In our book, Cashing Out of Your Business – Your Last Great Deal, we discuss how one of the key steps to developing your exit plan is calculating how much money you will need from your business transition to fund the rest of your life. We call this your “Wealth Gap.”

Very few owners are independently wealthy outside of their businesses. The vast majority will need to extract money from their companies to fund the rest of their lives.

Below are the things that you’ll need to think about as you calculate your Wealth Gap.

  • Take Stock – Quantifying the assets you have saved outside the business or your personal net worth is the first step to determining how much you will need from your ownership transition.

  • Diversify Your Holdings – Saving money outside the business provides you with diversification, less dependence on the business and more choices when it comes time to transitioning the ownership.

  • Determine Your Income Needs – Analyzing your current and post-transition personal income needs is critical and; don’t forget about sources of income you may have outside of the business. And be sure to consider the personal expenses that are currently paid for by the business.

  • Calculate Your “Wealth Gap” – Once you know your net worth and the gross income you will need post-transition, you will be able to calculate your Wealth Gap—how much you need to net from your business transition. Most owners don’t have an adequate nest egg and will be dependent on the sale of their business to fill this gap.

  • Contingency Planning – Determining how the business can continue without you, and securing the necessary insurance, will enable you to avoid the financial disaster that life events can cause.

  • Estate Plan & Asset Protection – Setting up asset protection and estate planning to protect your assets while living and upon your death. If not done correctly, your assets can be wiped out by unforeseen taxes, lawsuits, and many other unfortunate circumstances.

The next phase of life can be what you envision, a life filled with excitement and the fulfillment of lifelong dreams and goals. But you must have a solid Business Ownership Transition Plan and understand how much you really need from the sale of your business.

Calculate your Wealth Gap and get started on your exit planning today.


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