For entrepreneurs, running a successful business is only part of the financial picture. Many business owners focus on growth, operations, and profitability, but one crucial number is often overlooked: your wealth gap. Understanding this figure is essential, especially if you are considering selling your business.
What Is The Wealth Gap?
Your wealth gap is the difference between the money you currently have and the amount you need to fund the lifestyle you want in the future, particularly in retirement. It answers a simple but critical question: How much money do I need to live comfortably after exiting my business?
This number goes beyond your day-to-day earnings and takes into account your personal savings, investments, and anticipated post-sale income. By understanding your wealth gap, you can make informed decisions about your business, your sale, and your financial future.
Why Knowing Your Wealth Gap Matters
Sets Clear Goals For Your Sale: Understanding your wealth gap allows you to calculate how much your business needs to sell for on an after-tax basis. This ensures that your sale proceeds will fund your desired lifestyle.
Guides Financial Planning: Working with your financial team or planner to determine your wealth gap gives you clarity on what you need to save, invest, or grow before selling.
Aligns Business Performance With Personal Goals: Knowing your wealth gap helps you determine the EBITDA your company needs to generate and the multiple your business must achieve to fill that gap. This ensures your exit strategy is realistic and achievable.
Reduces Post-Sale Uncertainty: Selling without understanding your wealth gap can leave you unsure about whether your proceeds will cover your retirement needs or other financial goals.
Empowers Strategic Decisions: By knowing exactly what you need to reach your financial goals, you can make smarter decisions about timing your sale, investing in growth, or making operational changes to increase value.
How To Calculate And Address Your Wealth Gap
Start by reviewing your current financial picture: your personal savings, investments, real estate, and other assets. Then work with your financial advisor or planner to project your desired lifestyle, retirement expenses, and future income needs. The difference between what you have today and what you will need in the future is your wealth gap.
Next, assess your business’s value. Determine the EBITDA your company generates and calculate the multiple required to reach the after-tax sale price that will fill your wealth gap. This approach ensures that your business sale aligns directly with your personal financial goals.
How Our Team At Exit Stage Left Advisors Can Help
At Exit Stage Left Advisors, we understand that selling a business is not just about achieving the highest possible price. It is about ensuring your financial future. Our team works closely with business owners to:
Analyze your current financial situation and calculate your wealth gap
Determine how much your business needs to sell for on an after-tax basis to fund your desired lifestyle
Develop a tailored exit strategy that aligns your business’s performance with your personal goals
Connect you with trusted financial experts to refine your planning and maximize your post-sale security
Guide you through the sale process to ensure a smooth, successful transition
By combining our expertise in business sales with a focus on your personal financial objectives, we help ensure that your exit strategy is not just a transaction but a step toward the lifestyle and future you envision.
Conclusion
Selling a business is one of the most important financial decisions an entrepreneur will make. The true measure of a successful exit is not just the sale price. It is whether it fills your wealth gap and supports the lifestyle you want after the sale.
By understanding your wealth gap and working with the experienced team at Exit Stage Left Advisors, you can align your business strategy, financial planning, and exit strategy to achieve confidence, clarity, and peace of mind. Your business sale becomes more than a transaction. It becomes the foundation for the next chapter of your life.
