Most business owners will, to some degree or another, be interested in the value of their business.

Some are obsessed with the numbers and focus all decisions on increasing profits; for some the value is based merely on the outcome of their activities – but they still keep an eye on the numbers; some pretend they don’t care at all, but take great interest when a similar business sells.

One of the principles of coaching is that there needs to be a goal – how will you know if a coaching session has been successful? Often the ultimate goal for the business owner is to sell the business. But how much for? And is selling actually the best option?

How Much Do You Need To Sell Your Business For?

As well as being a business coach, I also run a financial planning practice called Ovation Finance. We deal constantly in personal objectives, and so often find that they are intrinsically linked with business objectives.

A focus on selling a business in five years’ time (have you ever noticed it is almost always five years?!) will result in different business decisions to someone who wants to be bought out by their management team.

One question we often seek to answer, therefore, is not how much a business is worth, but how much the owner needs it to be worth to give them the life they want.

The process goes a bit like this:

What does life look like after the sale?

How much income will you need to fund that life?

How much do you therefore need to get for the business?

To Sell or Not To Sell?

If you were to sell your business, think about what you would do afterwards. Without a plan, you might end up sat at home with a lump of cash in the bank, a bit bored.

Perhaps you’d invest the money for income. Maybe you would want to use your skills, to give something back and keep yourself busy.

Investing in a small business could achieve both objectives. And, if you’re going to be involved, it would stand the best chance if it was something you had experience in.

In which case, why sell the business at all?

A Sense of Purpose

I used to work for a company called Smith and Jones (names changed, if you hadn’t guessed already!). Mr Jones was Chairman, in his late 60s, and still the major shareholder. The other directors were sniffing around, trying to get him to sell his shares.

I asked a colleague why Mr Jones didn’t retire. She replied “Because right now he’s Mr Jones, Chairman of Smith and Jones. After he retires, he’ll just be Mr Jones.”

Having a sense of purpose is very important for our wellbeing. Working out what you want to do in your business, as well your personal life, is crucial for helping to construct a business you enjoy working in – and may therefore never want to sell.

Income

We need income to live on. Some cash is handy, to repay the mortgage and maybe other debts, perhaps buy a luxury or two and possibly travel. But cash above that tends to be invested to provide an income.

Perhaps the focus of the business planning should therefore be how to make the business last forever so that it can always provide you with an income, plus release as much cash as you need.

Enjoy Your Role

Why not focus your role in the business on making sure that you enjoy what you spend your day doing. Are you performing only the tasks you enjoy? Could you take a month off work, right now, and the business sail smoothly along in your absence?

What about your staff? Do you have the right people in the right roles? Are they doing what they enjoy?

In Conclusion

This article raises a lot of questions and few answers.

That is because the answers will be different for each individual. Coaching helps you work out what the answers are for you, and the business plan will then follow.

The old Chinese proverb says that every long journey starts with a small step. But in which direction?

Chris Budd is a Quiver Management coach, MD of Ovation Finance Ltd and author of The Financial Wellbeing Book and podcast series.