Latest / Remodelers On The Rise / Remodelers Need an Exit Strategy
Transcript
- Kyle: All right, welcome to the Remodelers on the Rise show, folks. David and I go how many years back do you think we go back, Dave? David Lupberger: I'm thinking twenty five years anyway? How does that well Kyle: No. I mean, I would have been nope. Nef definitely not that. Because I started my business 18 years a yeah, probably about that. Probably like that. David Lupberger: You've been to what, twelve or thirteen? Yeah. Okay. So maybe all right. Kyle: But it seems like you've known me for 25. David Lupberger: Yeah. Kyle: which is which is nice. No, I was still 25 years ago, I was still in college. You didn't know me then. David Lupberger: Let's go twenty. Kyle: That's about right. That's about right. And Dave and I haven't talked talked in a little while, but we were in a mastermind group together for a number of years. I would say, as I look back on the arc of my business, I remember getting in a room when I got invited to the construction consultant's mastermind. And Vicky Suter was in there, and David was in there, and Dan Bauman and Ed Earl and Diane Gilson and a couple others. And remember in particular, because David and Vicky were doing similar work to me, of just I probably didn't do if you're watching the video, I probably didn't do this physically, but I think I was sitting there going, if someday I can just be like them. And and going, how do they charge that much? I could never charge that much. How do Well, can't charge that much because they're way smarter than me. It was one of those things of like you put yourself in a room with people that are a little further down the the the path than you, and you learn from them and you glean from and you try to give ideas that that you have to encourage them as well, that whole concept of a mastermind group. But I look back, David, in particular for you, and just there's a there was a lot of wisdom I gleaned from you. there's and you you guys will hear it here in a second. There's just a piece. That David brings to the conversation. I bring this and I bring this chaos and this wildness and this and that. David brings this peace and wisdom that is magnetic. So thank you for what you may or may not have realized of being very impactful in my early and mid-years of my career. and I'm just thrilled to have you as a guest because here you are, September 2026, and still doing what you do wonderfully, which has helped. remodelers and contractors and we're gonna specifically zero in on a portion of that. but welcome David. David Lupberger: Thank you so much. It's so good to see you again. And look what you've done and your summit. Congratulations. Kyle: Thank you. Thank you. I appreciate I appreciate that. We had a wonderful rise conference. and then I said, David, we gotta start the recording. We've already caught up a little bit on what's going on with him. And then he goes, Well, Kyle, I wanted to hear how you were doing. There'll be time there'll be time to do that later. But we got to get David Lupberger: Okay, fair enough. Kyle: down to business. We got to get down to serving these remodelers. so you're going now with a focus on contractor transition strategies and doing a lot around, okay, I've been running this business, I've been growing this business. What does it look like to transition or exit or sell? introduce yourself a little bit more of kind of where you've been, who you are, what you're up what you what you do, and then let's get into this specific topic at hand. David Lupberger: Terrific. Contractor Transition Strategies is my website. I was a full service general contract for 25 years, did design build work, and got to a point where I wanted to do something else. And so got into consulting, and nothing takes the place of experience. And working with younger contractors, can we lessen that learning curve? So I still do public programs, and as you can see, I'm a little north of 60. And so I'm looking at my own, you know, life. What do I want to transition to? What am I doing? So I began bringing that to some of my meetings. So JLC Live, I've been to IBS, you know, every year, and a number of association meetings, you know, Neri or the NHB. And I begin asking my audience, what are you doing to prepare for transition? And do you know, Kyle, I'd never had more than two people raise their hands. Kyle: Mm. David Lupberger: In a room of 50 people. And so what became clear is they're not preparing. There's Kyle: Mm. David Lupberger: very little industry education. And the common phrase is, I'm not ready, I don't need this, I'm not retiring. Well, no, and and it could be 10 years from now. But you can begin to take steps because this legacy, and I speak with people, you know, working for 25 years. and the reputation they have, the legacy they've built in their community, the list of past customers, loyal employees, trusted trade contractors and suppliers, that has value. And so I think I sent you a note that Forbes magazine, with all the baby boomers like me, you know, hitting retirement. That for Main Street businesses, and those are businesses under six million a year, which most remodeling companies fall into, many do. Kyle: Mm-hmm. David Lupberger: In general, 80% of businesses doing under six million a year will just close their doors only because the owner is the business. They Kyle: Mm-hmm. David Lupberger: haven't taken the time to replace themselves. And so suddenly this became a really compelling commitment and I just enjoy doing it because it's it's my own life. It's what I'm doing. Go ahead. Kyle: Hmm. Yeah. And I yeah, and I don't I don't want to steal the thunder of a portion of this, but I I would I will kind of say this right out the shoot. If you're going to if you're going to transition the business in a way that you're able to sell it, if you're going to transition it in a way that