Should You Sell Your Business or Keep It? [Guide]

Starting and growing a business is extremely rewarding. But eventually, there comes a time when you need to ask yourself if you want to keep or sell your business. Maybe you’re ready to retire, or maybe your business is demanding too much of you and you want to spend more time with your family.

Whatever your reasons for considering selling your business, it’s not a decision to be taken lightly. It’s important to carefully weigh the pros and cons of selling your business or keeping it. While there are financial factors in selling a business, it’s also a very personal decision.

In this article, we’ll explain some of the financial, tax, and emotional factors to consider when making your business and planning your business exit strategy (if that’s the route you decide to take).

Key Takeaways

• Deciding to sell or keep a business is both a financial and personal decision.
• Compare your current business income with what a sale could realistically replace.
• Get a professional valuation to understand your business’s true worth.
• If most of your wealth is tied up in the business, selling may reduce your risk.
• Taxes can significantly impact your sale proceeds, so plan ahead.
• Consider your emotional readiness and long-term lifestyle goals.
• Middle-ground options like partial sales or added management support can offer flexibility.

Financial Considerations

Before making any decisions, look closely at how your business fits into your broader financial plan.

How much income does your business provide, and can a sale replace it?

Compare what you currently earn through salary and profit distributions with what you’ll need in retirement. Selling gives you a lump sum that must be reinvested to replace that income. Or maybe that lump sum alone will be enough to fund your retirement. Alternatively, keeping the business may offer continued cash flow, even if you step back.

As an example, if your business generates $120,000 a year and a buyer offers $1.2 million, that lump sum, after taxes, might only produce $50,000–$70,000 annually once invested. That difference can make or break your retirement plan.

What is your business worth, and what does the future look like?

Get a professional valuation so you know what buyers might realistically pay. Then look ahead. Is the business growing, leveling off, or getting harder to manage? If your company is thriving, you may increase its value by keeping it a bit longer. But if industry shifts or personal fatigue are setting in, selling while things look strong can protect what you’ve built.

How much of your net worth is tied up in the business?

Many business owners have most of their wealth tied up in their company, which can be risky if that’s their only major asset. Selling can help you diversify, spreading your wealth across stocks, bonds, or real estate to reduce risk and create a more stable income stream in retirement.

If you’re not ready to sell, think about ways to build retirement savings outside the business. Selling their company is the only retirement plan for 34% of small business owners. This isn’t the wisest strategy, considering that up to 80% of listed businesses never sell. On the other hand, if you’ve contributed to a SEP-IRA, SOLO 401(k), or another retirement plan, selling your business could simply represent moving onto the next chapter of your life more comfortably.

Tax Considerations of Keeping or Selling Your Business

Taxes can heavily influence whether selling now or later makes the most sense. Keep these fundamentals in mind:

• Capital gains on a sale: Most business sales trigger capital gains. Asset sales may create higher ordinary income tax, while stock sales often qualify for lower long-term rates. Long-term gains are typically taxed at 0%, 15%, or 20%, plus a possible 8% Net Investment Income Tax for high earners.
• Installment sales: Taking payments over several years spreads out your tax bill and may keep you in a lower tax bracket. Just be aware that future payments depend on the buyer’s ability to pay
• Sale proceeds and retirement accounts: You can roll employer plans into an IRA after selling. If you keep the business, max out tax-advantaged retirement contributions.
• Ongoing taxes if you keep your business: You’ll continue paying income, payroll, and possibly corporate taxes, depending on your structure.
• Estate and succession taxes: Holding the business until death offers a step-up in basis for your heirs, but large estates may face estate taxes. Plan ahead if legacy is a priority.

Emotional Factors to Consider

Most business owners put a lot of blood, sweat, and tears into their businesses. That commitment usually leads to some level of emotional attachment to the business, which also plays a role in deciding the pros and cons of keeping the business or selling it.

Does your business give you purpose?

Many owners struggle after selling because a business that has shaped their identity and daily routine for so long. Think honestly about how you’ll spend your time after a sale and whether stepping away feels exciting or unsettling. If you still enjoy the challenge, you may choose to stay involved part-time or shift into an advisory role.

Is the business draining your time, energy, or health?

Running a business can demand a lot of time and emotional energy. In fact, 72% of entrepreneurs are affected by mental health issues compared to 48% of non-entrepreneurs. As you grow older, it’s important to check in with yourself about how your business is affecting you. 

Are you sacrificing your health or quality of life to run your business? If you are, selling your business can be the right move, especially if the sale won’t put you in a position of financial stress. On the other hand, maybe you thrive under the routine and responsibility.

