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Is Your Business Going to be Your Financial Nest Egg?


Hey there, this is Walter Bergeron, and today I’m going to be covering, is your business going to be your financial nest egg when you go to retire. We’re going to cover some of these things today so to give you an answer of exactly how that can be a reality that your business can be a huge and secure financial nest egg when you go to sell your business.

My name is Walter Bergeron and I specialize in doing just that, like I just, like I did for myself a couple years ago, sold my business for over $10 million and I’d like to show you how you can do the same for yourself so that you can retire and live the lifestyle you deserve when you go to sell your business.


Now the ugly truth here is that most entrepreneurs are not prepared to do this, and there are some ugly truths I’d like to go over with you really quickly just to show you that maybe you should think of another way to sell the business, rather than giving it to an employee, or selling to a family member, maybe there’s another method you can use to have your HVAC business be your financial nest egg when you go to sell it.


There was a survey conducted by American Express, that says that 60% of small business owners, say that they’re not on track to save money for their retirement. I know I wasn’t. Also that’s 73% of them are worried that they’re not going to have enough money to live the lifestyle they want, and that’s the truth because most of the time when you go to sell your company, it’s not worth nearly as much as you would hope it to be. Now I hope to dispel that myth today and give you a way to sell the business and use a different method of selling it and growing it so that you can get the amount of money you need.


Now the thing is that business owners expect to actually work longer than their employees, according to a 2012 study by the Small Business Administration that says that most employees plan to retire before the business owners. That means that if you wait until you’re 72 years old, which is what most business owners are doing, your employees that may have worked for you for decades, will actually retire before you do, and you’re the business owner, and you’re waiting longer to sell the business.


To me there’s really only one solution – You need to use your business as your retirement.


Which is what most business owners do, what most HVAC contractors, what most entrepreneurs do, is they sell their business before they retire. Now the first thing that I want to recommend you is to get yourself a qualified financial wealth distribution advisor. A special type of advisor to give you a real exact number on how much money you need to sell your contracting business for, when you go to sell it, so that you can live the lifestyle that you deserve. But if you’d like a real quick, down and dirty way to do this right here today, let’s go over that right now and I’ll show you exactly how I do that.


It’s called the 4% retirement thumb rule. You can look this up on your own but I think you’re going to find that this is pretty accurate. That if you live off of 4% of the principle of the amount that you invest, hey that’s what you can live off of for the rest of your life. So this is a really a long term thumb rule to use. So let’s say you sell your business like I did for $10 million. That means that you can live off of about $400,000 per year, indefinitely.

That means that that $10 million will last you because you’re living off only the interest from that amount you invested. Now if you want to live off $200,000 per year, well now you only need to sell your business for $5 million. What this is doing is giving you a good accurate number for your enough is enough number, before you decide to get out of the business, so what number do you need to live off of long term, to live the lifestyle you deserve? Live the life you want to live. Hell it could be the lifestyle you’re living right now while you’re operating the business, if you do it correctly. So let’s quickly go over this.


What is your enough is enough number?

What you’re typically going to do is, is you’re just going to take your yearly income needs, so if it’s a $100,000, you divide $100,000 by 0.4 and you come up with how much you need to sell the business for. I’ll give you a couple of examples here. So if you want to live off a $100,000, you need to sell the business for $2.5 million. You want $200,000 a year, you sell it for $5 million. Now again it’s a real rough thumb rule, but it should give you an idea on how much money you need to live the lifestyle of, well of financial liberation that you deserve, you’ve been growing this business for so long, why don’t you have a plan now to cash out and live the lifestyle you’re at least living now, or better.

So you now know that you have an enough is enough number. You now know that if you can sell the business for two and a half, for five million dollars, you could live off of this amount of money every single year and never have to touch the principle.


There’s another part of this equation, and the second part of this equation is well, what’s your  business worth? Unfortunately I’ll have a little bit more bad news for you here. Now typically in most cases when a contracting business is sold to a financial investor, or an employee, or someone else that’s in your industry, the value of that business is worth anywhere between 25 and 33 percent of total sales, and of course you add in some of the value for the fair market value of any of the assets in a business.


