As a business owner, you may be trying to decide when or if to sell your company. Do you wait for it to hit a certain size? Does it need to be worth a certain amount? These are common approaches, but maybe there is a better way to determine when to hang out the “for sale” sign. Put simply, when you reach the point where you can sell your business and amass sufficient funds after the taxes are paid to live “comfortably” for the rest of your life, it is time to sell. Otherwise, prolonging the sale has no meaningful upside.
How do you know when you have reached this point? First, you must determine how much money you need to live on each year for the rest of your life. Most people overestimate this number, so try to be realistic.
You must also determine what your company is worth. There is no clear-cut formula for calculating its worth, but it is important to at least have a rough estimate of its value. You may want to hire a professional to help you with this task.
It is important to understand how much money will belong to you after the sale. Thus, you should make sure you understand your tax liability and the expenses related to the sale. Again, you should seek the assistance of a professional with this task. It may be possible to take certain steps before the sale, such as restructuring your company, to decrease your tax liability before you sell.
Once you have the full picture, you can make a smart decision on whether or not to sell your business. If you can meet your financial goals by selling now, prolonging the sale will only subject you to risk. It is important to ask yourself if there is some reason beyond simply funding your retirement that justifies holding on to the business.
If you are interested in selling your business, let us help. Call us to schedule a free consultation.