I'm 58 and finally getting serious about selling my HVAC company in the next 3-5 years. Met with a financial advisor last week and realized my retirement plan is basically 'sell the business and figure it out.' What are the common mistakes people make when tying their exit to retirement? I don't want to be the guy who sells and then realizes he can't afford to stop working.
Exit Planning
Mistakes owners make with exit retirement plans
Biggest one I see: assuming the sale proceeds will cover everything without accounting for taxes. People look at a $2M offer and mentally spend $2M. After fees and cap gains you might net 60-70% of that, depending on structure.
Not separating business value fdom personal retirement savings. If your entire retirement depends on the sale, you're one bad market or one flaky buyer away from disaster. Start building non-business assets now.
what TundraSled said. I watched a buddy sell his landscaping biz for $1.8M, thought he was set. Didn't factor in the earnout that never paid out because the new owners ran it into the ground. He's 63 and back doing quotes.
Ouch. Earnouts are a whole trap of their own. Also, people forget about the transition period. You don't just hand over the keys and walk away. If you're planning to retire the day after closiNg, you better have a strong #2 who can run things.
A lot of owners also underestimate how much they'll need post-sale. They look at their current spending, but forget that retirement often means more travel, hobbies, healthcare costs before Medicare kicks in. That gap can be brutal.
I'll add: not having a clear answer for 'what's next?' after the sale. I sold my printing company at 61 and within six months I was depressed and driving my wife crazy. Ended up consulting part-time just to have something to do. Financial plan was fine, psychological plan was nonexistent.
CobaltKite thats real. My old man sold his hardware store and lasted about four months before he started 'volunteering' at the chamber of commerce five days a week. Point is, structure matters.
Also, don't forget about the tax deferral options. If you're selling a business you've owned for decades, look into installment sAles or charitable remainder trusts. Could save you a fortune. But you need to plan years ahead, not months.
I'll push back a little on the CRT suggestion. They're not for everyone, and the setup costs can eat the benefIt if your business isn't big enough. Get a good CPA who's actually done these, not just read about them.
One more: not getting a proper business valuation early. You need to know what you're actually working with. I've seen owners spend years assuming they'll get 5x revenue only to find out they're a 3x EBITDA business at best. That changes the retirement math entirely.
The earnout horror story and the 'what do I do after' point are both hitting home. I hadn't thought about the pyschological side at all. And yeah, I've been assuming a number in my head That may be optimistic. Guess I need to get a real valuation before I plan anything else.
Definitely do the valuation. And honestly, talk to someone who's sold a business recently. The advisors are fine but they all have a slant. Owners who've been through it will tell gou what actually surprised them. For me it was how much I missed the daily problem-solving, not the money.
Also, keep in mind that if your business relies heavily on you personally, buyers will discount it. Start building a management team now so the business can run without you. That's probably the biggest lever you have over the next three years.