Is the thought of an empty schedule or not dedicating your days to running the business unsettling? In that case, maybe it’s best to keep your business. You can always find ways to reduce your workload while still staying involved, like delegating more, hiring a general manager, or growing your team.

Is legacy important to you?

If keeping the business in the family or passing it to a trusted employee matters, consider whether the right successor is willing and capable. These conversations can be emotional, but they clarify whether selling, gifting, or preparing a successor is the best path. If you hope to pass the business to your kids, keep in mind that only 30% of family-run companies successfully transition to the next generation.

If you run a family-owned bakery, for example, you can keep your business in the family if a child wants to run it. But if not, selling to a long-time employee might preserve the legacy in a different way.

Ultimately, this is what it comes down to: which path will bring you the most happiness and the life you want in the years ahead? Some entrepreneurs feel most alive when they stay connected to their business. Others are ready to fully embrace retirement. There’s no right or wrong choice. What matters is choosing the option that supports your purpose, well-being, and long-term peace of mind.

Decision-Making Framework

Here’s a useful framework to guide you as you decide to keep or sell your business.

1.   Define Your Retirement Goals and Timeline

Start with a clear picture of the retirement you want. Think about how you’ll spend your time and whether you want a full stop or a gradual transition. If you need cash soon, selling may make sense. If you love the work, you may prefer to stay longer. Your vision sets the direction.

2.   Assess Your Financial Needs and Resources

Estimate what your retirement lifestyle will cost and compare it to the income and assets you’ll have. Include Social Security, savings, business income, or potential sale proceeds. Don’t forget healthcare and taxes. Understanding the gap helps clarify whether keeping or selling supports your financial goals.

3.   Get a Professional Business Valuation

A valuation shows what buyers might realistically pay. It may confirm your expectations or reveal gaps between your goals and the business’s current worth. That insight helps you decide whether to sell now, improve the business, or adjust your plans.

4.   Examine Market Conditions and Timing

Check the broader economic climate and your industry’s outlook. Strong markets may boost your sale price, while downturns can push you to wait. Balance those factors with your age, energy, and plans. Timing doesn’t have to be perfect, but it helps to be aware.

5.   Consider Tax Strategies and Legal Preparations

If selling, explore ways to structure the sale efficiently. If keeping the business, update your estate and succession plans. Clean financials and clear documents protect you whichever path you choose.

6.   Evaluate Personal Readiness and Emotional Factors

Will you miss the business or welcome the freedom? Even when the numbers make sense, they can never fully account for how you feel. Think about what excites you and what worries you. Your emotional readiness is as important as your financial readiness.

7.   Explore Transition Options

The decision to keep or sell your business doesn’t need to be so black and white. There are middle grounds you can explore. Partial sales, an employee stock ownership plan, management buyouts, or hiring a general manager can create flexibility. These options can give you time, income, or liquidity without stepping away all at once.

8.   Make the Decision and Craft an Action Plan

After weighing the factors, choose your direction and outline the steps. If selling, prepare the business and gather your professional team. If keeping it, strengthen systems and delegate more. A clear plan turns the decision into action.

Related: 7 Reasons Why You Should Use a Broker to Sell Your Business

FAQs

How do I know if selling my business can fund my retirement?

Start by comparing your current business income with what you’d earn by investing the sale proceeds. A financial planner can help you calculate whether the lump sum will sustainably replace your salary and profit distributions.

What if my business makes up most of my net worth?

If a large portion of your wealth is tied up in the company, you may face more risk and less financial flexibility. Selling can help you diversify, but you should evaluate whether you’re financially prepared to exit or need more time to build savings.

What if I’m emotionally attached to my business?

It’s normal for owners to feel connected to the company they built. Consider how you’ll spend your time after selling and whether stepping back feels exciting or uncomfortable. Your emotional readiness matters just as much as the financial side of things.

Are there options besides fully selling or keeping my business?

Yes. Partial sales, hiring a general manager, ESOPs, or management buyouts can give you more time, income, or flexibility without requiring a complete exit.

The Decision is Yours Alone to Make

There’s no right or wrong answer when it comes to deciding whether to keep or sell your business. By looking closely at your income, valuation, tax considerations, and personal readiness, you can make a decision that feels both practical and empowering. The best path is the one that makes the most sense for you, both personally and financially.

If you’re asking yourself, “How to decide if I should sell my business?” at Chatterton & Associates, we can assist you. While the decision is yours to make, we can provide a trusted, outside opinion to help guide you. Contact us today to learn more about our business financial planning services.

Sincerely

The Team at Chatterton & Associates