Thursday, October 22, 2020

Retiring is Not Easy for New Home Builders

Recently I’ve learned that a couple of modular new home builders want to sell their business now that business is booming and just know someone will want to buy their home building business.

One of the biggest reasons many successful home builders want to sell their business is to fund their retirement fund. Sounds good on paper and even while discussing it with your spouse but reality can be quite a wake up call.

That reality includes several factors:

Other builders are also looking to retire

The vast majority of today’s new home builders, both modular and site builders, are eligible to be card carrying members of the AARP, the organization anyone 50 years and older can join. Many, if not all are planning to retire and sell their businesses also, so why would they want to buy another builder’s business

The kids don’t want to take over the family business

Getting the kids to take over the family business has been discouraged by most builders not wanting their kids to have to own a tough business with all the ups and downs associated with building new homes. Those same kids have also overheard you complain about subcontractors that caused major problems and cost the business thousands. They’ve also watched their parents yelling and screaming about how this customer screwed them over and how that cheated them out of the final payment. Kids aren’t stupid, especially yours!

Your salesperson, supervisor or office manager will want it

If there is any group of people that will probably never buy your business, it’s the people that work for you and know where all the skeletons are buried. They work for a paycheck and if you can’t provide one on a steady basis, they’re the first off the boat. Besides, most have little or no savings and couldn’t get enough to pay you what you want.

My modular factory could buy my business

That is probably the worst case scenario. Why would your modular factory want your business? First, they are a manufacturer that builds the major components for builders like you. They don’t finish the house for the customer nor do they actually get involved with selling it either. They simply want to have you order a home, build it and ship it to you so you can finish it.

Reality can be cruel and selling your modular new home business is appealing mostly to you, not others. Besides, what are you selling?

You’re selling your business name, your tools, your office unless it’s rented or in your home, and good will. You aren’t selling work in process because the profit doesn’t come until it’s finished and the new home buyer has moved in.

New homes, in almost every state, come with extended warranties on the house, the foundation and many other things the new home buyer will expect you to fix. Neither your new buyer nor your kids won’t want to take on any expenses you are responsible for. 

There are many conferences you could attend on transitioning into retirement by selling your business and lots of consultants ready to help you, for an upfront fee, but the reality is you are not selling something that is a repeat purchase like a beauty shop or a restaurant. Even though you are building something tangible, what you’re really offering is a service.

Being a new modular home builder requires a special type of person. You have to be a counselor and a consoler,  a salesperson and a repair person, a negotiator and sometimes even a prick. Selling your business to someone that doesn’t have those qualities means your business may not be around very long after it’s sold.

And if you’re lucky enough to actually find a buyer, be prepared for the buyer to ask you to hold some or most of the financing. That becomes worthless when they go out of business.

When the time comes for you to get out of the home building business, I really hope everything works out exactly the way you had hoped but don’t say I didn’t caution you.

Gary Fleisher, the Modcoach is the owner of the Modcoach Network consisting of Modcoach News, Modular Home Coach and Modcoach Connects.

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