Well, if it’s any consolation, the same is true for business transfer agents. The value of a letting business can be assessed pretty accurately; we are rarely more than 10 per cent out, but we have a database full of enquiries from owners who will not sell until they get their ‘target price’. I must confess that I am constantly intrigued by how people arrive at their target prices but for many it is an emotional decision rather than a rational one.
Time after time, people say to me, “When I reach £250,000 per annum profit, I will be happy”, or, “If I sell for a million pounds, I will be happy”.
This applies across the whole spectrum of income. I have clients who are struggling to pay their mortgage on a modest home and I can absolutely understand how an extra X thousand pounds will have a real impact on their happiness. But at the other end of the scale, I have a client who is worth at least a hundred million pounds who is just as hungry for his 101st million as he was for his very first million. Whilst I am not a communist, I do sometimes think to myself, “What is it that really drives him and how much is enough?”
Ask yourself these questions:
- Exactly how will an extra £X per annum or £Y on the sale price make me happier?
- What will the extra money give me that I don’t have now?
- Which of my possessions that I already have gives me the greatest pleasure?
- Who do I enjoy spending time with?
- What am I most grateful for?
- What achievements am I most proud of?
- How can I live more in the moment?
- What am I most looking forward to?
- What is stopping me from being happy right now?
- How would I like to be remembered?
These are not easy questions to answer and you may need to reflect on them for some time before you can answer them but do persevere because the time that you spend on this will be well worth it.
I am intrigued by how people arrive at their target prices, but it is an emotional decision… not a rational one.
My expectation is that whilst financial targets will come into some of your answers, there will be other non-financial roles that are of equal importance and this realisation can be life-changing. So how can you use this knowledge?
Quantify your goals
Well, it might help you to quantify your financial goals and put together a plan to get from where you are now to where you want to be over a finite timescale. The difference however will be that the final number will be based on your needs rather than being just picked at random. You should also try to set some non-financial goals that you can achieve over the same period. These might include areas such as:
- Close relationships
- Fun, hobbies and adventure
- Intellectual stimulation
- Career development
- Your home environment
- Contribution to society
- Religious and spiritual matters
- Personal finances
I have been asking myself these questions recently as I will be 60 in a few months’ time so I am reassessing my own priorities.
I love my job and I don’t think that I will ever retire but as one becomes older, one’s priorities change and things that once seemed important matter less. I have just moved to a smaller house now that my children have left home and it is amazing how many possessions that once seemed essential can be sold or given away and are barely missed.
So, to all the people who are thinking of selling their businesses, I would say don’t get hung up on a magic number and don’t drive yourself mad waiting for the perfect time in the market cycle to sell because you never will. Instead, ask yourself this question. “If I sell my business now for £X, then will that be enough to allow me to start the next phase of my life?” And if the answer is “Yes”, then do it and, if not, then write out a proper plan and a timescale in which you can achieve your objectives.
Adam Walker is a business transfer agent and management consultant who has specialised in the property sector for more than twenty-five years. www.adamjwalker.co.uk