If you’re a business owner, chances are you started with a dream of freedom — freedom to call your own shots, control your time, and build something meaningful. But what if the very business you’ve built to create freedom is now the biggest thing holding you back?

This is where the concept of “The Freedom Point” comes into play — a critical milestone that every entrepreneur should understand if they want to turn their business success into lasting financial independence.

What Is The Freedom Point?

The Freedom Point is the moment when the net proceeds from selling your business would generate enough wealth to support your ideal lifestyle — forever. It’s a liberating threshold where your financial future is secure, and work becomes a choice, not a necessity. Yet, many business owners unknowingly pass this point without taking action, risking everything they’ve worked so hard to build.

Think about your own journey as a business owner. When you started, your net worth may have been modest, perhaps a small retirement fund or some equity in your home. Over the years, as your business has grown, it’s likely become a significant portion of your net worth. If your business now represents the majority of your financial wealth, you could be at The Freedom Point — but by holding on, are you gambling with your financial future?

Why Holding On Is Risky

Entrepreneurs often overlook the risks of keeping their business too long. Beyond market downturns or competition, there are the 5 Ds:

1. Divorce: Shared ownership can complicate personal and financial matters.

2. Departure: Losing a key partner or team member disrupts operations.

3. Disability: A personal health issue could leave you unable to lead.

4. Death: Without a succession plan, your business’s value can plummet.

5. Disruption: External events, such as economic downturns or technological shifts, can significantly impact your business’s value.

    

Every day you hold onto your business beyond The Freedom Point, you’re risking your freedom. What happens if market conditions shift, or you face an unexpected crisis? Could you sustain your current lifestyle if the business value drops? These are hard questions, but ones every business owner must ask.

Calculating Your Freedom Point

Reaching The Freedom Point isn’t just about selling your business; it’s about knowing when the time is right. Calculating your Freedom Point is an essential process that should ideally be done comprehensively with professional advisors, given its importance to your future. However, if you want a quick back-of-a-napkin estimate to get a sense, here’s how you can calculate it:

1. Define Your Ideal Lifestyle: Start with how much annual income you’ll need to live freely. Be honest about your aspirations — whether that’s jet-setting or retiring in a quaint village in Devon.

2. Apply the 4% Rule: Multiply your annual income needs by 25. For example, if you need £200,000 per year, you’ll need a nest egg of £5 million.

3. Assess Wealth Outside Your Business: Add up all assets beyond your primary residence, like stocks, bonds, or other investments.

4. Estimate Business Sale Proceeds: Subtract taxes, legal fees, and debt from your business’s potential sale price. Combine this with your other assets to determine if you’ve hit your number.

    

If your assets exceed your target, congratulations — you’ve reached The Freedom Point.

Diversify Without Fully Exiting

Not every entrepreneur wants to ride off into the sunset. If you’re past The Freedom Point but aren’t ready to let go, there are ways to diversify without fully stepping away:

• Sell a Minority Stake: Retain control while unlocking liquidity.

• Earn-Out Agreements: Transition ownership over time while staying involved.

• Majority Recapitalisation: Sell most of your shares but keep a small stake for future upside.

   

These options allow you to reduce risk while still staying connected to your business.

The Pandemic’s Wake-Up Call

If the COVID-19 pandemic taught us anything, it’s that nothing is guaranteed. Thriving businesses can falter overnight, and many entrepreneurs are now rethinking their timelines. Surveys show that business owners are planning to sell sooner and redefining wealth as “having enough to do whatever you want.”

This shift in mindset highlights the urgency of reaching The Freedom Point. Why shoulder unnecessary risk when the life you’ve dreamed of is within reach?

Are You Ready to Take the Leap?

Selling your business isn’t just about financial gain — it’s about reclaiming your freedom and securing your future. The Freedom Point is your signpost, a clear indicator that it’s time to evaluate your next move.

So, ask yourself: Have you reached The Freedom Point? And if so, what are you waiting for?