A critical and foundational element of your successful exit plan will be the calculation of any gap you might have in the value of your current assets (business and personal) and how much money you will need when you leave the business. This is your financial gap analysis.
The reasons for ensuring an accurate Financial Gap Analysis include:
Provides you with a starting point and an endpoint needed for achieving your goals.
Serves as motivation for you to design and implement a plan to "close the gap" and increase the value of the business.
Where there is not an asset gap, you're afforded opportunities to increase goals, or possibly leave sooner than you were originally planning to.
An accurate Financial Gap Analysis provides a more realistic view of your situation and how much still needs to happen, or doesn't need to happen, for you to accomplish your goals.
Take these steps to make it happen:
Clarify your owner-based post-exit goals and objectives.
Arrange for an accurate and objective Estimate of Business Value.
Arrange for Financial Needs Analysis, based on your goals and objectives and using current and accurate quantitative data (business and personal resources).
If there is an asset gap, conduct a thorough assessment of your business value drivers, and create a plan to close the gap.
For example, let's say that your current personal financial plan, which includes all of your future goals, indicates you will need $5,000,000 to do all you want to do after you leave the business. If the current accurate value of your business is $2,500,000 and the value of all other assets is $1,000,000, then you have an "asset gap" of $1,500,000 ($5 mill - $3.5 mill = $1.5 mill).
You may be surprised to hear that typically the most challenging, time-consuming, yet rewarding aspect of performing a Financial GAP Analysis is establishing your post-exit goals and objectives. Contact us today for assistance with establishing your goals and performing a financial gap analysis.
