Setting Financial Goals: A Blueprint for Entrepreneurs Selling Their Businesses

Clarifying Financial Goals

Before embarking on the selling process, entrepreneurs should take the time to clarify their financial goals and objectives. Here's a step-by-step plan to help streamline this process:

1. Assess Current Financial Position: Begin by assessing your current financial situation, including business assets, liabilities, and personal savings. Understanding where you stand financially provides a baseline for setting goals.
2. Define Desired Outcome: Clearly articulate your desired financial outcome from selling the business. This may include a target sale price, desired net proceeds, or specific financial milestones you hope to achieve.
3. Consider Lifestyle Needs: Consider your lifestyle needs and preferences post-sale. Do you plan to retire comfortably, start a new venture, or pursue other interests? Your financial goals should align with your desired lifestyle.
4. Evaluate Risk Tolerance: Evaluate your risk tolerance and investment preferences. Are you comfortable with conservative investments, or are you willing to take on more risk for potentially higher returns? Understanding your risk profile helps shape your financial strategy.
5. Consult Financial Advisors: Seek guidance from financial advisors, accountants, or wealth managers who specialize in business sales and wealth management. They can provide valuable insights and help tailor a financial plan to your specific circumstances.

Determining Personal Financial Needs Post-Sale

Once you've clarified your financial goals for selling your business, the next step is to determine your personal financial needs post-sale. Here's how to approach this:



1. Calculate Living Expenses: Estimate your annual living expenses post-sale, taking account of factors such as housing, healthcare, travel, and leisure activities. Be thorough and realistic in your calculations.
2. Factor in Inflation and Longevity: Account for inflation and potential longevity in your financial planning. Ensure that your financial resources can sustain your lifestyle comfortably for the rest of your life and potentially beyond.
3. Consider Tax Implications: Understand the tax implications of selling your business and how they may impact your net proceeds. Consult with tax professionals to optimize your tax strategy and minimize tax liabilities.
4. Plan for Contingencies: Plan for unexpected expenses or emergencies by setting aside a contingency fund. Having a financial buffer provides peace of mind and protects against unforeseen circumstances.
5. Review Estate Planning: Review your estate planning documents, including wills, trusts, and beneficiary designations, to ensure they align with your post-sale financial goals and objectives. With the passage of time, certain legislative changes can affect previous estate planning, so review with the corresponding attorney is crucial.

Conclusion



Setting clear financial goals is essential for entrepreneurs selling their businesses. By clarifying their financial objectives and determining their personal financial needs post-sale, entrepreneurs can ensure a smooth transition and secure their financial future. By following the steps outlined in this article and seeking guidance from financial professionals, entrepreneurs can navigate the selling process with confidence and peace of mind. Remember, selling a business is not just about maximizing profit; it's about achieving financial security and fulfilling your long-term financial goals.

For the past 20 years, CFO Network has been helping business owners achieve their goals – including preparing to sell or pass down their business. Our combined 500+ years of experience can help ensure a profitable conclusion to your most complex business issues – including a sale.