you still own it, but you have others running it, whatever that transition looks like, the punchline is what you just mentioned there is. It needs to be less owner reliant. If things are still a lot of things are going through you, and you're the person that does the sales and you're doing your hand and estimating, you're still doing some project management. The more things that you're still involved in, the less value your company has and the less attractive it is to selling it or transitioning it to somebody else. So that's kind of the fun part. Is even if you're 22 years away from your goal of selling your business eventually, or if you're two years, or if you're 10 years, the approach that we need to take and the strategies we need to employ are still similar. So we'll leave that there. I I know you're gonna probably unpack that a little bit more. Yes, but David Lupberger: But that's great stuff. Kyle: but I think that's that's such an important thing for us to remember is whether you're gonna sell it or not, the strategies are still the same. Less owner reliance, building up the team, et cetera. so where do you wanna take this, sir? Where do you wanna take this? Do you wanna maybe three primary questions? Can we get into that side of things? Let's start with that. David Lupberger: Great. So basically, if people are thinking about a transition, and again, even ten years away, it really doesn't matter. What you just said is dead on. You know, can you build your business with the end in mind? All right. So basically, three questions. One, when do you want to leave? And guess what? This is a building plan. And you tell me, are building plans, do you change them sometimes during a project? Consistently. Kyle: Yes, yes we do. Yep. David Lupberger: So when do you want to leave subject to change? Number two, is there an asset gap? Meaning, if I'm doing less, do I have as much money as I do now? Because you don't want to live on less. So basically, what are the financial requirements? The divide I decide to work less if I'm not making as much money between Social Security, between investments, or taking a part-time advice re-roll, maintaining an advice reroll in the company so you maintain an income stream. So that's the second question: is addressing the asset gap. Number three is: do you have a successor? And so We get to again these service businesses doing six, seven, eight million a year, you probably won't have private equity firms coming to buy your business. All right. Remodeling is so unique. So basically, I talk with people, can we grow your successor? What does that look like? How much time does it take? So those are three juicy starting Kyle: Mm-hmm. David Lupberger: points. Kyle: And they're and they're it's I think maybe it's because I've been doing this a little bit longer or a good number of my clients are reaching the point of what's the end what's the end goal here? But it's been coming up a lot more in the last number of years. And even that question, I've been having some of our some of our groups just do kind of a vision casting long term thing. And I remember me thinking through it and going, okay, the first question, when do you want to leave? When do you want to retire? Well, I don't know, it's so far away. I I don't know. Who knows? Well, welcome to ambiguity and not really knowing where you're going. And guess what? You're not probably going to arrive there as strongly and as good as you would want to. So take David's advice. Put a big fat subject to change next to it. But really think about this. This could be a takeaway from you listening to this podcast with us. When do you want to leave? And give me plan A and plan B. And of course it's gonna change, and of course things are happening, but tell me what that is. In my case, if I said, you know what, at 62, I think I wanna be pretty retired. That is 19 years from now. Yes, okay, I've got an actual date. 19 years is interesting. For some of you, you're gonna say 10 years. So some of you are gonna say six years. Some of you are saying four years and you are not taking it serious. You're saying four years and you don't even believe that that's the case. Because your actions are showing you're not taking this serious. Time's a ticking. We need to get this moving. so the when do you want to leave part? if you if you're working with a remote or Dave on that one, how do you get him to kind of think about that? Is it just a matter of kind of putting a putting a flag in the ground? David Lupberger: Just what you said. It's think about this. It's a date that can be changed. But when I get with somebody I'm telling to truly create a business that doesn't depend on you, plan for three to five years. All right. And when you just mentioned if I'm retiring four years from now, number one, this discussion, what does retirement mean? What does it look like? I mean, I sit with people and we put together a wish list. All right. The other interesting part has been of all the clients I've been working with, all except two contractors have stayed involved in some capacity. And just on an advisory role, perhaps a sales role, perhaps a networking role. This is why they got into the business. You can still do with the things you like. It's how you built this thing. You know, the commitment you have to the company, the employees you've worked with. So this is really. I can say fundamentally, you can create a transition model to do anything you want. All right. Now, if we start getting into some transfer of equity, we just have to have the legal agreements. But the point is you can do anything you want to do, but like a large-scale building plan, you gotta put it on paper. You got to plan Kyle: Good. David Lupberger: it. Kyle: It's good. So so David, again, contractor transitionstrategies.com. It's it's in David Lupberger: Yes. Kyle: the business name. It's what he's been focused on. And we're