We know our business needs to be ready, but how do we align our personal financial needs with the company's actual valuation five years before we sell? How do we calculate our net proceed targets so we do not end up with seller remorse?

Question

Tyler Smith · Accepted Answer

Many business owners make the mistake of preparing their company for a sale without ever calculating what they actually need to fund their next chapter. This oversight often leads to severe seller remorse when they realize the net proceeds after taxes and fees cannot support their post-exit lifestyle. To prevent this, you must determine your wealth gap five years before your target exit date. Start by working with a qualified wealth advisor to calculate your post-exit annual income requirements. Once you have this target, reverse-engineer the net cash proceeds required to generate that income. Next, work backward to determine the gross enterprise value your business must achieve. You must account for state and federal taxes, investment banking fees, legal costs, debt payoffs, and working capital adjustments at closing. If your current business valuation is lower than this required number, you have a wealth gap. This gap becomes the primary driver of your business strategy. Bring this target into your V/TO as your five-year or three-year picture. By aligning your operational Rocks and growth strategies with the specific valuation needed to bridge your wealth gap, you ensure that when you finally exit, your financial security is completely locked in.