The first step is to figure out whether you can live off the profits of your sale. If your business is valuable enough to set you up for life, sell as soon as possible. If you don’t, market volatility or bad luck could later cause your business to decline in value, depriving you of the chance to retire in luxury.
Start by determining how much money you’ll need per year to maintain your lifestyle. This isn’t the same as the amount of money you currently spend. As a business owner, you must pay to entertain clients and host corporate events. Once you subtract these costs, your lifestyle will be significantly cheaper.
The next step is to figure out how much money you can make by selling your company. Start by calculating your company’s value, and then subtract the taxes you’ll have to pay to sell the company, fees you’ll have to pay to a corporate sales broker, and all other costs of selling. The remaining number will be the rough amount of money you will make from the sale.
Finally, multiply your net earnings by 0.04. This will give you a rough estimate of the interest you can make each year. If selling your company will net you $20 million, for example, you can expect to earn $800,000 a year from the proceeds. If you will spend less than $800,000 a year, now is the time to sell.
Even if you won’t earn enough money from selling your company alone to maintain your lifestyle, selling may still be a wise choice if you think you can make up the difference through other sources of income. As a successful business owner, you’ll be in high-demand for part-time consulting jobs and lucrative public speaking gigs. You may also scale back your lifestyle and/or sell other assets to make ends meet. Whether you choose to do this or continue trying to grow your company should depend on the following factors:
Sunbelt Business Brokers is committed to maximizing sales prices and minimizing costs for business owners who are ready to let go. Whatever your company’s size or specialty, Sunbelt will get you the price you deserve.