talking about, hey, as you start thinking, Remodeler, about transition and exit, the three primary questions. Number one, when do you want to leave? Let's put that in writing. And then how fun did it sound, David? What you just said. When I sit down with remodelers on this, we go, all right, let's talk about retirement. What does that mean for you? Let's put together a wish list. And that's not an David Lupberger: Yeah. Kyle: easy thing to do. David Lupberger: Hmm. Kyle: You you most of the people that are listening to this and are interested in this, you're business you're a business owner. And the thought of you throttling down from eighth gear, is that how many gears there are in a car? David Lupberger: Sure. Kyle: Eighth? Eight gears? What does it what does it take to climb those Colorado mountains out there, David? David Lupberger: Lord, you got so the forty niners and there's forty nine of Fourteeners, I'm sorry, they're forty nine of So if you want to climb all the fourteeners, plan for four or five years. Yeah. Kyle: Yeah. That's gonna be eighth gear. Yeah, that's gonna be that's gonna be definitely gears. Right, but you but I'd say tongue in cheek. You got you gotta gear down. It is it is not easy. It is not for the faint of heart to really think through that. And how am I gonna go from going full throttle to slowing down? At the same time, there's we know we know if we design this well, there can be just such richness in life and enjoyment of life. And so many of you have worked so hard, so hard to build what you've built. And you've done that in some ways with a little bit of regret, where you've gotten a little bit out of hand with work-life balance. Some of you, myself included, like just we go through seasons where business needs a little bit more. Don't you want to design your retirement in a way that's going to bring you and your spouse or your family some enjoyment? That that is absolutely should be some of your goals. So when do you want to leave? But more importantly, what do want this to look like? And to your point, David, most likely the ladies and gentlemen listening to this, you ain't gonna sit on your butt. You're still gonna want to be active. And what you're saying is, hey, there's a lot of ways this can look. You can still stay involved. Imagine just doing the stuff in your business that you love. David Lupberger: And what a blessing, what a relief. So I speak with people, you know, in most contractors, they're saying, I don't have time. All right, I'm still too busy. Well, then you need make a choice of I'm going to consciously begin to scale down. And so what can I and we go back to what do you enjoy doing? What if we reduced your 50 hour work week to a 15 hour work week? What if you could leave for three weeks on vacation and not get calls? And so this is all a byproduct, which is what have you been putting off? All right, what Kyle: Mm-hmm. David Lupberger: are those things you'd like to do? Look, now's the time. And it just comes up again and again, which is what are we waiting for? Kyle: Mm. David Lupberger: And, you know, putting time with your family, with your kids. You want to hear some great news? Kyle: Yes. David Lupberger: My son just told me his wife's pregnant. Kyle: Ooo Grandaddy Loopberger. David Lupberger: I am gonna be a granddad for the first time. And guess what? That's gonna change our priorities too. And Kyle: Yeah. Congratulations. Is he still over in New York? David Lupberger: he is living in Brooklyn. God bless him. He Kyle: Yeah. David Lupberger: and his wife and making the commute to Manhattan every day. I don't know how they Kyle: Woo. David Lupberger: do it, but they seem to like it, okay? Yeah. Kyle: Okay. Yeah, but now they're gonna start, you know, having babies and then they're gonna become suburbanites. They're gonna David Lupberger: That's me. Yeah. Kyle: everything that they probably are saying we'll never become those people and the babies come. David Lupberger: Yeah, yeah. Wait till yeah. Things change. You get it. Kyle: That's exciting. All right. Hey, hang on, go on the record though. What's gonna be your grandpa name? Are you gonna be a papa? Are you gonna be a granddad? Are you gonna be grandpa? What's what you got anything you're brewing on that? David Lupberger: Not I haven't really thought about it yet. We just learned Kyle: What David, this is your this is important. Okay. David Lupberger: We just learned last Sunday, so I I maybe I need to go ahead and spend some time 'cause Kyle: Yeah, put that yeah, put that on your radar. You got time. You got time. David Lupberger: I guess Mr. Lootberger or Sir, that's probably not the the best choices. Okay. Kyle: No, no, that's not the vibe. That's not the vibe you want. Right. David Lupberger: Fair enough. All right. Kyle: But you said that's exciting. That's gonna change your plans. So design your plan. Design your plan, folks. Dream a little bit. When you dream a little bit, you think through that, I'll I'll interject this and then I want to go into the money part. I was I was in the I was in the bathroom at church on Sunday and this guy came up to me. I may have mentioned this on yesterday's podcast, whatever. And he goes, Hey Kyle, you happy? And I was like, first of all. That was a weird question to ask at the urinal. Second of all, this question has sat with me now for 72 hours. What a great David Lupberger: Yeah. Kyle: question. What a great question. Are you happy? And he's a he's a quirky guy. I like him a lot. And I think it's he was just like, hey, you happy? And I'm like, you know what? I'm gonna think about that. I'm gonna think about that. And in a lot of in a lot of areas of life, I'm very happy. In some areas, I would like to change some things. You know, what's working, what's not working. And think about that as you dream. Like, you know, I won't retire. You know what I'm not happy about? I don't I'm not