How Much Is Enough? The Personal Funded Ratio Every Business Owner Needs to Know

Let me tell you about Andrew.

Andrew sold his IT services company for £8 million. Net of tax, he walked away with roughly £5.5 million. By any measure, a life-changing sum. Andrew was 52, healthy, mortgage-free, kids through university. He should have felt invincible.

Instead, Andrew was terrified. Because despite having £5.5 million in the bank, he had no idea whether it was enough.

“Everyone kept telling me I was set for life. But set for what life? I didn’t know what my life was going to cost. I didn’t know how long I’d live. I didn’t know what inflation would do. All I knew was that this number — which sounded enormous — was all there was. And it had to last forever.”

— Andrew, 6 weeks post-exit

Andrew’s problem wasn’t money. It was uncertainty. And uncertainty, for a high-achiever who’s spent 25 years controlling outcomes, is unbearable.

The Number Everyone Gets Wrong

Ask ten business owners “how much do you need to never work again?” and you’ll get ten guesses. Five million. Eight million. Ten million. The numbers are always round, always confident, and almost always based on nothing more than instinct.

Here’s the problem with instinct: it doesn’t account for inflation, tax drag, sequence-of-returns risk, lifestyle creep, health costs in your seventies, the villa you haven’t bought yet, or the fact that you might live to 95. Instinct tells you £5 million is enough. Arithmetic might tell you something different.

I’ve seen people with £10 million who are underfunded for their lifestyle. I’ve seen people with £2 million who are perfectly set. The difference isn’t the number. It’s whether they know their number.

What a Personal Funded Ratio Actually Is

The concept is beautifully simple. Your Personal Funded Ratio is:

Simple to state. Less simple to calculate honestly. Because “Total Lifetime Spending” isn’t what you spend now. It’s what you’ll spend across every year from today until you die, adjusted for inflation, tax, and the inevitable lifestyle changes that come with ageing.

The Lifestyle Creep Trap

Here’s what nobody tells you: your spending goes up after you sell. Not because you’re reckless. Because you have time.

When you were running the business, you were too busy to spend properly. You’d book a week in Mallorca and call it a holiday. Now you’re booking three weeks in Barbados, first class, because why not? You’re renovating the kitchen. You’re buying the car. You’re eating out four nights a week instead of two. You’re flying to see the grandchildren more often. Each expense is individually reasonable. Collectively, they’re 40% higher than your pre-exit spending.

I call this the Spending Expansion. And if your Funded Ratio was calculated on your old spending, it’s now wrong.

• Travel: doubles for most clients in year one. You have time now.
• Property: the renovation that was £50k becomes £120k because you’re home and involved.
• Dining and entertainment: up 60–80%. You’re filling empty evenings.
• Gifts and generosity: helping the kids with a deposit, treating the family, charitable giving you always intended to do.
• The “investment”: the friend’s business, the property abroad, the vintage car “that’ll only go up in value.”

None of these are wrong. All of them need to be in the calculation.

Calculating Your Real Number

This isn’t a spreadsheet exercise you do on a Sunday afternoon. But here’s the framework I use with every client, simplified.

Step 1: Define Your Ideal Year

Not your minimum year. Your ideal year. The one with the holidays, the dining, the experiences, the generosity. Be honest about what you actually want to spend, not what you think you should spend. Include everything: housing, travel, lifestyle, healthcare, gifts, discretionary. Get a real number.

Step 2: Project It Forward

Assume you live to 95. Yes, 95. Not because you will, but because planning for 85 and living to 92 is a problem you don’t want. Apply inflation at 3–4% per year. Add a buffer for healthcare costs increasing from your mid-70s. This gives you your Total Lifetime Spending figure.

Step 3: Stress-Test Your Assets

Your total assets aren’t just the sale proceeds. They include pensions, property equity, investment portfolios, and any future income (board fees, consulting, rental income). But discount them for tax and accessibility. A pension you can’t touch for eight years has a different value to cash in the bank today.

Step 4: Run the Ratio

Divide your total usable assets by your total lifetime spending. If the number is above 1.0, you’re funded. If it’s above 1.3, you have meaningful surplus. If it’s below 1.0, you have a gap that needs addressing — either by adjusting spending or generating income.

“Most people who’ve just sold a business have a Funded Ratio between 0.8 and 1.4. The ones who know their number sleep at night. The ones who are guessing don’t.”

— B.D. Dalton II

Why This Changes Everything

Knowing your Personal Funded Ratio doesn’t just solve the money question. It solves the permission question.

When Andrew calculated his ratio — 1.35 — something shifted. He could take the holiday without guilt. He could help his daughter with a house deposit without panic. He could say no to a consulting opportunity that paid well but would have consumed his time, because he knew he didn’t need the money. The ratio gave him permission to live, not just survive.

It also freed him to think about the other four pillars. When financial security is a feeling, it consumes mental bandwidth. When it’s a number, it sits quietly in the background and lets you focus on purpose, health, connection, and regret minimisation.

Andrew’s Number

Andrew’s £5.5 million was enough. More than enough. His ratio came in at 1.35 — meaning his assets could fund 135% of his ideal lifetime spending. He had a surplus.

That surplus didn’t make him reckless. It made him strategic. He allocated £200k to angel investing — money he could afford to lose. He helped both children with house deposits. He committed to two international holidays a year without checking his bank balance first. And he stopped lying awake at 3am doing amateur arithmetic.

The money hadn’t changed. Andrew’s understanding of the money had changed. And that understanding — that certainty — is worth more than another million in the account.

“You don’t need more money. You need to know your number. Everything else follows from there.”

— B.D. Dalton II