What’s your ‘Magic Number’?

January 6, 2023

A contribution from Joss Mitchell, Wealth Director at RBC Brewin Dolphin.

After many years of managing and growing your business, it has come to the point where you feel
like a change. This could be driven by your family, a lust for a new adventure, or to allow someone
else the chance to take your business onto its next stage of growth.

Whatever the drivers are for your decision, it will potentially have a huge impact on the lives of you and your family. Putting a plan in place well in advance will give you the best chance of ensuring your business exit helps you realise your aspirations. While your business is often a deeply emotive asset that you might struggle to leave, for your family it might be the moment where you can consider better schools, a holiday home overseas, the yacht you’ve always dreamed of, or that around the world trip you have always talked about.

Developing a ‘never work again fund’ is often a key priority for business owners. It is also vital to
make sure that during negotiations on the sale of your business, you know what your ‘magic
number’ is. This is the amount that could comfortably support you and your family, potentially for a very long time.

magic number


Working out your Magic Number

The starting point for working out your magic number is to consider your current financial situation and how much you are likely to need in the future, taking into account your expected expenses, income, assets and liabilities. It is then possible to work out how much your business needs to be worth to sustain either your current standard of living or your planned future lifestyle, factoring in inflation, tax rates and the occasional bump in financial markets.

A cashflow model can be hugely empowering in illustrating what your business needs to be worth so that you can retire or exit your business comfortably. There is a huge amount of structural work that needs to be considered prior to any sale, and ideally this should be done years in advance. Making sure you maximise the tax allowances available to you and your family is key.

Any protection that was provided to you via your business in the past, such as death in service
insurance, key person insurance or private medical insurance, will likely not be so in the future, so
this also needs to be considered.

A complete review of your pension situation is key prior to sale, as this might offer tax-efficient
financial planning opportunities that you haven’t taken advantage of. Owning your key assets via a
corporate structure can be hugely efficient, but once you’ve sold that, if all your assets are now in
your personal name, this isn’t so efficient.


What is it all for?

In addition to all the above factors is the key question – what is it all for?

You have worked extremely hard to create a business that you are now able to sell for a
considerable sum. However, if you and your family haven’t discussed what and how this might
change things for you all, this is the time to do so. Most SME businesses are owned and managed by families but, sadly, there are too many examples in the past of family businesses being sold and
families falling out over the proceeds.

Often, the best route is to keep things as open as possible – not just between you and your partner, but also between your children and/or grandchildren. Consider creating a family charter which allows for some governance of the family assets. It will put in place some structure for all parties to understand and will hopefully reduce the risk of breakdowns in relationships.

Perhaps most important of all is to create a ‘circle of trust’ around you all, which is populated by key advisers working together with the one aim of making your lives easier.

We spend a huge amount of time operating as a quasi ‘financial COO’ for families, helping to guide them in all aspects of their wealth. This can range from how and where to hold your money, ESG investment strategies, pensions and tax-efficient investing, and assisting in acquiring or managing your lifestyle assets (wine, property, art, etc). If we can’t help, chances are we will know someone who can.

Make sure you know what it’s all for and your magic number. If you don’t already know this, I’d be
very happy to assist you.


The values of investments can fall and you may get back less than you invested. The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

For further information, please contact Joss Mitchel via Joss.Mitchell@brewin.co.uk or call +44 (0)20 3201 3771.

quote marks icon