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Price Is Not Always the Most Important When Selling Your Business

February 13, 2014

A friend just sold his business and retired.  The price he received was not a life-changing sum, but the future time he gained was priceless.

People that own a business make their livings from it while also accumulating savings for their sunset days.  Many work until they drop.  Some have foresight to leave earlier.  Some don’t contemplate ever retiring, but a health scare delivers a reminder of their mortality and then they decide that life is more than just working.  After all, the purpose of working is to make a living.  When wealth is secure, why continue working?

For some it is an identity issue, not imagining themselves separate from their business. Others never developed interests outside of their business and need to keep working, they feel, to maintain sanity and keep the juices flowing.

If you own a business and want to keep working, that’s ok for you.  However, continue reading if you want to start a new phase of your life that could last 20 or 30 years.

What you receive for the business is not important when measured against the new life being given.  Benjamin Franklin “retired” from his printing business at age 42 by selling it for half the income for 18 years.  He gave up half his income for all of his time.  Considering what he accomplished, it was a pretty good deal.

I know people that say they want to sell and retire only to keep raising their price or setting terms that are not viable for the buyer.  The serious sellers get a reasonable price and walk away.  I am often asked to negotiate or evaluate a proposal.  With rare exceptions every deal ends up within a ±20% range.  20% is a large amount and no one should be flippant about it or settle for a giveaway price, but it is not large enough to hold off starting a new phase of your life.  A phase that will be without concerns or worries about cash flow, personnel, suppliers, inventory, customers, bad debts, deliveries, competitors, bank covenants, leases, disaster planning or the credit markets.

The ±20% is pre-tax and pre-brokers commission.   The other added costs are based on the price received.  The net from the extra 20% can be further translated into the reality of about a 4% cash flow from the remaining additional amount.  That is the difference holding up a sale.  The big picture is gaining 100% of your time.  The small reduction in potential cash flow is simply not worth it.

What do you want?  Decide and then get it done – your life or an extra 4% per year on the difference.

3 Comments leave one →
  1. pweitsen permalink
    February 13, 2014 3:11 pm

    Ed consistently has the knack of hitting the sweet spot

  2. Robert Nagler permalink
    February 13, 2014 3:12 pm

    Hi Ed The most important part of selling any thing is making sure the
    buyer has the fund to pay for it

    • mortykay permalink
      February 13, 2014 4:32 pm

      Priceless articule that may influece someone life

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