The Entrepreneur’s Freedom Number: Securing Wealth Beyond Your Business

Imagine this: You meet an investor who has a £5 million portfolio. But instead of a well-diversified mix of stocks, bonds, and property, every single pound is tied up in one stock. You’d call it reckless. Any financial adviser would tell them to diversify immediately.

Yet, most entrepreneurs make this exact mistake. Their entire net worth is locked in a single, illiquid asset: their business. They are paper rich but cash poor, sitting on a fortune they can’t easily access. Worse still, 80% of businesses that go to market don’t sell. And even if they do, the process can take years.

So here’s the uncomfortable truth: Your business is not your financial freedom plan.

What Is Your Freedom Number?

Your Freedom Number is the amount of liquid wealth you need to walk away from work permanently, should you choose to. To calculate it, follow these steps:

1. Determine Your Annual Income Requirement

   • How much do you need per year to maintain your lifestyle?

   • Let’s say it’s £300,000.

      

2. Apply the Safe Withdrawal Rate

   • Financial planners use the 4% Rule, meaning you can safely withdraw 4% of your assets annually without running out of money.

      

3. Calculate Your Freedom Number

   • Take your annual income requirement and multiply by 25.

   • £300,000 x 25 = £7.5 million.

      

If you think selling your business for £7.5 million will get you there, think again. After taxes, fees, and transaction costs, you may walk away with only £5.25 million. Doing a quick calculation on the back of a napkin is useful for getting a rough idea, but in the exit planning process, we go into thorough detail to ensure this number is robustly defined. That’s close, but still requires careful planning to ensure long-term financial security. Most entrepreneurs will only exit their business once—there are no second chances to get it right. This is why a thorough and strategic exit planning process is critical to maximising value and securing financial independence.

Why Having 90% of Your Wealth in One Asset Is Dangerous

Most business owners hold onto their company too long, believing it’s their best investment. But let’s look at the risks:

• Market Disruptions – A new competitor, a recession, or an industry shift could halve your business value overnight.

• Personal Health Issues – If something happens to you, is your business still sellable?

• M&A Reality Check – Only 20% of businesses that go to market actually sell.

   

By contrast, if you had £5 million in stocks, you could liquidate it with a click. Your business? It could take between 2-5 years to sell—if at all.

Diversification: The Smart Entrepreneur’s Strategy

Wealthy entrepreneurs don’t wait until the last minute to diversify. They use their business as a wealth creation engine, not a financial prison. Here’s how:

1. Start Extracting Liquidity Early

   • Pay yourself well. Build up cash reserves outside the business.

   • Invest in income-producing assets like property and stocks.

      

2. Strategic Wealth Allocation

   • Don’t reinvest everything back into growth.

   • Allocate some wealth into liquid, diversified investments.

      

3. Exit Planning as a Business Strategy

   • Your business should always be sale-ready.

   • Buyers pay premiums for businesses that can run without the founder.

      

The Best Time to Start Is Now

One day, you’ll want—or need—to sell your business. If you haven’t planned ahead, you may find yourself too wealthy to walk away but too tied up to cash out.

Exit planning isn’t just about selling. It’s about securing your financial future.