5 Things to Consider Before Retiring From Your Auto Shop
A 2018 study by Northwestern Mutual found that one in three Americans have less than $5,000 in retirement accounts. 33% of baby boomers, those closest to retirement age, have less than $25,000 in retirement. The statistics are no better for small business owners. A 2017 Manta survey found that 36% of small business owners surveyed had no retirement funds set aside.
Many shop owners expect the sale of their shop to provide for their retirement in whole or in part. If you are planning to sell your shop (or transition to retirement while retaining ownership), here are the top 5 things you need to consider:
1. Is my shop a “product” ready to sell?
Do you have proven, successful (profitable) sales processes and operating procedures that you run the business by? They must be in writing and used by everyone in the shop. A buyer needs to know they can turn a profit immediately and train new employees. If “the way we always do it” is in your head, there’s nothing to prove that a new owner can have the same level of success.
2. Who is fulfilling key roles in the shop?
Are you working as an automotive technician or service advisor in the business or handling book-keeping duties? Are you paying yourself the same amount you would pay someone else to do the job? You need to show that the shop will still make a profit if you pay someone else to do these things.
Preparing for retirement? Unless you’re selling your shop, it’s likely you’ll need to choose a successor and train them to fill your shoes. Get ATI’s FREE Succession Chart to help with this process.
3. Do we have liabilities to clean up?
If your auto repair shop has tax problems, equipment leases, lines of credit or business loans outstanding, get those cleaned up. The same thing goes for any lawsuits or other legal issues. A new owner won’t want to deal with those issues – when you retire, neither will you!
4. How profitable is the shop (really)?
A good accountant will encourage you to spend money at the end of the year to show less profit and pay less in taxes. A great accountant will discuss your 3- to 5-year plan to sell and tell you how to get big profits on your tax returns (knowing that means a bigger tax bill.) They’ll also tell you if your spending habits or lax expense policies are draining profits. And you won’t be buying the latest and greatest new alignment machine if the one you have still works great.
5. Is the shop at the top of its game?
Many shop owners think of selling when the shop is in decline. The best plan of action is to sell when the shop is thriving. If you can show a buyer that the business is making robust sales, has a savings account, retirement funds (for you and your employees), and putting 10-20% of sales in your pocket – now that’s the perfect time to sell. Or retire and keep pocketing those profits – your choice!
At the Automotive Training Institute, we provide consulting and coaching services to shop owners to help them get the most out of their repair or collision business. For more information on how to better prepare for retirement or other effective business practices, find an ATI shop owner event near you.