Many things in life seem to boil down to being a numbers game – including how to sell a business. Numbers are everywhere… Turnover, EBITDA, valuation range, offers, approaches, prospects and so on. Wealth Managers are understandably a go-to advisor for many considering the numbers in their life. At Entrepreneurs Hub we thrive on cultivating good relationships with Wealth Managers because we know they are extremely important in helping our clients understand the one number that can make all the difference but is often misunderstood.
Call it what you like; golden number, magic number or lifetime cashflow; it is a number that is essential for any business owner to know. It is the answer to the question – how much do you need to walk away with to live the life you want to live?
The reason it is so often misunderstood is that, firstly, it is not necessarily the same as what you want to walk away with, and secondly, it is a very complex thing to work out. If I were to ask you to take a guess at what you thought it would be, I can virtually guarantee you it would be wrong. In fact, for the majority of business owners, it is probably a lot less than you think.
Wealth Managers play an important role in helping to assess and calculate what you will need to realise from a sale to maintain the lifestyle you want to have. It can be a powerful number when it comes to negotiating a deal. Why is this? Because you will have a better understanding of what various offers mean to you.
It may also help in your decision making of how to approach a sale. For example, a significant gap between the number calculated by your Wealth Manager and your professional valuation range may result in you taking a different preparatory path. Entrepreneurs Hub regularly works with clients for many months prior to taking a company to market, so that the business can be given the injection of growth or stability it requires to meet its full potential.
So, whatever you call it, it’s a very useful number to know – but I said earlier it was complex to work out. You have to factor in a number of variables, all of which will change over time. Tax incentives, cost of living, income from investments, life events, dependents, healthcare etc… Because it is impossible to know the future, these have to be calculated with a degree of probability factored in so that you get a number that will stand up to the march of time.
As mentioned above, the best way to get a handle on this number is to speak to a trusted Wealth Manager. Once you have your number, you then need to get an idea of what your business is worth. Entrepreneurs Hub will work with your Wealth Manager to offer free, no obligation business reviews which come complete with a guide valuation range.
If you want to understand what your business could be worth and begin planning for a sale then please do get in touch and we will be delighted to meet with you.
If you are a Wealth Manager and would like to speak to us about referring one of your clients or working with us, we will be delighted to hear from you too.