The process of selling your business is full of numbers… Turnover, EBITDA, valuation range, offers, approaches, prospects and so on. Among all these, there is one number that is crucial to understand but is often misunderstood.
Some call it a golden number, some refer to a magic number and others to lifetime cashflow – there are probably many other names that I haven’t mentioned. But whatever you call it, it amounts to the same thing. 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 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 you, it may actually be less than you thought.
Now it’s worth mentioning at this point that just because you have a golden, magic, lifetime number doesn’t mean you settle for less when you are negotiating. But what it does mean is that you have a better understanding of what various offers mean to you. This is how it works:
You want to sell your business. You have set in your mind that you would not accept less than £4m as you have a lot of plans post sale. But you don’t really know what you need. So, to find out, you engage a trusted wealth adviser to take you through a process and calculate what your minimum number is. You expected the number to be around £4m and you are pleasantly surprised when it turns out to be only a little over £3.25m. You then get a valuation range from an adviser like the Entrepreneurs Hub. They tell you that, providing you use a proactive process, bring multiple interested parties to the table, and don’t put a price on your business they would expect to see offers from potential buyers for your business between £4m – £6m. Knowing that this is well above your “number” and now is good time to sell, you can be confident in starting the process of marketing your business for sale.
So, whatever you call it, it’s a very useful number to know – but I said earlier it’s complex to work out and here’s why. 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 future events.
As mentioned above, the best way to get a handle on this number is to speak to a trustworthy wealth adviser. At Entrepreneurs Hub we have developed key relationships with wealth advisers whose record stands for itself and we are always keen to make introductions at the appropriate time.
But if you are wondering where to start, then I would suggest getting an idea of what your business is worth. Entrepreneurs Hub offer free, no obligation business reviews which come complete with a guide valuation range. Of course, the business is worth what someone is prepared to pay for it, so we have an uncompromising approach to ensure we find the right acquirer for you.
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 would be delighted to meet with you.
Alternatively, there is a lot of value to be had from attending one of our confidential online webinars (no name tags, no microphones) – click here for more details.