happy that, you know, I at the end of the day I still feel behind on work. You know, in retirement, whatever retirement looks like, or even in the years leading up to that, I'm gonna change that. I wanna be happier in that. So another, what does retirement mean? Wish list, et cetera. Now, how much money do you need? That is the next thing as we think through the big picture of this transition. What is the asset gap? Talk to us about some best practices there. David Lupberger: Well, you so many people at a certain point, you know, get a financial advisor and they've got some spectacular software that says if you live till X, you know, age, Kyle: Mm-hmm. David Lupberger: let's look at your potential income, let's look at your investments, let's look at Social Security. And guess what? You can't include your house. All right, your house does not generate income. So basically, what are we looking at? And then you can go in five and ten year segments. And again, this is all financial planning. But basically, is there a gap? And if you're looking at a gap, then let's address in this three to five year plan, let's address the gap. All right. What can we do to do this? So this can go back to working on your business in a certain capacity, introducing recurring revenue, accurate numbers. All right. But Kyle: Mm-hmm. David Lupberger: really begin to say, I know ahead of time. I've got an asset gap. Let's address it. And that's what I work with contractors on. You know, what Kyle: Nove. David Lupberger: can we do? What what are some new markets? Working with architects. There are solutions to this. All right. And so basically let's address it. It can't be a surprise. You don't want it to be a surprise, nor do you want to get to a certain age and say, I'm making sacrifices. And I keep circling back to that three to five year planning, which is, man, Kyle: Mm-hmm. David Lupberger: this is a building plan. You're building this, you know, forever home, you know, for this fourth stage of your life. Man, let's do it all. Kyle: Yeah. Yeah, it's good. I I find that content, I put a lot of content out over the years. And when I talk about retirement savings and setting aside money, that content, generally speaking, is a dud. Not a lot of engagement. And what that tells me and what I've learned is that this is a topic that a lot of people listening to this, you know you need to be doing more of. And You've got a lot of other variables and you got kids going off to college and you've got this and that and the other. And retirement gets pushed down the list. Every one of us listening can put another hundred out. Let me correct that. Every one of us listening can put another $50 this month towards retirement. True or false? The answer is most likely true. A lot of you can be doing even more. You might have to make some sacrifices, but guess what? The clock's a ticking. If you are, I just typed in into chat GPT. Ever heard of it? It's interesting slash, it might be. Coming for our lives, who knows? my client's 52, and he's gonna start putting $500 a month towards retirement. How much is that going to turn into when he turns 68? At a 7% return, that's gonna turn into $176,000. At 8%, it's gonna turn into about $200,000. You need to start wrestling with these numbers. You need to start understanding how much you might want to be taking out in retirement life. You might have to start taking more serious, okay. Part of my retirement life means I need to pay off my stinking house a few years before I retire. So that that's lowers our burden. It gives us more opportunities. You need to become a little bit more of a student of retirement, especially if it's the lat, especially if you're way behind. You need to lean into that. You need to lean into that. I'm talking to too many of my clients who who are just thinking of one in particular, who who look at the numbers and see the numbers as they get close and they're going, we're so stupid. Why didn't we just start putting a little bit more in a little bit earlier? So pay attention to that asset gap, like like David's saying. How much money do you need? Let's again, that can subject to change, but get that out there and see how it's looking. and if you're behind, let that be fuel, not not regret. David Lupberger: Yeah. Yeah. The last thing you want to do is arrive at and again, this is a planned transition. Sometimes transitions are unplanned, accident or illness. So Kyle: Mm-hmm. David Lupberger: part of what I also do is I address a continuity plan, business continuity, which is, you know, what are you doing to protect yourself in an accident or illness? And I gotta tell you, every client I've worked with has said, Do you have a continuity plan? If something happened, I've never gotten a yes. Kyle: Mm-hmm. David Lupberger: They're basically, are my fingers are crossed, business is good, let's keep going. Let's just address it. It's kind of like this financial conversation. What if? All right. Let's Kyle: Yeah. Yeah. David Lupberger: just be aware of it. Let's bring it to the light of day. Kyle: Crap, that reminds me. I started at the start of the year a continuity plan for Remalers on the Rise. If I got attacked by a flock of turkeys tomorrow, I'm done. David Lupberger: Yeah. Kyle: my the life insurance side is pretty okay. I did inform my wife that there would be some cuts that would need to be made, and she wasn't very pleased with that idea of like, okay, so I lost my husband and we're gonna have to do this and that and the other. So I thought, you know what, maybe I need to get a little bit more term life. I'm in communications right now. I had our financial advisor chat with him actually yesterday. And looking at disability insurance of going, you know, that's a gap I think in our in our financial life. If I got in an accident or was not able to speak or this or that, that would make a major impact in our lives. we've