So I was talking not too long ago to a contractor who said that he knew, he knew his enough is enough number, and he planned on selling his contracting business for $4 million. So I said wow, and I kind of knew what size business he had, so I asked him, “Well, how much are you doing in annual sales right now?” He says, “Well I’m doing $2.2 million. So it’s very easily worth $4 million.” And I got to thinking, “Well do you have any other really big assets like a building or a bunch of trucks or what else do you have to add to this $2.2 million in annual sales?” And he said, “Well nothing really, I lease the building, all my trucks,” I think he had 10 or 12 trucks, “They’re all 10 plus years old” and that’s about all he had. Well look there’s no way this business is worth anywhere near $4 million. By most accounts it’s worth between, I don’t know $550,000, maybe $750,000. Maybe at some point if he goes a little bit higher he might be able to sell it for $1 million, if he’s really lucky.


That’s a terrible amount, he’ll never get to his enough is enough number, or have the money he needs to invest to live off of that 4% retirement thumb rule at this method, but for you, I’d like you to know what this difference is for yourself.


So take your enough is enough number, the one we just figured out, how much you need to sell the business for, then subtract it from the business value. So go and figure out about what your annual sales is, on the high end maybe you can multiply that times 0.3 or maybe 0.5 if you’re really lucky, but I think what you’re going to see is that you still have a difference, you still have a big gap between what you need to live the lifestyle you want and what the actual business is worth. Now the fact that there is a difference, it’s kind of depressing, maybe it’s not what you want to hear, but you’re now armed with this knowledge.


Now you know how much you need to grow your business. You now know that you do need to grow it and you’ve got a pretty doggone good idea how much more you need to grow it to. Now let me show you some ways to grow it to that number.


Most entrepreneurs are going to use the organic growth method.


Meaning that you’re going to work really hard, you’re going to market really well, you’re going to start growing fast, maybe you’ll grow as fast as 10% per year. Well 10% per year, if you have to double the size of the business, that means that you’re going to double the size of it roughly every 7 years or so. If you double the size of your business every 7 years, is that going to get you to the numbers, your enough is enough number, in the time frame that you wanted? If you need $2.5 million and you’ve only got a $1 million business now, you’re talking at least a decade before you get there, and that’s if you grow at 10% every single year. If there’s any year that you don’t grow at 10%, your number gets offset a whole lot.


Maybe you’re growing faster, but that’s still puts you at only $2 million and it may take 5 or 7 or 10 years to get there so it may not be the timeframe that you wanted. So organic growth, while you do need to have it as a part of your foundational business assets, it’s not going to get you to this lifestyle of true financial liberation you deserve, it won’t get you there quickly enough. It’s a really slow option, but let me show you there is another option. There is another way.


Organic growth needs to be a part of the process you’re using, but you also need to put on top of that exponential growth. Meaning that you need to grow faster, to get you where you want to be, in the timeframe you want to be there.


So this other option is called exponential growth and it could make your business worth millions of dollars more than it is right now, and it might get you to where you want to be. Now this method, we won’t have time to go over here, I’ll go over it in the next video if you opt in for it, but it’s the strategy used by the really big behemoths. By Google, and GE, and Infusionsoft, and lots and lots of other really big companies. Maybe even some of the HVAC companies that you’re aware of in your industry, you know that they’re using these big exponential growth strategies.


So right now you know that you do want to live a lifestyle of true financial liberation and selling your business is the method that’s going to get you there. You also know what your enough is enough number is, you know how much you need to live off of, at the end of the year you know that you need to live off of $200,000 or $400,000 or whatever your number is, you know that number. You also know how much you need to sell the business for. You also know on top of that how much the business is worth and that there’s a difference.


So if you understand one thing that you really need to begin now. To start to get this plan, to start to grow this business both organically and exponentially before it’s too late. Before you get to the point where no amount of growth will get you to your enough is enough number. So the way I see it right now, you really only have two choices. You can in fact just ignore this, you can keep doing what you’re doing, settle for a lifestyle that frankly I don’t think you deserve.

I think you deserve more than this lifestyle, that at least to live the lifestyle you’re living now or better when you go to sell the business.


Thank you so much.