Cindy (not her real name) has a good thing going. Her business is growing at a steady pace, and she’s been able to pocket around $500,000 a year the past several years. We sat down recently to discuss her interest in selling. “我刚当了祖母. My daughter and her husband are going to need more of my time than I can give if I’m still running the company. I’d like to sell it now and live off the proceeds.”
Cindy’s husband had prepared a financial forecast for the business, which included his estimate of value at $13 million. It would take a whole other blog to explain why his estimate was wrong. Suffice it to say, his expectation was high by about $10 million. Yes, I said high by $10 million.
Expecting to retire on $13 million when your business is worth $3 million is a very disappointing place to be. 现在, 别误会我, $3 million is a lot of money, I know many business owners who’d love to sell their business for that much. But for Cindy and her husband, $3 million is well below their expectation, and simply not enough to retire on. Once they pay taxes on the $3 million, they’ll have about $2.25 million to fund their retirement. On a conservative after-tax basis, that means they’d have about $80,000 per year to live on. But Cindy has been used to making $500,000 a year. She acknowledged she could reduce her spending levels somewhat, but not from $500,000 to $80,000. I watched as she turned to her husband and said, “We can’t afford to sell the business.” The sense of disappointment was palpable.
I’ve seen many situations like this. The owner has an unrealistic sense of the business’s value, causing them to make bad assumptions about their retirement. This problem is a result of the owner not knowing how their business is valued, while assuming that selling the business will fuel their retirement. This can be summed up as lack of planning and/or planning without professional guidance.
I do not think Cindy and her husband have the energy to take the business to the next level. 坦率地说, what has to be done to move the $3 million valuation even closer to $13 million might not be doable given her new personal commitments. 他们被困.
In my perfect world, every owner would value their business once a year. Being realistic about what you have and what it can generate after you sell it would eliminate a situation like Cindy’s when the owner is surprised to learn that they literally cannot afford to sell. Being attached to your business because you can’t afford to sell it is like being attached to a dialysis machine, you cannot afford to be away from it.
JIM CUMBEE is President of 田纳西河谷集团, Inc. a retainer-based business brokerage and transition mediation firm 在富兰克林,TN. Cumbee is an attorney and has an MBA from Harvard Business School. 吉姆是这本书的作者 韦德体育app官网 Run, A Pro’s Guide to Selling a Business. http://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 . He has a wide range of corporate 和企业家ial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, 但是故事, names and fact patterns are changed to preserve the parties’ identities.