got to we've got to think through this stuff. But the continuity plan is as business owners, if you got attacked by a flock of turkeys tomorrow, you need to, you need to be organized there. And and that's one of the things as part of preparing for exit, David, that you're talking about. let me pause for a second. I want to talk about the third primary question of the successor part. I want to talk David Lupberger: No. Kyle: about the potential sale options. But people listening to this, we are strategically placing this at the end of September. Some of you are listening to this and it's been months. Well, you missed it. But a lot of you end up listening to these episodes within a week or two. In the show notes, there's going to be a link. To a four-part webinar series that David is doing. They're each session is just a little 30 minutes long. It starts on September 30th, September 30th, October 7th, 14th, and 21st. Go in the show notes, click the link to that. And I'm guessing if they just also go to contractor, where else could they go? Contractor Transition Strategies, they probably find it. Okay. David Lupberger: Transfer tradition strategies. Yep. Yep. Kyle: All right, so take a look at that, folks. All right, NC. All right. David Lupberger: Thank you. Kyle: The third, the third part. Found a successor to purchase the business and the sale options. Talk to us about that. David Lupberger: Terrific. Great question. So people think I'll sell my business. Well, who do you think you're going to sell it to? Especially a smaller service business. Do you have a friendly competitor? That might be the case. All right. Now, here's the only here's two issues with selling to a third party. One is what they want to give you is probably not what you want. They're trying to maximize their purchase, you're trying to maximize the return. So the value, we get into what's the true valuation, but more important to me is company culture. Is you as a remodeler have created a culture. Your employees like working with you, not just because of the money, but because you care. And so if you're looking at some kind of transition and bringing in a potential buyer. Do they care about as much of your employees as you do? And the reality is it's going to change. How does that change the company culture? That's really my primary question. How do we maintain this culture that you've grown for 20, 25, 30 years and maintain it? And a risk here can be something called flight employee flight risk. That Kyle: Mm-hmm. David Lupberger: if they don't see that they can work with somebody, that the culture remains the same. That endangers the future, which then endangers the entire process. So Kyle: Yes. David Lupberger: third party, to me, that's a little bit lower on the list. What I like the most is selling to a key employee. Now, what do you think the issue is selling to a key employee? Kyle: They might not be sitting on a big old pile of money. David Lupberger: They're probably not sitting with a million dollars in the bank. All right. So can we put together a plan where based on performance, and you can put together performance metrics, they earn something called Phantom Stock. And all Phantom Stock is is a promise to pay in the future based on performance. And you know what vesting is, corporations that Kyle: Mm. Mm-hmm. Yep. David Lupberger: an employee says by year three. You can get this company stock, it transfers to you based on this commitment. We're doing the same thing. That basically here is a performance plan, and I promise to give X, and it doesn't transfer till a certain time. And one thing it's rewarding the person, maintaining company culture, they see what's possible. The other thing you're seeing is, are they qualified to do your job? And I have this conversation regularly is a remodeler, you, myself, business owners, we've learned to live with risk. All right, and any remodeler who's watching this, there's good years, there's challenging years. And about 90% of the population is uncomfortable with risk. They Kyle: Mm-hmm. David Lupberger: just are. So I love this vesting aspect of creating a performance plan. Granting some form of phantom stock to be transferred at a future time. All right. And they demonstrate that they have the ability and the initiative. And it's a win-win. And I've got to tell you, in several cases, the potential successor lets the owner know this isn't for me. All Kyle: Hmm. David Lupberger: right, that they learned, but guess what? We know. All right. Let's go to plan B. Let's not make an empty, you know, that we're hoping something works out. Now They're never going to purchase the entire company depending on value. And we'll get into valuation here shortly. But it could be a good down payment. And then you're looking at: does an owner want to carry some financing? The small business administration? You know, they'll loan up to 90%. And it's a 10-year loan. If real estate's involved, it can be up to a 25-year loan. With the SBA, an owner can maintain a minority interest in the company. So there's a variety of options. I keep circling back to you can do what you want to do. All right. We just need to put the pieces together. Kyle: Good. Very cool. yeah, and then that is that is the question. So what we've covered what we've covered already is are some of the things that people need to be thinking through. probably everybody's favorite thing is so how much is my business worth? How much is this business worth? What is the value of this? Tell us what you've been what you've been learning, experiencing, and how you kind of approach that question. David Lupberger: Terrific. People will say, what's my business worth? And let's just do a little five-minute segue on business valuation. So what we're talking about is something called EBITDA, earnings before interest tracks, taxes, depreciation, and amortization. Basically, it's net profit. So