“We’ve had enough, we’re selling our business! It’s time to start enjoying life and doing all the things we haven’t had time to do.”
“There, we’ve finally done it. We have made up our mind and we’ve got it off our chest – the relief is enormous. Ahh, yes, the freedom, I can taste it now.”
It doesn’t matter how long you have been in business, the decision to sell is exciting as you think about the new possibilities opening in front of you.
Just one moment… I hate to put a dampener on things, but have you thought about how you are going to fund this exciting new lifestyle?
When talking to clients about this we are often met with blank looks. In the excitement of making the decision to sell and the vision of a new life, the lines between the lump of cash from the sale vs the regular income they have been receiving, get somewhat blurred.
Unless you are staying on in the business in a salaried position, you are also selling your income.
If you have built up passive income from other investments, then this may not be too much of an issue. The capital that you have from the sale of the business will be added to the pot and you are good to go.
However, many business owners don’t do this.
The income while they are in business is all sucked up in their lifestyle, whether knowingly or not. There is little thought given to what is going to happen in the gap between selling the business and the passive income kicking in.
Although you might not be thinking about selling your business right now, here are a few things to think about,
- Do you know what your business is worth in the Marketplace? This could be quite different than the figure you have in mind or what the ‘accounting valuation’ is.
- Right now, how much of your business income is going towards your lifestyle? How much of it is going towards creating passive income for the future? Think long and hard if you include your home in this calculation – you will still need somewhere to live.
- How much income will you need to enjoy the lifestyle you are planning after the business is sold?
- Is the path you are on now going to get you there?
It is better to find out the answers to these questions now, rather than when you have made you mind up to sell, otherwise you may be in for a nasty shock.
If you don’t like the answers that the exercise above reveals, here are a few things you can do about it.
- Look at your business systems, processes, marketing strategies and every other area of your business and set a timetable for improvement. Get the right people to help you with this, it may be a business coach, a marketing strategist, your accountant or whoever you need to bring on board to achieve your goal.
- Look at what you’re doing with your personal money and make changes to how you choose to spend your money. Make sure your partner is on board with the plan and that you are both in alignment with the plan to move forward. This is where we can help.
- Spend some time with a registered financial planner, so you know that once you do sell, your capital will be working for you and will last at least as long as you do.
- What other options are there to generate income? Maybe it is time for a change of direction; it may be that you take your money out of one business and invest in another.
Wherever you are in your business cycle, don’t take the option of doing nothing and adopt the ‘she’ll be right’ attitude. That ignorance may well lead to your downfall.
Get a good team around you and make the most of however long you intend to stay in your current business.