With all the hullabaloo (admittedly a lot of it from me) about the need to create recurring monthly revenue (RMR) to build value for your business for a potential exit strategy, you’d think you were a total loser if you didn’t have regular monthly contractual income.
But what if an RMR style business is just not feasible for your small integration company? Yes, there is still a way … a conventional way to retire with regular income.
First, let me back up. No, you are not a loser if you don’t have RMR. Many one-, two- and three-person CE pro shops have concluded that they do not have the ability to service their existing accounts with a guaranteed response time commitment without disrupting their business model. Plain and simple … it's not worth the risk to try it. I respect that decision, so there is no need for an inferiority complex.
Recently, I met with a long-time CE pro reader (who wishes to remain anonymous) here in New England who is a perfect example of finding another solution for an exit strategy. His business is a combination electrical/low-voltage integration company. He has two guys that work for him. His sweet spot is doing commercial wiring, but especially during the rough New England winters, he does a lot of residential service work … electrical panel replacement, rewiring for roof ice-melting systems, etc.
In the past few years, he has started installing audio and video, cutting in for in-ceiling and in-wall speakers, mounting flat panels, setting up wireless home networks, etc. He is very excited about the momentum for that portion of his company. But when I asked him if he was building any RMR, the flat answer was “No.”
“That would disrupt my entire business model. Plus, I don’t have the manpower to do that,” he told me bluntly.
But he still has a plan for building an RMR exit strategy for himself and his family: Real estate.
You see, instead of trying to recreate the wheel in his smooth-running business to inject RMR, his plan is to invest his profits into multi-family condos as rentals. To date, he has purchased two duplexes and one triplex. Each unit yields a monthly income more than enough to pay the mortgage. With aggressive 15-year loans in place, his goal is to have the units owned free and clear in the next decade or so. In total, the units currently generate about $18,000 per month in revenue. Down the road, he will also have sellable real estate assets that will easily generate enough money for eventual retirement.
So, in essence, he understands the RMR game very well, but instead of building it in his business, he is building it elsewhere.
He has a solid plan in place and he is certainly far from being labeled a loser.
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