It would be interesting to hear your specific financial goals, such as: "I would sell my startup if the net proceeds of the sale would exceed n." I'm more interested, however, in knowing what factors you considered to come up with your number.
I am asking because I run a profitable internet business that has doubled each of the last three years; our metrics indicate that we can maintain that growth rate for the foreseeable future. As with any business, there are major risks but the likelihood of them actually threatening us is relatively low; unfortunately, precisely quantifying the risks is impossible.
Since a significant chunk of my net worth is tied up in the business, I worry that a "rogue wave" could endanger our prospects. We have been approached multiple times by serious acquirers offering favorable terms and a 5x revenue multiple; so far, have I rejected their offers. We have no outside investors so the decision to sell would be entirely mine.
Since the M&A market is beginning to show signs of life again, I am considering a sale. The question is, how does one decide when to step off the train, and take a huge amount of risk off of the table? Thanks!
1. The rule of thumb I've always heard is that $2 million in the bank lets you live off the interest with a salary of $50k/year. Which is all that anyone really needs. $4 million for $100k/year, etc. These are the standard "I'm set for life" numbers, as long as you don't do silly things with your money. Which many many people do (trust fund kids, professional athletes).
2. Just because you can retire doesn't mean that you're going to retire. One of the ways I like to think about it is that an extra $50k/year from my investments can turn a $20k/year job into a $70k/year job. So now all of the sudden I can take all kinds of jobs that I wouldn't have considered doing in the past due to low salary. Plus you don't need the job, so you can walk away from stressful or unpleasant situations much more easily.
3. Personally, I think the remorse that I would feel if I had lost it all due a rogue wave would outweigh the remorse that I'd feel if I had sold the business "too early" and missed out on doubling my money.