The Freedom Point
Jul 31, 2025
Are You Financially Ready to Sell?
Many entrepreneurs reach a point in their business when they start looking into their options of selling. The sale of a healthy company has the possibility to generate enough income to fund the rest of your life. This is called the Freedom Point.
In a recent conversation with a client, I heard about another small business owner, Steven, who thought he was on solid ground when considering a potential sale.
Why wouldn’t he?
He’s a successful owner generating $10M in revenue with a healthy EBITDA margin of over 25%. He’s built a thriving operation, maintains a comfortable lifestyle, and has $1.5M in personal savings with modest debt — $200K in the business and a $500K mortgage.
On the surface, Steven seems like he’s in a strong financial position, but is he financially prepared to sell?
But after completing the Freedom Score assessment, he learned personal financial readiness is more than just impressive EBITDA.
Let’s break down why, we might not be as financially prepared for a sale as we think, despite solid business metrics:
1. Dependence on Your Business for Lifestyle Income
A key metric in the Freedom Score is Lifestyle Freedom — the ability to sustain your current standard of living without your business. Even with healthy savings, if you’re drawing most of your income from business profits, a sale will significantly alter your financial picture.
Let’s assume your current lifestyle requires $250K annually. To replicate that through passive income at a 4% withdrawal rate, you would need an investment portfolio of $6.25M. Your existing savings plus potential proceeds from a sale might fall short — especially after taxes, fees, and debt payoff.
2. Overestimating Net Proceeds from the Sale
A business generating $2.5M+ in EBITDA is attractive, but valuation depends on multiple factors: industry trends, customer concentration, recurring revenue, owner dependence, etc. If your company sells at a 5x multiple, that’s a $12.5M valuation. But you won’t walk away with all of it:
- Subtract $200K in business debt
- Deduct taxes (often 20–30%+ depending on structure)
- Consider broker fees and closing costs
- Your take-home might be closer to $8–9M, or less
And from that, you'll likely need to pay off your $500K mortgage (unless you can sustain it with other assets). Suddenly, your net investable assets are much lower than expected.
3. Illiquidity of Business Value Until a Sale Happens
Until the business sells, most of your net worth is tied up in an illiquid asset. If a personal emergency or retirement need arises before the right buyer comes along, you may face a liquidity crisis. The Freedom Score flags this as a significant risk — especially for owners whose wealth is overly concentrated in their business.
4. Lack of a Clear Transition Plan
You may also lack Time Freedom — the ability to step away from daily operations without impacting business performance. If you’re central to sales, operations, or customer relationships, buyers may discount the business or require lengthy earn-outs, delaying your financial freedom.
The Wrap Up
The Value Builder Freedom Score offers an honest reflection: wealth on paper doesn’t always equal financial independence. Even with impressive business performance, your personal financial plan must be airtight to confidently exit. We can help assess your Freedom Score and develop a roadmap that bridges the gap between today’s success and tomorrow’s security.
Are you ready to reach your Freedom Point? Complete your own Freedom Score report and take the guesswork out of your future.
TAKE THE ASSESSMENT
If you're an owner looking to build more value in your business before a sale, check out our blog on exit strategy for insight into some of the first steps you can take to prep for a sale.
If you'd like to connect about your business, I welcome you to book a call to discuss what tools might be right for you.
Preston True
Preston True is the founder of Get TPA Fit, a rapidly growing business coaching and value-building firm. Based in Detroit, Michigan, TPA has worked with hundreds of entrepreneurs and leadership teams on day-to-day problem solving, business culture and long range vision, so they ultimately learn how to delete chaos, earn more and build value.