basically, if I'm buying your company, Kyle, I'm seeing after all the cost of goods sold. After all company overhead, after employee and owner compensation and bonuses, what's left? What's my potential net profit? Kyle: Mm-hmm. David Lupberger: If I buy this, what can I make? So basically, we're arriving at again EBITDA, but it's net profit. And depending on your market, there's a multiple. When I do this with contractors, I tell them multiple of three is a safe multiple. So let's say you've got a $200,000 net profit after again, cost of goods sold, overhead, owner and employee compensation and bonuses. You're looking at a company that's worth valued at $500 to $600,000. All right? So Kyle: Mm-hmm. David Lupberger: we can amend that though. All right? And part of what we can do is if I see that there's an asset gap, what I really want to do is make sure that my numbers are correct. If somebody's buying the company, is my accounting clear, correct, and reviewable? All right. Number two, do I have written job descriptions and procedures? Number three, can I add recurring revenue? So there are things we can do to begin to address this. Now Here's something I'm going to call seller discretionary expenses. I have a All right, like I said, it's a five-minute segue, but Kyle: Ooh, now we're now we're starting to nerd out a little bit, David. Wow. Yeah. David Lupberger: guess what? The federal government allows us to take legal deductions to lower our reportable income, to lower our revenue. So we pay less taxes. So I might go to Hawaii for you know a two-day business seminar, take my family. I may buy my spouse a new car. I may make certain purchases because my accountant says, you know, we can deduct that. Kyle: Mm-hmm. David Lupberger: Here's the point. When somebody values your business, they're not going to ask you about sellinary seller discretionary expenses. They're going to say, what was the net income? And an appraiser will look at your business for a three to five year weighted average. And so will look at what you reported. So A great business broker said, if you're thinking in three to five years to do this, stop taking those seller discretionary expenses. All right. If I'm gonna increase my taxes by $20,000, $25,000 a year, guess what? But that means a $50,000 increase in net income as a multiple of three, that's a hundred and fifty thousand dollar gain. that's demonstratable through the proper accounting and appraisal Kyle: Yeah. David Lupberger: process. Did most of that make sense? Kyle: It absolutely made sense, especially if you're very serious about selling. yes, your books, clean them up. Yes, I know you did that bat off the record. I know you did that bathroom model. I know you ran all that through cost of goods sold. I know that knocked down your gross profit margin, which knocked down your net profit. I understand. At the same time, if you're looking to sell your business, the fatter that net profit is, the fatter that multiplier and final result's gonna be. That makes sense. Yeah. David Lupberger: There it is. You just you just nailed it, which is your accountant should be saying we're going to take all these things out for the next three years. Because Kyle: Yes. David Lupberger: an appraiser is going to say a three to five year weighted average. There's good years, there's slow years. Let's look at a three to five year average. What's the true net income? Kyle: David, three times multiplier. Come on, I thought it was gonna be more than that. I thought it was gonna be better than that. I heard somebody say five times. What do you mean three, David? David Lupberger: I can get it to five if I can show recurring revenues very powerful. Now we're in a remodeling market. So what a remodeler is doing, because you might have a $2 million year, but that doesn't mean you'll have a $2 million year next year. So Kyle: Mm-hmm. David Lupberger: what can I do to begin increasing recurring revenue? I think when we've worked in the past, you know, I had a home life plan. That basically look, once we have a relationship with a client, this goes off on a small tangent, then I'll circle back. But the point is, you just probably created the biggest investment in their house through a major remodel. Who's doing the annual evaluation of their home? They do an annual physical, they visit their dentist, they take their car every 50 to 30,000 miles to get a review. What if you did an annual physical on their home? And all I can tell you is. This is creating a relationship because people will do projects every three to five years. And so let me put myself in a position to work with them and be that service provider. Guess what? It involves some service work. But all I'm Kyle: Yeah. David Lupberger: saying is there are ways to do this. Beginning to create go ahead, go ahead. Kyle: Yeah. And and and the remote and the remodeling industry is n selling a remodeling business is is worth a remodeling business is worth less than a plumbing business. True or false, would you say David? Generally speaking, right? And and David Lupberger: True, completely true. Yeah. Kyle: just from a business standpoint, we can understand this. If I'm going to buy a $3 million remodeling company or a $3 million plumbing company. Obviously, I need no margins, et cetera, et cetera. But that plumbing business, there's some recurring, there's contract work where the risk is a lot less because it's divided up amongst hundreds of clients versus 15, 20 clients. So our industry just naturally is not going to get as high of a multiplier as a plumbing business, just as a simple kind of example. but it's good. It's good to wrap your head around stop, stop saying, Well, I'll be fine. I'm just going to retire by selling my company. That is a really, really bad retirement plan because it is hard to sell a remodeling company. Not impossible, but it takes a lot of hard work. And the valuation