How to Value My Business for Sale: Understanding Your Freedom Number

Sep 7, 2025
3 min read

Updated: 16 hours ago

Introduction

If you’re planning to sell your business in the next few years, there’s one crucial number you need to know: your Freedom Number. This isn’t just about revenue or profit. It’s the amount of money you need after tax to fund your ideal life after selling your business.

Without knowing your Freedom Number, you risk selling too early, undervaluing your business, or holding on for too long out of fear.

In this article, I’ll guide you through calculating your Freedom Number and using it to shape your exit plan. This way, you can retire comfortably and on your terms.

What Is a Freedom Number?

Your Freedom Number is the minimum net proceeds you need from the sale of your business to live comfortably without financial stress.

It’s based on your lifestyle goals, time horizon, and planned activities after the sale. It’s not just about what the market might pay for your company. Think of it as your personal sale target. Without it, you’re flying blind.

Why Knowing Your Freedom Number Matters

Understanding your Freedom Number offers several benefits:

Set a Clear Sale Price Target: You can reverse-engineer how to reach your target.
Avoid Underselling: Don’t sell your business for a figure that won’t sustain your lifestyle.
Decide on the Right Deal Structure: Choose between a full sale, part-exit, or earn-out.
Plan for Tax: Keep more of what you earn.

If you want to boost your business value to reach your Freedom Number faster, check out the following article: Case Study: "From 'Just Done' to Joyful Exit: How Dave Rediscovered His Freedom".

Step-by-Step: How to Calculate Your Freedom Number

Step 1: Define Your Annual Income Goal

Start by determining how much you want to live on each year after selling.

Ask yourself: “What will it cost to maintain my ideal lifestyle?” Consider including:

Household expenses
Travel, hobbies, and leisure
Healthcare costs
Big lifestyle upgrades you want

Example: You decide you need £60,000 per year.

Step 2: Choose Your Time Horizon

Decide how many years you want this income to last. It could be 20 years, 30 years, or indefinitely if you plan to invest the proceeds for ongoing returns.

Example: £60,000/year × 20 years = £1,200,000.

Step 3: Add One-Time Costs

Factor in significant expenses you want to cover after the sale, such as:

Paying off your mortgage
Funding children’s education
Relocation or property purchase

If your one-time costs total £200,000, your target rises to £1,400,000.

Step 4: Factor in Tax and Fees

Remember, the sale price isn’t what you keep. You’ll likely pay:

Capital Gains Tax (potentially reduced with Business Asset Disposal Relief)
Legal and advisory fees
Debt repayments

If you expect a 20% total deduction, you’ll need to increase your Freedom Number to cover it.

Calculation: £1,400,000 ÷ (1 – 0.20) = £1,750,000 sale price target.

Using Your Freedom Number in Exit Planning

Once you know your Freedom Number, get a current valuation to see how far you are from your target. Evo-Valuations Reports start from £299 (+VAT).

Identify Valuation Gaps: Use the “8 Levers of Business Value” to close them.
Create a 3-Year Plan: Focus on profit quality, systemisation, and risk reduction. (See Exit-Ready for a step-by-step guide to getting your business ready for sale).
Review Annually: Track your progress against your target.

You can also start shaping your post-exit future now by reading The Ultimate Post-Sale Wealth Plan: How to Keep More of What You Sell For.

Pro Tip

If you’re considering an earn-out or part-exit, your Freedom Number can be lower upfront. However, your business will need to run without you for the deal to work.