Editor’s Note: This is a follow-up article to “I sold my startup,” which appears in the March issue of Pest Management Professional.
If you’ve read my “Start-Up Diaries” column over the past 17 years, you know I have a talent for turning simple tasks into something akin to Geraldo Rivera opening Capone’s vault. (If you were born after 1986, you might need to look up that reference.) Building the pyramids was probably less stressful than me selling my company. It was a tear-jerkin’, sleep-losin’, hair-pullin’ ordeal that lasted nearly nine months and culminated with my employees and me clutching one another and crying in the company’s parking lot.
At the time, I wasn’t sure I wanted to sell, but I had been approached by several parties and I was curious. Stuart Aust and his talented sons required a down payment, some traveling expenses (they love Portillo’s restaurant) and broker commissions. They then started requesting information from me, including:
- Employee payroll, start dates and personal time off (PTO)
- Employee biographies
- Fleet info, including individual vehicle identification numbers (VINs), purchase dates, mileage and Blue Book Values
- Company manuals
- Profit-and-loss (P&L) statements
- Service agreements and contracts
- Insurance claims for auto, general liability and workers compensation
- Health insurance
As they began putting together a gigantic report on my company that would rival War and Peace, they also started sending out feelers to companies, gauging interest. They warned me against making large purchases because I would be responsible for any debt, especially truck loans.
The courtship process
There were several companies interested in purchasing Schopen Pest Solutions but, just like “The Bachelor,” three finalists emerged to take me out for dinner. As you know, OPC Pest Services, a subsidiary of Rollins Inc., got the final rose.
Before I was tendered an offer, I held a few virtual and in-person meetings with the Rollins team. The in-person chats were my chance to brag about my company and how we do things at Schopen Pest Solutions. I wanted to make sure that my incredible employees would be taken care of without fear of losing their jobs. My meetings with the Rollins leadership team made me feel comfortable enough to continue into the negotiations stage.
Getting attorneys involved
At this point, I needed to find lawyers — one to handle the contracts and a second to help me with taxes. I selected West Palm Beach, Fla.-based Mark Ruff to work on my contract with Rollins. My tax lawyer was Rodney Piercey, based in Barrington, Ill. He set up our charitable trust (see “How to set up a charitable trust,” at right).
Because it was an asset-based purchase, I supplied The Aust Group with an extensive inventory list. I gave value to everything: chemicals, sprayers, uniforms, chairs, computers, paper clips, ketchup packets, etc. You name it, I counted it.
Next were the vehicles. I owned some of the trucks, but I had nearly $420,000 in loans on the rest of the fleet. The good news is that I had more than $650,000 in value for the vehicles.
Finalizing the deal
Finally, we had to choose a closing date. We selected March 6. The Rollins representatives started booking hotel rooms and flights while I started working on my exit speech. The plan was to get all my employees inside our conference room for a quick meeting. We had so many people at the branch office that our overflow parking took over the restaurant next door.
After I told my stunned workers I was selling my business, I tried sneaking out, but I tripped over a chair and literally ran to the parking lot to drive away. Unfortunately, I left my car keys inside the office.
As I was attempting to go back inside to find my keys, the restaurant owner walked over and begged me to tell my employees to move their vehicles. I turned to my poor wife, who was trying to console me, and started to ask her to go find my keys when I noticed all my employees flooding out into the parking lot. They were flocking to us crying and hugging me. It was both awesome and heartbreaking at the same time.
Since then, as I write this in early May, things have settled down. I had one-on-one meetings with a few of my staff who were upset about my decision to leave the team completely after Oct. 31.
The Rollins people have been nice and professional. As expected, they started implementing changes quickly. Some were necessary, such as healthcare, 401(k), bills, deposits, etc. Still, I was surprised by how quickly the transition occurred, and how fast many responsibilities were assigned to the Rollins team. Within a few weeks, things changed for me. Rollins began reorganizing while sharing some of its best practices with our team members. This was challenging for us, but understandable to align the businesses.
Selling my company taught me a lot about business. It showed me my strengths and weaknesses. I feel I could be a better owner now, but since I no longer have a company, I will use this knowledge to help other companies grow through my new company, RV There Yet Pest Consulting. I thank my accountant, Ron Jarvis; my lawyers Mark Ruff and Rodney Piercey; The Aust Group; and Rollins Inc. for financially changing my life forever.
Finally, thank you to PMP magazine and readers like you for following Schopen Pest Solutions from start to finish.
How to set up a charitable trust
Having a charitable trust in place before I sold the company saved me a lot of tax dollars up front and allowed me to invest my money before being penalized with capital gains tax. It is a complicated endeavor and could be an article on its own, but here are the basics:
- Working with my lawyer, I had to name a charity. Mine is Zion Lutheran Church.
- Eventually, I will need to donate at least 10 percent of the money to the charity.
- All the money paid to me for the assets of my company are put into the trust, tax-free.
- I can draw out up to 11.16 percent of the charitable trust per year. I was able to choose the frequency of the withdrawals, and I chose quarterly.
- As the money is extracted, it is taxed, but with a 40 percent deduction because of the charity.
- While the money is in the trust, I can invest it how I see fit. The great folks at Cornerstone National Bank & Trust Co. in Palatine, Ill., are investing the money for me.
- In 20 years, all the money will be drawn out of the trust and the charity will receive its percentage. Bonus: While the trust is growing because of the interest, the charity’s donation is growing, too.
- Patience is a must with this process. I won’t see the full benefit for two decades, but the money I will save, even after lawyer and administrative fees, far surpasses the millions of dollars I would have lost to state and federal taxes.