Moral Money: our reader receives a surprise offer – but feels too young to retire
Dear Moral Money,
I have built a business over the last 12 years. Gradually, we grew from me and my assistant to a team of nine, but now I find myself being offered more money to sell it than I ever imagined it would be worth.
The new owners plan to run the business very differently to the way I have done, and I feel conflicted. What will I do if I am not the head of my current firm? How will my team and our customers be treated by the new owner?
I feel too young to retire, and the amount I am being offered probably isn’t enough to keep me for the rest of my life. I will likely need to continue to earn a while, but I can’t think of anything I want to do more than my current role. I worry, however, that I may end up regretting not taking the offer – maybe my firm has reached its full potential under my leadership and I am better off selling now and finding a new challenge. I am finding it hard to make this decision and any guidance would be welcome.
Anon
Dear reader,
Well done. I know from experience that entrepreneurs rarely have anyone tell them they have done great work, so take a moment to acknowledge it.
As your financial planner I know your business was born out of a desire to have more say over the hours you worked and the type of clients you worked with.
You started a home visit chiropodist business with a virtual assistant to help with administration. A few years later you bought premises with a friend who offered physiotherapy services, and you have gradually grown the number of therapies and facilities at your wellness centre – but you didn’t start it with the intention of scaling and reselling.
Up to now, the other people you have shared responsibility with have all been practitioners at the centre. The other therapists are all self-employed and effectively share the premises, administration and some discounted supplies by plugging into and being part of the centre.
Arguably the most important benefit is the good reputation among the local community, and the cross selling of services all available under the same roof. You have been careful and particular about the practitioners invited to join your cooperative, and your leadership has been very influential.
The offer to buy your business comes from a local property developer who has built a small portfolio of businesses similar in profile to your own. He has experience of helping businesses that share premises and resources to optimise their potential, and he believes all the practitioners would benefit from updated premises, systems, cheaper access to resources and he believes the business has over 35pc of unused capacity.
After several meetings with him and his team you can see the centre would have a very different vibe to the collaborative working environment you have built up with your colleagues. While you admit there are improvements in capacity to be had, you believe the cost would be a working environment similar to what you chose to leave behind.
We have done some financial planning that imagined you retiring at 55, but this offer has come to you at 45. We had established the asset base you required to have the lifestyle you desired, with some travelling, doing up a forever home and being generous with family.
It assumed that the first 10 years of retirement would be busy, and once long haul flights had lost their appeal, the new house was done and the family catered for, things would get a little less expensive in later retirement, leaving you with enough money to be sure you don’t run out.
The sale value gives you the asset base we had planned to support retirement at 55, but if you think of it this way it can highlight the challenge: divide your life into three parts – work, rest and play. Then ask if you do your best spending when sleeping or working, or at play?
It becomes obvious that play time is expensive. In your case, if you were to start the high spending years earlier and tried to maintain it for longer, your later life financial security would be undermined. You may end up outliving your resources unless you are willing to compromise on lifestyle in retirement.
Given that you enjoy your work and have created an environment that nourishes you, I understand why you are reluctant to imagine an alternative occupation. I also understand your concern that not taking the offer leaves you reliant on the continued success of the centre – however, this is not a new risk.
Before the offer came in you were happy that you had three elements of value in the business – you own half the premises and would continue as a landlady in retirement, you had your own client bank to sell as an asset and you are the sole shareholder of the business that owns the brand, and the income sharing contracts with the therapists.
From a financial planning perspective, it is too early for you to retire. From a quality of life perspective, I think you are probably going to get the best return – both personally and financially, from developing your centre further.
I also believe that now you have experience of what a purchaser will be looking for, should you explore how to make it even more valuable to future buyers. Given how concerned you are to preserve the culture of the centre, you may want to explore selling the company to your team of therapists via a Management Buy Out (MBO). Floating this idea sooner rather than later would give the therapists time to consider how they may raise finance if they want to participate.
I think you should be flattered by the interest in buying your business, but I think when it comes to what will work best for you it is not selling at that price at this time, but letting it open your mind to exploring your options and preparing for sale in the coming decade.