When You Know It's Time To Go | Inc.com

One of the biggest decisions you must make as an entrepreneur is deciding when to sell your business. Thanks to a calculation called "The Risk On Threshold," there's an easy way to figure out the right time to sell.

My guess is you're planning to sell your business in the next five or ten years. You may have decided to sell when (and if) your business hits an arbitrary size; or you may have a round number your business must be worth before you agree to sell it. Those are reasonable approaches, but you may end up hanging on to your business well past its "best before" date as a result.

The Risk On Threshold

There's another way to think about the decision of when to sell your company. I call it "The Risk On Threshold" and it is a rule of thumb that was inspired by a conversation I had with Tim Malott, a partner at San Diego-based M&A firm Shoreline Partners.

Malott told me the story of a client of his, back in 2007, who had a business he estimated to be worth $30 million. Malott figured that, through some proactive tax planning, the owner would have been able to walk away with $20 million after tax and selling expenses. Financial planners usually agree that you can live for decades on four percent of your nest egg without ever having to worry about money. Four percent of $20 million is $800,000, or $66,666 dollars a month--enough to fund a champagne and caviar lifestyle for life.

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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at info@buysellflbiz.com or 239.738.6227. Also, visit our Florida Business Exchange website at www.fbxbrokers.com and my personal website at www.buysellflbiz.com.