Ten million dollars.
It sounds good. It’s a nice, round number. It’s a status symbol. It’s the number most owners shout out when I ask them what they want for their business.
It is also almost certainly wrong.
Most business owners treat their exit number like a lottery jackpot. They pick a figure based on ego, not on math. They pick it because it’s what their neighbor got or because it’s what they think they "deserve" after twenty years of grinding.
The market doesn’t care what you deserve.
The market cares about cash flow, risk, and math. And if your "walk away" number isn't grounded in the reality of your post-exit life, you are walking into the most important negotiation of your life with a blindfold on.
The Ego Number vs. The Real Number
Most owners confuse Enterprise Value with Net Proceeds.
They see a headline that a competitor sold for $10 million and assume they will put $10 million in the bank. They won't.
By the time the government, the lenders, the lawyers, and the brokers get their cut, that $10 million looks a lot more like $6 million.
Here is the hard truth: You don’t live on your sale price. You live on what’s left after the haircut.
If you haven’t calculated the taxes, the debt payoff, and the transaction fees, you don’t have a number. You have a wish.
The "Haircut" Calculation
Before you even think about valuation, you need to understand the gap between the check written at the closing table and the money that actually hits your personal brokerage account.
- Taxes: Depending on your jurisdiction and business structure, the taxman is taking 20% to 40%.
- Debt: The bank gets paid before you do. Every cent of business debt is deducted from your walk-away total.
- Transaction Fees: Lawyers, accountants, and brokers aren't free. Budget for 5% to 10% of the deal size.
- Working Capital Adjustments: Most deals require you to leave a certain amount of cash in the business to keep it running. That’s money you don’t take home.
If you need $5 million to retire and you sell for $5 million, you are $2 million short.
The 4% Rule: A Reality Check
What does your life actually cost?
Most owners have no idea because the business pays for half of their life. The car, the cell phone, the travel, the "business" meals: those don't disappear when you exit; they just start coming out of your personal pocket.
To find your real number, you have to use the 4% Safe Withdrawal Rate.
This is the gold standard in financial planning. It assumes you can annually withdraw 4% of your invested assets while preserving your capital over the long haul.
The Math is Simple:
- Take your annual post-exit expenses (be honest).
- Multiply that number by 25.
- That is your required invested capital.
If you need $200,000 a year to maintain your lifestyle, you need $5 million in liquid, invested assets. Not $5 million in business value. $5 million in the bank after the sale.
Black and white sketch of a simple calculator on a wooden desk next to a legal pad with "The 25x Rule" circled in bold ink.
Why Ignorance is Dangerous
If you don’t know your number, you are vulnerable.
Imagine walking into a car dealership without a budget. The salesperson will find a way to make you love a car you can’t afford, or they’ll squeeze you for every dime because they know you haven’t done the math.
Negotiating without a walk-away number is a recipe for regret.
When an offer comes in, you won't know if it’s a "Yes" or a "No." You’ll hesitate. You’ll let ego drive the conversation. Or worse, you’ll accept an offer that feels big, only to realize six months later that you can’t actually afford to stay retired.
I see this all the time. Owners sell, do the final accounting, and realize they’ve traded their primary source of income for a pile of cash that isn't big enough to support their lifestyle.
They end up back in the workforce, consulting for the person who just bought their company. It’s a tragedy of poor planning.
The Conflict of Partners
If you have partners, this problem multiplies.
I’ve sat in boardrooms where one partner thinks the walk-away number is $2 million and the other thinks it’s $10 million.
Partner A wants to travel and live a quiet life. Partner B wants a legacy and a yacht. If they haven’t aligned on their individual needs before a buyer knocks on the door, the deal will implode.
Buyers can smell internal friction from a mile away. They will use it to drive the price down or wait for the partners to start fighting so they can pick up the pieces for pennies on the dollar.
What Breaks If You Disappear?
The walk-away number isn’t just about what you need; it’s about what the business is worth without you.
If the business requires your 80-hour work weeks to generate the cash flow that supports your "number," a buyer will discount the price. They are buying an investment, not a job.
If you are the business, you don't have an asset to sell. You have a lifestyle you're trying to pawn off.
To get to your walk-away number, you often have to spend two years making yourself irrelevant. You have to build systems, empower a team, and ensure the clock keeps ticking even when you aren't there to wind it.
This is the core of what we discuss in my book, Before the Clock Decides. You have to be intentional.
The Truth-Teller’s Checklist
Stop guessing. Stop using round numbers.
If you want to exit with your dignity and your bank account intact, you need to do the following:
- Track every personal expense the business currently covers.
- Consult a tax professional to estimate your "net" from a hypothetical sale.
- Run the 4% math. Does your net proceeds number support your 25x requirement?
- Get an objective valuation. Not a "market feel," but a data-driven report.
- Set a "Floor." Determine the absolute minimum dollar amount you will accept. If the market won't pay it, you don't sell. You keep building.
Your Move
Most owners wait until they are burnt out to start thinking about their number. By then, they are desperate, and desperation is a terrible negotiating position.
Don't wait for the clock to decide for you.
Your Move: Sit down this weekend. Open a spreadsheet. List your actual annual expenses. Multiply by 25. That is your target. Now, look at your last P&L. If those two numbers don't talk to each other, it's time to get to work.
If you aren't sure where to start, work with me. We’ll strip away the ego and find the real math behind your exit.
Because at the end of the day, the only number that matters is the one that lets you sleep at night.
Mike Steward is a Broker and Partner at Before the Clock Decides. He helps business owners navigate the brutal reality of exit planning so they can leave on their own terms, not the market's.
