3 Numbers Every Founder Should Know Before an Offer Shows Up

Paolo Quiroga |

Because "Is this a good offer?" has no answer until you know what you need.

Here's something I see all the time.

A founder spends 15, 20, sometimes 30 years building a company. Then one day an offer shows up. Maybe it's a private equity firm. Maybe a competitor. Maybe a broker who "has a buyer."

And the first thing the founder asks is: "Is this a good offer?"

Fair question. But my answer is always another question: Good compared to what?

Most owners can't answer that. It isn't because they aren't smart. Some of the sharpest people I know are founders. It's because they've never sat down and figured out what they actually need. They've been too busy running the business.

So let's talk about finding your number before someone else puts one in front of you.

If you haven't done this yet, you're in good company

The research backs up what I see in my own conversations:

 

  • 70% of owners who recently sold spent less than two years preparing, and 81% wish they'd spent more time on it.
  • 48% of owners want to exit within the next five years, yet only 49% have written down their personal goals.

 

So about half of owners want out soon, and about half haven't written down what "out" is supposed to look like.

I get why. The business has always been the plan. You're busy putting out fires. You've heard a friend sold for "8x" and that number stuck in your head. And putting a number on "enough" can feel like writing the last chapter.

It isn't. It's what gives you choices.

The three numbers every founder should know

You don't need a 40-page plan to start. You need three numbers.

1. Your freedom number. What does life after the sale actually cost? Not a guess. Think about a real year: where you live, how you travel, what you give, who you support. Then ask how much it takes to fund that for the rest of your life.

2. Your deal number. This is what a sale needs to put in your pocket to fund your freedom number, alongside what you already own outside the business. Notice I said "put in your pocket," not "sell for." The headline price isn't what you keep. Taxes, fees, debt payoff, and money held back for escrow or tied to an earnout all come out first.

3. The gap. The difference between what your business could sell for today and your deal number. If there's a gap, that's not bad news. That's the most useful thing you can learn, because now you know what the next one to five years are for.

What changes when you know your number

A number turns a feeling into a decision. Here's what it changes:

 

  • How you read an offer. You stop reacting to the headline and start asking, "What do I actually walk away with, and when?"
  • How you weigh the deal structure. Cash at closing, an earnout, rolling equity into the buyer's company. Each one carries different risk. If cash at closing already gets you to your number, you can afford to take a chance on the rest. If it doesn't, you'll look at that earnout very differently.
  • Your walk-away point. It's a lot easier to negotiate calmly when you know the number below which you won't sell.
  • Your timing. Sometimes the math says you're ready now. Sometimes it says two more years of building value makes a real difference.
  • Whether to sell at all. For some founders, the answer turns out to be selling part of the business, stepping back, or not selling yet. That's a perfectly good outcome too.

 

What founders tend to forget about life after

When owners build their freedom number, these are the things I see left out most often:

 

  • What the business pays for today. Your car, your phone, your travel, sometimes family members on payroll. After the sale, that all comes out of your own pocket.
  • Health insurance. If you're not at Medicare age yet, this one surprises people.
  • Family. Helping kids with school, a first home, or aging parents.
  • Giving. Many founders want to be more generous once they have the time.
  • Your next thing. Very few founders sit still. Maybe you'll invest in other businesses, start something new, or mentor. That costs money too.
  • A longer runway than you think. Selling at 55 could mean funding 30-plus years of life.

 

And the one no spreadsheet captures: who you are when you're no longer "the owner." That deserves its own article. For now, just know the money question and the identity question are connected. Getting clear on one makes the other easier.

Five questions to answer before your first buyer conversation

Grab a notepad. Give yourself an hour, without your phone.

 

  1. What does a normal year look like after the sale, and what does it cost?
  2. What does the business pay for today that I'd now be paying for myself?
  3. What do I own outside the business?
  4. What would a sale need to put in my pocket, after everything comes out, to make that life work?
  5. If an offer came tomorrow, what would make me say yes, and what would make me walk away?

 

You don't need perfect answers. You just need something to measure against. Then when someone asks, "Is this a good offer?" you'll already know the answer.

If you've never put a number on "enough," that's the conversation worth having before the first one with a buyer. If it would help to talk it through, send me a message. I’m always happy to compare notes.

 

This article is for educational purposes only and isn't tax, legal, or investment advice. Every situation is different, so talk with your own advisors before making decisions about selling your business.

1 https://www.ubs.com/global/en/media/display-page-ndp/en-20230720-ubs-investor-watch.html

2 https://blog.exit-planning-institute.org/a-decade-of-development