Whether you have started succession planning or it is a box on your “to do” list, you will want to ensure you obtain the value you deserve for your business. The income acquired from a sale will help foster a bright future after years of hard work and dedication. In this article, we will address some frequently asked questions about the dreaded “value gap” and how you can tackle it to retire in style.
What is a value gap?
A value gap is the difference between your current business value and the amount required to fund your desired standard of living at retirement.
Identifying and addressing a possible value gap is something that business owners should start considering as soon as possible. The sooner you understand the size of your value gap, the sooner you can start determining ways to bridge the gap towards a successful future.
Will I be affected by a value gap?
The business value gap can affect any owner considering the sale or retirement from their business. Owners that are relying on the business sale to fund their retirement or whose businesses are the major source of wealth and income can be impacted by the value gap.
What is my value gap?
To understand your value gap, you must consider several factors:
1. What is the value of your business?
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2. How much money will you require to retire comfortably?
Working together with a financial planner can help you determine a lump sum amount that will provide your ideal annual income
How can I eliminate the value gap?
Once you identify the difference between your current value and future financial requirements, you will understand the extent of your value gap and can create a master plan to tackle it. Your plan should include:
1. Assessment of exit options
2. Identification and implementation of premium value drivers
3. Development of business strategy and growth plans
4. Maximization of profitability
5. Creation of implementation plan
Creating a detailed and proactive plan has a direct link to your future wealth.
What are my next steps?
If a value gap exists – it’s important not to feel discouraged. There are many options to improve your financial situation. Ascend Business Partners can provide a detailed business appraisal and valuation as the first step in the development of a succession plan. This appraisal will assess the attractiveness of the business for future sale or ownership transition and provide you with an action plan to bridge your value gap and prepare you for succession.
We encourage you to try our complimentary exit readiness tool to obtain a complimentary 45 minute business consultation and look forward to the opportunity to work together to close the gap and start focusing on your future.
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