the company’s operations, culture, and vision. This ensures continuity for the business and its employees while giving you more control over the process and timeline of the sale.
An MBO can also provide flexible financial arrangements, enabling the seller to receive income over time, which also offers tax advantages. It has the added bonus of preserving the company’s legacy by keeping it in the hands of leaders invested in its long-term success.
• Sell to a Third-Party Buyer
Selling to a third-party buyer is a strong option for retiring business owners looking for a clean break and maximum financial return. This option often results in a competitive sale price, especially if the business is thriving. It can provide a substantial lump sum that can help secure your retirement.
A third-party sale can also open the door to new opportunities for the business, as an external buyer may bring fresh resources, expertise, and growth strategies. For owners who are ready to step away completely, this option offers the chance to exit without the ongoing responsibilities or emotional ties that may come with other transition methods.
5 Questions to Ask Yourself to Assess Readiness
When making the significant life decision to sell or not to sell, there are some questions to ask yourself to get the wheels turning. You want some logical brainstorming that can help you make the right decision for you, your family, and your business.
1. Does the Idea of Selling Excite You?
Does it feel like you’ve finally arrived at the place you’ve worked years to earn? Does the idea of selling your business take a load off your shoulders or pack more weight on it? Does selling feel right?
A big part of making major life decisions is listening to your intuition. No matter what your plan has been in the past, you may feel differently now that the decision is staring you in the face. Let your intuition and feelings guide you, but don’t lead only with your heart. Use your head as you follow your heart.
2. How Would You Feel if the Company No Longer Existed?
Once you sell to a third-party buyer, what happens to the company is out of your control. Are you prepared for whatever might happen to your company after selling? If this thought makes you sick, it may not be the right time to sell. If you’re at peace with this, that’s a good sign that selling might be the best thing to do.
3. Are You Ready for Continued Ownership?
One option for retirement is to step away from management and day-to-day responsibilities but keep ownership. This may be a happy medium for those who want to retire but are still very invested and do not want to leave the business altogether. This approach can be challenging as you try to navigate your new roles in the company and new approach to ownership. Are you prepared to have a more “hands-off” approach?
4. Have You Diversified Your Wealth and Retirement Income Sources?
You’ve got to be able to afford whatever option you choose. Diversification is essential when it’s time to retire. Keep that in mind when selecting your exit strategy. Consider which option will give you enough flexibility to meet your liquidity needs. Which option will best fund your retirement and give you some financial freedom? Which retirement income plan will work best for your situation?
5. Are You Prepared to Set Your Successor Up for Success?
If a family member or friend is going to take over your business, make sure to lay out the plan in a way that fulfills responsibilities to your customers, employees, shareholders, and yourself. You are the best resource for training your successor and preparing for such a transition. Are you prepared to train and prepare your successor?
As business owners reach a certain age, they often find themselves inundated with offers to sell, particularly from private equity firms or business brokers. This can set the wheels in motion, making it easy to overlook that selling doesn’t have to be an all-or-nothing decision.
What is your long-term vision for your HVAC business? If parting with it feels devastating, a traditional third-party sale might not be the right option. However, if selling your business feels right, sparks joy within, and makes sense financially, it may be the perfect way to fund your retirement.
