Long before the Great Recession, Boothbay, Maine, custom builder Steve Malcom had already positioned his company among the pre-eminent builders of high-end vacation and retirement houses in his market. That—and a couple of well-timed, multiyear projects that were large even by his company’s standards—has helped smooth what has been for many of his competitors a very rocky stretch. It has also freed Malcom to consider a future for his company that doesn’t include his full-time involvement. “I’m 59 years old,” he says, “and I’ve been toying with that subject for the last couple of years. Where I’m at right now is putting my toe in the water with people in the company to see how they might buy it from me.” The initial response was enthusiastic, he says, and if interest remains strong he will hire a consultant to determine just how much money a buyout will involve. It will be up to Malcom himself to make his potential successors understand how much commitment it will take, “just how much time it takes out of your life to own and run a company. If that’s a green light, I’ll pay to have a full-on business appraisal. That could take as much as two years to do.”
Succession planning is a major project even in normal times. The difference between Malcom and many of his industry peers is that he has the momentum necessary to support an orderly transition. With a staff of 42, his company, Knickerbocker Group, generates $12 million to $15 million in annual volume—an impressive number in this rural area—and has just expanded into Maine’s largest city, Portland. Malcom credits his young managers for initiating the move. “They’re the reason we’re opening the office in Portland. They did the legwork, they figured it out, and they made it happen.”
It’s not all roses, Malcom insists. Like everyone else, “we’ve been scrambling for jobs,” he says. “There’s been a lot of anxiousness [in clients] from day to day.” He offers as an example a major project he had scheduled to start the day after Labor Day. His client backed out the Friday before the holiday weekend. “It seems to be a very fickle world out there,” he says. Still, he adds, “We all know where the money is; it’s on the wealthy side of wealthy. And that’s a very discerning market.” By associating his company intimately with that market—through a steady flow of published projects, printed marketing materials, the company website, and social media—Malcom created the conditions that make retirement planning possible.
In today’s economy, though, Malcom represents an outlier to the general trend. “Throughout the country, we’re seeing people postponing their retirement, in every sector of the economy,” says building industry consultant Al Trellis, and his custom-builder clients are no exception. After some rough going, Trellis says, “all of my guys are stable now,” but none has escaped a significant adjustment in expectations. Over the years, “we’ve helped a lot of builders sell [their companies] to their employees,” he says. Even in the best of times, “it’s extremely hard to get equity out of their businesses.” In the current economy, the challenge is greatly magnified. Builders who planned to stay in the business but work less have felt the pinch, too, Trellis says. “They’ve all said, ‘I don’t have enough money to do that.’”
In both cases, Trellis says, “these guys are going to have to wait three to five years longer than they had planned—and work real hard. They got a delay of game penalty, whether they wanted it or not.” For builders in their late 50s or early 60s, that’s a blow, but one they can absorb, he says. “They can go three to five more years.” Those who are older will have to choose between hanging in and cutting their losses and accepting a retirement that falls short of their expectations. For both groups, the Great Recession has imposed a new timetable for retirement. “For most of them, it’s pushed it back. For a few, it’s moved it up. It either delays their retirement or accelerates it. This recession hasn’t left anything alone.”
