How Retaining Equity When You Sell Your Business Can Make You More Money

You Don't Have to Sell All of It.

Most people who sell a business leave money on the table. Not because they negotiated badly. Because they sold everything at once when the most valuable thing they owned was what the business was about to become.

When I sold my GC business I did not sell all of it. I retained 20 percent. Not forever, for 24 months. The specific window during which the development projects already in motion would complete, the value they created would be realized, and the business would be worth meaningfully more than it was on the day I signed the paperwork.

At the end of those 24 months I was bought out at the new valuation. Not the valuation on the day I sold. The valuation after the work we had already started was finished and on the books.

That retained 20 percent was worth more at buyout than it would have been if I had sold it at closing. Significantly more. Because the business I had spent years building did not stop growing the day I handed over the keys. The pipeline I had built, the projects I had started, the relationships I had developed, those did not evaporate. They completed. And I was still a shareholder when they did.

This is not complicated. It is just not the default conversation that happens when someone is selling a business and the buyer is motivated to close. The default conversation is about the purchase price. What you are worth today. What they are willing to pay right now. That number matters. But so does the number the business is going to be worth in 24 months when the work already in progress lands on the balance sheet.

If you are building something with real projects in motion, a GC business, a development company, a consulting practice with active engagements, and someone wants to buy it, the question worth asking is not just what is it worth today. The question is what is it going to be worth when the work I have already started is done. And is there a structure that lets me participate in that upside while the buyer gets what they came for.

Retained equity with a defined buyout window is one answer to that question. It is not the only answer and it is not right for every situation. But it is an option that most sellers never think to ask for because they are so focused on the closing number that they do not think about the number 24 months later.

I did think about it. It worked the way it was supposed to. The projects completed. The valuation moved. The buyout reflected what the business actually became rather than what it was worth on the day the deal closed.

That is the version of a business sale that most people do not know is available to them.

If you are thinking about selling a business or a stake in one and want to talk through what a structure like this looks like in practice, not as financial advice, because I am not your financial advisor, but as someone who has actually done it and lived through the 24 months in between, that conversation is at calendly.com/jeph-reit.