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Ep #24 Common Financial Readiness Issues When Considering an Exit Thumbnail

Ep #24 Common Financial Readiness Issues When Considering an Exit

Do you know how much money you need from the sale of your business to fund your lifestyle comfortably in retirement? How much is your business worth? Do you have to increase its value to help fund your next chapter?

Retirement planning for the entrepreneur is very different compared to the individual working a 9-5 as a W-2 employee. By setting up a plan, you can understand how much your business is worth compared to how much you have saved and invested outside the business, and figure out if you are on track to meet your needs and goals.

So, in this episode, Tom will be sharing how to calculate if you are on track for retirement as a business owner and the importance of not 100% depending on the sale of your business to be your one-way ticket to retirement. 



  • The biggest risk owners take when planning for retirement.
  • How to calculate if you are on track for retirement as a business owner. 
  • What mistakes should owners watch out for in planning their retirement.
  • The benefits of knowing the cost of your current lifestyle. 
  • How to plan your exit strategy around your financial needs and why it's so important


  • “Exit Strategy is simply retirement planning for the entrepreneur.” - Tom Poltersdorf  
  • “How much money do you need from your business to sustain your lifestyle in retirement?” - Tom Poltersdorf  
  • “If you were to step away from your business, how much money do you need in a bank account to live comfortably?” - Tom Poltersdorf 
  • "Don't depend on your business to be your one-way ticket to retirement." - Tom Poltersdorf



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"Hey everybody welcome back to business exit success. We are continuing our discussion on Exit Readiness and the three types of readiness issues owners face when considering stepping away from their business. Quick review the three exit readiness factors are Personal Readiness (which we just did an episode on, so if you missed it, that was episode 23 and you can find that along with the resources at beyondyourexitwm.com/podcast, the second readiness factor is Financial Readiness, which we are discussing today, and lastly is Business Readiness, which will be our next episode."

"So why are we digging into these, I want to reshare this story real quick for those who did not get to listen to episode 23 yet, but in a nutshell, I was at a networking event with other professional advisors in the exit planning space, talked to a few M&A advisors, and I found out they were turning away over 500 businesses a year who were looking to go to market and sell. They were turned away because they were not in good enough shape to go to market for a sale. Mergers & Acquisition advisors are the intermediary for the business owner who wants to buy or sell a business, that is what they do all day, every day so this really surprised me. So today we are talking about common financial readiness issues."

"As a Certified Financial Planner, I see this a lot because we dig deep into the personal and business finances of business owners. So here’s the scenario. You are running your business, and you are taking home a very comfortable solid amount of income per year from your business. Let’s say it’s 300,000 a year. Your business cash flow is great, profitable, revenue is steady and increasing."

How much would you need to retire?

"If you were to step away from the business, let's say 10 years from now, how much money would you need to have in a bank account for you to continue living your current lifestyle on 300,000 per year? If we factor in 3% inflation, if we include receiving 30,000 a year in social security income, if we assume you live to age 90 in retirement, you would need close to 4,000,000 in a bank account to support your current lifestyle. 4m dollars. Now if you have been saving and investing along the way, that number will be a little less but it’s still a huge number. And that’s only using a minuscule number for inflation at 3%, we all know it’s way higher than that. The cost of everything right now, and we are in early 2023 has increased dramatically. Statistically not just business owners but anybody in any profession, including folks making high six figures, do not save enough for their financial future."

80% of enterprise value is not tied to the business financials

"Now for us business owners, we have this one asset that we hope to one day sell. We hope to one day say I’m ready to exit and sell my business for “x” number of millions of dollars. We’re profitable, revenue has been great the last several years. We reach out to an M&A advisor to assess our business and let us know what we can potentially sell it for, and we find out they can’t take it to market, because in its current state, it isn’t worth anything. And I know what your thinking, your probably like “How can it not be worth anything”?, I’m taking home 300,000 / year, revenue is great, and we’re profitable. And the truth is, it doesn’t matter."

"That’s only a part of the overall equation to what makes a business attractive in a sale. Just because you are a profitable business, does not mean you are a sellable business. In fact, more than 80% of a company’s value is tied to the Intangible assets of the business and not the financials. And with this, we are sort of segwaying into Common Business readiness issues so I will continue more on that in the next episode but what I really want to drive home is that this is perhaps the biggest financial readiness issue, is depending on our business to be our one-way ticket to retirement."

Depending on your business to be your ticket to retirement

"If we are in our mid-60s or even 70s, and we find out the business is not attractive enough to go to market, and we haven’t saved and invested enough outside of the business to support our lifestyle, our options are as follows: We can lower our lifestyle standards and aggressively save and invest in a 401k or other type of retirement plan, implement strategies to increase the value of the business so that one day you can go back to that M&A advisor and take it to market, or a combination of both, which is usually the case."

"And if you’re telling yourself well I will just take the steps to increase the value of the business. I agree you certainly should and I help owners with that process but from my experience, it takes a ton of time, commitment, discipline, and your attention to grow value in a business. And for some people, if they're in their late 60s or 70s, they don’t want to deal with the hassle of doing it. So they sell for a drastically lower value, or they don’t sell at all, and end up liquidating the business to get as much from it as possible."

Why start exit planning early?

"This is why engaging in exit planning early, having these exit planning conversations early is soo important. You do not want to end up in the situation I just talked about. So here’s what you can do about it, go to an exit planning advisor and get an open market valuation done on your business. Understand what it’s currently worth, what are your strengths and what are your weaknesses when you look at your company from a buyer’s perspective, and when you compare that information to what you as the owner, need to live on in retirement, you now have the knowledge on how much you need to save to reach your retirement goal, you now know how much you will need to grow your business by to sell for your desired amount. You now have everything you need to build your plan for a successful transition that if done correctly, can be done on your terms and when you’re ready."


"Folks if you’re a business owner this is what we do all day every day, We do an assessment of the business, come up with a value and then compare that against what you will need in retirement to live comfortably. Usually, there is a gap and we take the steps to make sure you are saving enough and making the necessary improvements within your business to increase its value so one day you can exit when you're ready and on your terms."

"I will include a link to a retirement calculator that I really like, I have no affiliation with it but I like the visual component it has and the entry fields are super easy to understand. So check that out, plug and play with your numbers to get a general idea of where you are at. Now please be aware and make a note that there’s a lot more that goes into this, especially when you factor in real inflation numbers, taxes, if you have young kids, and saving for college, so don’t take the numbers you get as fact but I feel it’s better to start with something rather than not starting at all. The link and resources will be in the show notes and you can find that at beyondyourexitwm.com/podcast and this is episode 24."