and the multiplier or the payout, the speed of payout, might not be what you expect it to be. You know, ideally, Let's let's be tucking money. Hey, hey, 32-year-old remouler, hey, 43-year-old or modeler, hey, 52-year-old or modeler. Let's be real serious about tucking money away in investments. Some of you may say, hey, I'm doing that through rental houses. Cool. Like pour into that, pay them off, make sure they're cash flow and all that. A lot of you would be saying, yeah, let's get it into retirement. Let's understand the difference between regular 401k contribution and a Roth 401k or a Roth IRA. Really become a student of that. And hopefully you get to the point where. Even if I don't sell my business, I could retire. That's a wonderful plan. And then selling your business is icing on the cake for retirement and really, really, really cool. And a new challenge for you to sink your teeth into. and so it's just you have so much fun with it. So if you if you start number one, go to go to David's little four-part series and just learn more about this. Go to his website, click on the show notes, learn more about this. Become a student of this, whether you're kind of on your term or or still have a a ways more. and I think this was some good stuff here, David. I wanna, I wanna have you say another nugget or two that comes up, but kind of the thing I wrote down a second ago was: all right, David, you've been teaching people how to do this, you've been walking people through it, and then just because of where you're at in in your business, career, and life, you've been kind of almost a test case of what does retirement look like and how do I want this to look? Share just kind of some some of the other wisdom that kind of comes to your mind, things that people need to be thinking about, realities of it. What's what else comes to your mind beyond what we've already shared? David Lupberger: It it's it's really where you started of understanding the numbers. And if if I'm doing a project for a client, which I did hundreds of times, budget is everything. All right. Can they afford? They have a wish and they have a budget. I need to meet both. We're doing the same thing here. All right. What's your wish and what's your budget? What are we trying to achieve? How do I get there? And you decided this could be creative. This should be fun, which is, but I need to address it proactively and really begin to say what, where, how, when, who's involved. So part of this is there's a legal aspect when you start looking at, you know, how do I document that? All right. There's a tax aspect to this. And again, I work with an accountant who works very closely with people. Tax planning. So, this is basically it's no different than a very sophisticated or technical remodeling project. There are a lot of moving pieces, but it's why your members do what they do because we enjoy this. Every Kyle: Mm-hmm. David Lupberger: day is a challenge, every day is different, every project is different. You can approach this the exact same way. What's possible? Where do I want to go? What's the timing? Yeah. Kyle: Love it. Hmm. That's good. What have you learned about retirement as you're kind of doing a little more more traveling or this or that? What have what have you kind of experienced personally? David Lupberger: God, great question. Because I've got a number of people, you know, in my age group, and they stopped working. And so it's funny because my wife and I, my wife, she's 68, she's still working like I am. We don't want to stop. And it's interesting because I look at them and I'm saying, How do you fail your day? And again, they do. All right, but that's what they wanted. So As I'm looking at this, the real challenge in all this, which is what do we want to keep doing? How long? What's possible? So to me, and this goes back to when I'm working with the contractors, I do, they don't want to stop, but they want time. And that's really what the webinar series, you know, is about. It's just how do I stop doing the things I shouldn't do, get to the things I can do, how do I do this in a strategic, calculated you know, planned fashion. So Kyle: That's good. David Lupberger: I'm I'm enjoying what what we're doing in I might have mentioned we went to Ireland in June. I went to N Nova Scotia for a week in August. more trips are planned. And imagine a business model where you can take off two weeks and it's fine. And you can plan to take off three weeks and it's fine. That's the goal in all this. Kyle: Hmm. And if you're able to do that, there's a phrase I heard one of my other colleagues mentions it of retire place, which is kind of like, look, if if I have designed my role in my company where I'm really enjoying it, it's giving me some flexibility and freedom. I'm working 25 hours a week, I might not be in a hurry to sell this business. I might just kind of retire in place here, is kind of the the thought with that. Couple other things that come to mind is one, work to give yourself options when you get to r quote unquote retirement age. Many people just don't have as many options to choose from when they turn, let's say, 64. And what that means is we're diligent, like we've mentioned a little bit more. We're diligent in savings, we're diligent in in putting a plan together and going after that. So work to give yourself some options. the other my my dad. Talked about his dad. My my grandfather was a painter by trade. My dad's thing, when he was near in retirement, he goes, My dad s retired, sat on his butt, and died. I'm not doing that. So my David Lupberger: Yeah. Yeah. Kyle: dad retired from Ford Vistian and he did, you know, medical delivery stuff. He did the bus driver thing, but he lasted about six months and then he realized I can't handle this. and then he's doing a lot of carport. car porter, like just, you know, riding around taking this car to this dealership, to