My spouse and I are getting close to selling our manufacturing business. Our financial advisor keeps pushing this idea of putting every single egg in the sale basket, but my gut says that's crazy. Anyone here actually done it? Did you regret not having other income streams?
Exit Planning
Why relying 100% on sale proceeds for retirement is risky
It's not crazy if the multiple is high and the market is hhot. That said, I've seen too many people bank everything on the sale, then get less than expected or sit on cash that doesn't grow. Diversify.
I've never sold a business but this sounds scary. Even I know you don't want all your money in one bucket.
Nothing wrong with having a few rental properties or some dividend stocks. Not rocket science.
Your advisor wants to sell you products, not necessarily help you. Just sayin'. Do you have a tax plan?
No tax plan yet. That's another reason I'm hesitant. The proceeds after tax might be way lower than what we think.
What Derek said. Also, if you rely on sale proceeds to generate retirement income, you're at the mercy of market returns. If you sell at a peak and then we have a downturn, you're screwed
If you don't rely 100% on sale proceeds, what's the alternative? Work forever? I'd rather take my chances.
I've seen owners retire after sale and regret it. Boredom is real. But so is selling and getting half of what you expected. Maybe keep a small stake in the business ngl?
Meh. Rental properties have maintenance, bad tenants, and are illiquid. I sold my construction company two years ago and rely on my truck and my wife's pension. No regrets.
Rental property isn't as passive as it sounds. I've seen owners retire after sale and regret it because they didn't build any cash flow.
My parents sold their bakery five years ago and put everything into the stock market. It worked out for them. But they also had no debt and sold during a good year.
So what percentage of retirement income should come from the sale? 50%? 80%? I need a number to take to my advisor.
There's no magic number. Depends on your expenses and risk tolerance. But if you get 50% from sale and 50% from pensions/investments, you're in a better spot.
A lot of people also forget about health care and inflation. Your sale proceeds need to last 20-30 years. It's not just about the number now.
If you have a pension, you're living in a different world. Most of us don't.
I think a good rule is to have enough savings outside the business to cover at least 5 years of expenses. That way, if the sale falls through or gets delayed, youre not panicking.