If you’re a business owner, selling your business might be a key part of your long-term finances. You may plan to use the sale proceeds to retire, provide greater financial freedom, or fund your next project. So, understanding how much is “enough” could be vital. 

Even if you’re not planning to exit your business any time soon, assessing how much capital you’d need to generate to secure the life you want could still be a useful exercise. Depending on your business and goals, it can take years to prepare a business for sale and you might want to take steps to improve its value beforehand. 

Assessing how much is “enough” for you isn’t about the value of the business, but rather what you need to enjoy the next stage of your life. So, answering these two questions about your lifestyle and long-term plans may be useful. 

1. When do you plan to exit your business?

When you plan to step away from your business could have a huge effect on the capital the sale needs to generate.

For instance, if you’re retiring at 55, the figure that’s “enough” could be significantly higher than if you retired when you were 65. Knowing how long the sale proceeds need to fund your lifestyle could help ensure you’re financially secure as you move on to the next chapter of your life. 

You don’t have to set a date in stone, but having an idea of when you plan to exit the business could help you make informed decisions that you update if necessary. 

2. What are your plans after you’ve left the business?

Thinking about the lifestyle you want to lead after you’ve moved on from the business may be essential too.

Perhaps you’d like to start another business and want to factor in funding your new venture when calculating how much you want to sell your current company for. Or, if you plan to work in a different role, the amount you need to be financially secure may be lower. 

Using the sale of your business to create a sustainable income 

By first setting out your lifestyle plans, you can start to calculate how much you need to be financially secure. 

Reviewing your expected expenses after you’ve exited the business could help you assess how to achieve a sustainable income. You might want to make it part of your wider financial plan too, and take into account areas like:

• The income you will receive from other sources, such as your pension or property 
• Whether your income needs will change due to inflation or other factors
• Gifting some of your wealth to loved ones
• Creating financial resilience in case you face an unexpected shock.

A financial plan could help you bring different assets together and understand your financial position. You can then calculate how much you need to sell your business to live the life you want. 

Having a clear idea about how much is “enough” could place you in a better position when it’s time to negotiate. While it may be tempting to hold out for the best possible deal, if an offer would provide you with financial security, do you want to wait for a different buyer to potentially offer more?

Comparing what’s “enough” to the value of your business 

Once you have this information, you can compare it to your business’s current value.

You might find that your business is worth “enough” to achieve your long-term plans now. If that’s the case, you might want to reassess your goals. Perhaps you didn’t think early retirement was achievable, but it’s now something you can realistically consider. 

If you find there’s a shortfall, it might be worrisome. However, understanding the gap between your needs and the value now may put you in a better position. You might choose to take steps to grow your business to reach the target figure. Alternatively, you could adjust your plans for after the sale of the business. 

Contact us to talk about your financial plan as a business owner

As a business owner, your finances might be complex. From understanding how to effectively manage your tax liability now and in the future to saving effectively for retirement, there are many areas you might want to consider. A tailored financial plan could help you get to grips with your finances to improve your wellbeing now and when you step away from the business.

Please contact us to arrange a meeting to talk about how we could help you.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Business exit strategies are not regulated by the Financial Conduct Authority. 

Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited.  08/05/2024