that dealership. He's keeping busy. And as I've I've watched that over the last 10 years, that's been good for him. It's been very, very good for him to stay active. He's active at their church. He's active with friends and whatnot. so you can design this. And and the the other thing I would mention, and then you get the final word is this came up the last few weeks. It's been a little bit of a theme the last couple weeks is I think some of you just don't believe it's possible. You dreamers Who have been building a business from scratch and I know it's clunky and I know it's not working perfect. I think some people just don't, yeah. I'm not even gonna really put much thought into that because I know we're behind and you know, I don't even know what's possible, so I'm just gonna avoid it. You can do it, you can absolutely do it. And and you might look at me go, shut up, Kyle, you don't even know my situation. There's something to be said for you can do this if you start following some of the things that David's mentioning, and if you just have the belief of, you know what, we are going to. Design a lifestyle in retirement that we're just gonna be thrilled with. Let's dream about that and then let's get excited about that. If we're excited about a destination, it's so much easier to make the changes that are hard to make now, sacrifices to make, the the the change to make in order to make that dream happen. So you can do it, person listening to this. David, what's the final word on this topic? David Lupberger: You you'd mentioned an interesting option, which is you don't have to sell the business. All right. Create an income stream. You know, participate. And what you just said, one of the reasons I'm doing what I'm doing, because it's emotionally and intellectually engaging. All right. What remodeler? Look, they're all emotionally and intellectually engaged. All right. Our industry demands it. Well, let's just, you know, continue. Because, you know, somebody says I'm gonna well, when people say, you know, they're gonna play golf. All right, so you play golf, you know, 20 hours a week, and I'm probably being generous, that leaves about 60 hours left over. Okay. Kyle: Mm-hmm. David Lupberger: So let's really begin thinking about Exoplanning Institute, ironically, that's just another group association. They did a survey in general and they discovered over 70% of business owners regretted their sale one year later. Now that's generic businesses. Kyle: Yeah. David Lupberger: So I come back to man, this is a building plan. It's no different from what you do with your clients if you're doing design build. All right. You're really outlining what's the dream, the vision, the budget, the plan, the time. We're saying the same thing. Do the same thing. Let's design it. And guess what? Subject Kyle: Excellent. David Lupberger: to change. But it should be creative and fun. Full speed ahead. Kyle: Love it. Contractor Transition Strategies dot com or go to the show notes, click on that David Lupberger: Yes. Kyle: link. David, it was nice, it was nice catching up with you. You asked me right before we started the recording how I'm doing. I'm doing well. the you know, two kids off college age. We just sent off our our sweet piper off to college. she communicates really well though, so it hasn't been as emotional because she's checking in with us and sending us pictures and she's doing well. Calvin David Lupberger: Wow. Kyle: is a freshman. You probably it's been years since we chatted. Calvin's a freshman. He's on the marching band. He loves it. He went to a toga party, which at first we're like, buddy, this is high school. All right, we're no shenanigans, this and that. Turns out it was just a bunch of band nerds dressing up in toga, listening to music, having a good old time eating pizza. So he's doing that. And then Annie's Annie's in eighth grade and she's doing well. And Sarah's working at our church full time and doing choir directing and she really loves her job. You know what? You know what's you what's annoying about my wife's job? Is I have, and listen, Cassie's gonna keep this in. This is still part of the podcast. I I have worked quite diligently since I started my business to keep work-life balance in check. And it's David Lupberger: Yeah. Kyle: not easy. It's not easy. There's I've I've never gotten to the end of my to-do list, but I've tried to do, I've made it a priority in my life. And I can count on both of my hands the number of times that I just randomly showed up an hour later than I said I would at My wife has been working full time for a year. It happens all the time. Honey, Sarah, where are you? Didn't you say you're gonna be home at 4 30? Didn't you say you're gonna be home at 5 30? sorry, I just got I was planning this and I was planning that. She works, she's a good worker. but I thought that was kind of funny. I want 15 years of being missing it, missing getting home five times, and here you are in the first month missing it. Jeez, Pete's woman. But she's enjoying it. And I'm and I'm loving my work. David Lupberger: Well, it sounds like she's an ideal employee too. Boy. You Kyle: She has David Lupberger: got somebody like with that commitment, full speed ahead. Kyle: Yeah, yeah. But what about me, David? What about her needy husband who just wants to be around her constantly? David Lupberger: Yeah, I think we need to get you some hobbies, Kyle. Just between you and me. Kyle: I think I think I'm gonna retire. I think I'm gonna yeah, let's put a wish list together for can you help me with that? Can we do like that wish list dream thing? Okay. It's all good. David Lupberger: Thank you. I can help you with that. Yeah. Yeah. Kyle: All right. Very good. Everybody check out the pot check out David's resources. thank you so much. Good connecting again, and we'll we'll talk to everybody listening again soon. David Lupberger: Thank you, Kyle.