Imagine you discover that you are sitting on a winning lottery ticket that has just expired.
The jackpot would have been enough money to live the life of your dreams, but since you didn’t cash it in, the ticket is now worthless.
If you own a successful business, it can be tempting to keep building it, but when the sale of your company would fund the lifestyle of your fantasies for the rest of your life, why wouldn’t you sell?
You may reason that selling now would mean leaving money on the table, but holding on to your company is like keeping a winning lottery ticket tucked away in your drawer. And eventually, winning tickets expire in the same way most businesses will reach a peak and start to decline at some point.
Take a look at the list of Fortune 500 companies. Only 49 businesses that made the list in 1955 are still on it today. That means 451—more than 90%—have faded or disappeared completely.
How Rory Fatt Punched His Freedom Ticket
Rory Fatt started Royalty Rewards, a company that helped businesses create repeat buyers by providing incentives to their loyal customers. As Fatt described on a recent Built to Sell Radio episode, the business snowballed, reaching $2 million in annual recurring revenue in their first year and eventually hitting high seven figures at their peak.
Although he was happy with the business, he dreamed of a life where work was a choice, not an obligation.
Inspired to achieve financial freedom, Fatt documented all his expenses and what it would cost to provide his family with their dream life without worrying about money.
Once he had his number in hand, he knew what he needed to sell his business for. That’s around the time Fatt received an offer to buy his company of around four to six times EBITDA.
Could he have gotten more?
But that misses the central point. Fatt had an offer to buy his business that amounted to enough money that he would never have to work again. At that point, it was irrelevant if he left money on the table. He had a winning lottery ticket and decided to cash it in.
If you’ve built a valuable business, you should be proud of what you have accomplished. And to truly experience the wealth you have created—and to protect it—at some point, you’ll need to turn it from paper wealth into the liquid kind before it’s too late.