Selling your business is one of the biggest financial and personal decisions you can make. Years of hard work turning your dreams into reality are tied up in a single transaction, so it can be easy to focus too much on the business valuation and ensuring you receive the highest possible offer.
However, a successful sale doesn’t always have to mean securing the biggest number. Instead, it’s about understanding what you need from the sale to support the life you want afterwards.
For some, that may mean funding an exciting retirement or helping their children onto the property ladder. For others, it may involve philanthropy or even investing in new businesses. Essentially, it’s about determining what “enough” looks like for you, which is sometimes known as finding “your number”.
An independent financial planner can work with you to map out your goals, project the wealth you’ll need to achieve them, and show how different sale values may affect your ability to reach your target.
Read on to find out how you can determine what’s enough for you, and why it’s important to do this and other financial planning before a business sale.
A successful sale doesn’t always have to mean securing the biggest number.
Understanding “your number” is key to valuing your business
“Your number” is the amount of money you need to support your long-term goals and is the point at which work becomes optional rather than essential. In short, it’s the figure you would need to achieve financial independence and feel confident about what comes next.
Understanding your number is critical to selling your business, as it’s key to determining a valuation that serves your long-term plans and goals.
You may focus on maximising value during a sale. However, the value alone doesn’t tell you whether the sale will achieve your wider financial goals. A certain figure may be more than enough for one business owner and nowhere near sufficient for another.
Similarly, if you look for the highest offer at all costs, you may end up taking unnecessary risks, accepting an unfavourable deal structure, or delaying a sale that already achieves everything you need.
Understanding your number allows you to evaluate opportunities based on whether the sale will deliver the future you want. Once you know an offer is enough for you, you can focus more on the buyer’s cultural fit or the business’s future, rather than simply looking for the highest offer.
To find your number, you need to consider factors such as your:
- Lifestyle expectations
- Retirement plans
- Income needs
- Family commitments and dependants
- Estate planning goals
- Existing wealth and assets
- Risk profile
An independent financial planner can help you build realistic targets around these factors. They can use cashflow modelling to project how your financial needs may evolve under certain market and economic conditions, as well as changes in your personal life, and they can ensure these factors are also included in your plan.
It’s important to plan before the sale
A common mistake many people make is waiting until a deal is close to completion before considering financial planning. By that stage, many opportunities may have already passed.
Early planning is key because the period before a sale often presents opportunities to improve tax efficiency and better align things with your wider goals.
There are several areas where early planning can make a meaningful difference, including:
- Estate planning – Assets held within a business may qualify for Inheritance Tax (IHT) reliefs, such as Business Relief. Following a sale, those assets may no longer benefit from the same allowances and exemptions.
- Pension contributions – The period leading up to a sale may be a good time to explore making pension contributions to help efficiently extract value from the business while boosting your long-term retirement prospects.
- Business Asset Disposal Relief (BADR) – BADR can significantly reduce the rate of Capital Gains Tax (CGT) you may pay on a business sale.
- Gifting and trusts – You might want to transfer wealth to your family members as part of the exit process. Trusts and gifting strategies can help you achieve this efficiently, but you often need to implement these arrangements before a transaction completes.
- Timing of the sale – The timing of a transaction can have significant financial implications. Tax years, changes in legislation, business performance, and market conditions may all influence the eventual outcome. A rushed sale can result in missed opportunities that may have been available with earlier preparation.
- CGT and spousal transfers – In some cases, transferring assets between spouses before a sale can help you to make full use of the available allowances and improve your overall tax efficiency. However, this requires careful planning before the transaction takes place.
You may agree on a sale worth a certain amount, which might even align with your number. However, the amount you retain after all the factors above are considered can be significantly different.
It can help to work with an independent financial planner to understand how much the sale will leave you with, so you can make informed decisions based on the real outcome rather than the headline value.
Planning and understanding what’s enough before a sale helps support your life after
The period after a business sale can be surprisingly challenging for both financial and emotional reasons, and many business owners find it’s a bigger transition than they expected.
You may find it difficult to move away from the routine, structure, and purpose that your business provided, and you’re likely to have a considerable sum of money for which it’s important to have a plan.
Knowing what “enough” looks like before the sale can help ease some of these challenges.
Instead of worrying about whether the transaction was sufficient, you can focus on the opportunities the sale creates and the goals you want to pursue next. More importantly, you can move forward knowing the sale formed part of a financial plan designed to support your long-term security and future dreams.
However, the planning doesn’t stop once the deal completes. Ensuring the proceeds continue to grow, your income remains sustainable, and your wealth is protected for future generations requires ongoing management and advice. So, it’s important to work with an independent financial planner after the sale is finalised.
Get in touch
The most successful business exits are rarely just about securing the highest price. They’re about understanding what you need from the sale, planning early, and ensuring the transaction supports the life you want afterwards.
An Amber River financial planner can support you at every step of that process. To set up an initial appointment, call 0800 915 0000, or alternatively, use our contact form here.
This is important:
We’ve written this article purely for general educational purposes. It’s not investment advice, or an invitation or inducement for you to invest your money. The information in the article can go out of date over time too – thanks to law and tax rule changes.
Your situation will be unique to you, and that’s why you should always seek personalised advice from a qualified financial adviser before taking any action.
