The Wealth Gap
Click Here: https://calendly.com/hay2brick/intro?back=1&month=2024-11
Article by Allen T. Gregory
Let's talk about the Wealth Gap.
No, not the one in society. Let's talk about YOUR wealth gap.
First, I'll explain what it is and what it means. Then, I'll give you an exercise. After that, you will probably want to work with me and I'll make that easy for you.
Stated simply; your wealth gap is the difference between your current net worth and the amount of money you will need to support your lifestyle after you exit your business.
Many business owners have not calculated how much money they will need to maintain their current standard of living after they exit their business. NOT doing this could lead you to the poor house instead of the promised land.
Take out a sheet of paper and grab a calculator.
Write down the income you think you would need to support your lifestyle after you exit your business.
If you’re not sure, make an educated guess. Divide that number by 4%.
That is the amount of investable assets you would need to support your lifestyle after you exit your business while not reducing your principle.
This would be your Wealth Goal at exit.
For example, if you thought you needed $400,000 in post-business income and divided that by 4%, it would mean you would need $10 million of investable assets to continue to support your lifestyle without the income from your business and without touching your principle.
Next, write down your current net worth, not including your business.
Subtract that from your Wealth Goal of $10 million.
This is your Wealth Gap!
For example, if you wrote down that your net worth not including the business was $2 million, your wealth gap would be $8 million ($10M - $2M).
For many business owners, it is almost impossible to save their way to closing their Wealth Gap.
You probably don't want to do that anyway. You'd much rather create the value in your business to close the gap. Am I right?
As you can see from the example, Wealth Gaps are normally so large that the only way to close them is to unlock the wealth trapped in the business.
This is only one reason -- among many others -- why it is absolutely critical to have your business valued and prepare it for transition.
If the current value of your business and your plan to harvest that wealth will not close your Wealth Gap, you are going to need an integrated personal, financial, and business strategy to address how to close your Wealth Gap.
See ya in the inbox !
Sebastian Amieva
Investor / M&A Expert / Mentor