I want to sell my converting business to help my daughter and grandkids.
Rock, It’s always been my plan to hold onto my converting business until retirement at age 72 or later. Recently my daughter and her three kids moved in with us. One of my grandchildren requires 24-hour care, and my wife and I are arranging our schedules as well as hiring a caregiver. With all the changes, this seems like a perfect time to sell my business so I can help our daughter. My question is this. My general manager has offered to buy a portion of the business so I can continue as an absentee partner. I’m not sure if this is a good solution.
I’m glad you and your wife are in a position to help your family. You are eager to make these changes and get everything nailed down. This is a common approach for owner-operators who are inventive thinkers and like to solve problems. If I were in your shoes, though, I would take things slowly.
You may have serious expenses with 24-hour care, so it’s wise not to rush into selling your business, which is an asset that could fund your retirement and your family’s medical and lifestyle needs now and in the future.
You didn’t say how long your family will stay with you and your wife. Having your daughter live with you may or may not be a good long-term fit, so I would test the waters with the living situation before making a significant decision about your business.
Based on the age of your adult daughter, I estimate you are in your mid to late 60s. That would put your original retirement target in 5 to 7 years. For a five-year exit, now is the time to create your master strategy and timeline – and my team can help you with that.
Regarding your manager’s offer to buy part of the business, you may wonder how long you can ask him to run the business before selling to him or someone else. My answer: indefinitely. Take all the time you need to get your family settled.
If your manager is working full-time, he will need to take on more of your responsibilities. That means he will need to shift some of his current duties to another employee or someone you hire. Yes, there’s a cost to that, but it’s a reversible option.
If you’d like to reward your manager, decide on a bonus or performance-based compensation. Create performance targets ahead of time, and get everything in writing. Compensation should be as a payment, not as a percentage of your business. Also, think twice about a job promotion or raise until you know for sure if you will be permanently stepping back from the business. A bonus is a good compromise for now.
You can see that there is nothing in this scenario requiring you to rush to sell all or part of an asset you’ve spent a lifetime building – and that can continue to grow on the timeline you’ve already established.
Now let’s look at the practicality of going from being a full-time business owner to a full-time grandparent. It’s a significant adjustment. Having your office where you go for a few hours may be just what you need. Even owners who are well-prepared for retirement miss that aspect of the daily routine, so don’t be too eager to give it up.
If you’re committed to selling all or part of your business, take a hard look at whether your manager is the right person out of all the options out there. If he is, proceed as if you were selling to an “outsider.” To take shortcuts would not be fair to you, your wife, and your future. LaManna Consulting Group can provide a business valuation and essential market research. This is the first step if you want to proceed with the sale of your company.
If you haven’t done so, meet with your wealth advisor to determine your current and future financial needs. In addition, schedule a time every week when you and your wife sit down to discuss life as it evolves. Keep each other informed and be a team. That’s the reality of having your daughter back in the household.
If you wish to work with us, LaManna Consulting Group will take you through an evaluation. We’ll help you develop a solid plan that fits your unique situation. We’ll coach you and your manager so the business stays on track and flourishes. Having a manager run the business while you participate part-time is an excellent hybrid solution, giving you freedom and flexibility for the family.
We’ve written a guide to help you understand the terms used in your planning process; Demystifying M&A Jargon is a FREE download from LaManna Consulting Group. Educate yourself about all your options so you can have productive discussions with your advisory team and family.
A final thought.
Many people my age who were bootstrap owners have regrets about not spending more time with their families when their kids were young. Examine your motivations and the actual needs of the situation. Listen to your family members and decide together the best way you can support each other.
God Bless.