Getting An Early Start
Updated: Feb 21, 2019
I’ve spent a lot of time lately thinking about my future. I can’t say I know why it’s been on my mind, other than the obvious reason: I’ve got a terminal illness called aging! My doctor says I can’t be treated.
The more hair I lose and weight I gain, the more I think that bald and fat is a retired man’s game!
Retiring from a large company is easy (ish). You tell HR when your last day is, they check that it aligns with your age and pension terms and you’re off! They give you a gold watch and a box to pack your career into and off you go.
For me and most other independent paint retailers though, it won’t be that easy.
The market for paint retailers is not exactly liquid. There is no stock exchange where buyers and sellers can meet, so finding buyers can take time. Also, in the absence of an organized market for stores, assigning value can be challenging. That makes the process even harder: you don’t just need to find a buyer but you need a buyer who agrees with you on how much the business is worth!
In other words: you’re unicorn hunting!
If you’re thinking you want to retire within five years, you should already be looking at you business in a different and even more critical way than you might normally. Here are some of the crucial topics you’ll want to think about.
· Is your inventory fresh and saleable?
· How much income do your stores generate for you?
· How important are YOU in your business?
When you buy a gallon of paint you are making an investment. So is the next guy and they are not interested in your problems. We ALL know that when you sell your stores you don’t get paid for the mistint pile. But did you know that you don’t get paid for anything that a buyer doesn’t think they can easily sell?
If your buyer won’t buy an item and pay you (roughly) what it’s worth, then it’s more like used car than a can of paint: worth a whole lot less the moment you pay the invoice.
But given time, there are solutions to this issue. Most vendors will work with you to take back or swap out materials that are not moving. This is a good time to do that. If you have a line that’s not doing well, ask the vendor to swap it for a latex primer or something else you can sell off more readily. Or just sell off those items now for 50% off and stop reordering. A buyer will pay you much less than 50% for unwanted materials (maybe 0%!) and so better to cut your losses with a retail customer, even at a steep discount.
You can maximize the selling price you get for your stores by maximizing income. If you run cars, meals, sport and show tickets and the like through your business you are reducing your business’ income. That’s fine while you own it…but it’s costly when you go to sell. NO ONE pays you on those expenses; they only pay for income. Running personal expenses through your business may have had some benefits in your younger days, but it’s working against you now. Remember that when you sell you get a multiple (hopefully) of earnings. So every $1 you leave in your business is multiplied when you get out.
The fight of course will be “what is that multiple?” That’s for discussion another day but as long as it’s more than 1: pay for your own cars and meals! Doing this will also help YOU get a clearer understanding of your income (and therefore the asking/selling price).
The last bullet point is my favorite: because it’s all about me! Paint stores where the entire business is built around you (or any other single person) are worth less and have less of a market.
If your business can only be successful with you at the counter, you have got a problem! As you’re looking towards the exit, you have to start thinking about how your business will run without you because that is all that someone else is willing to pay for. Start adapting your business so that it can manage day-to-day without your fingerprints on everything. It’ll be worth more. (author's note: Here is one area I don't have to adjust much. Because of all the writing and consulting I do, my guys are used to not having me around).
These are not the only areas you should be looking at but it’s a good start. It will take you a few years to get these sort of things cleaned up the way you need to. That means it may take you a few years to get out, so start early.
Speaking of starting early, I just spoke to my daughter. She was at the airport in Switzerland, heading back to Barcelona. She was there at 1 PM for an 8 PM flight! Seems like she learned her lesson last week! Maybe TOO well!
Keep an eye on your inbox. One week from today I'll drop my podcast with Benjamin Moore CEO Dan Calkins. I'm really looking forward to sharing our conversations with you.