Value Gap & Wealth Gap: The 2 Numbers Every Business Owner Should Know

As a business owner, planning your future means knowing two critical numbers:

1. Your value gap
2. Your wealth gap

These numbers help clarify where you are today, where you want to be, and the steps needed to align your business and personal finances with your long-term goals.

What Is the Wealth Gap?

The wealth gap is the difference between your current net worth and the net worth you may need to support your desired lifestyle and goals once you’re no longer working.

Why Is It Important to Track Wealth Gap?

Without knowing how much you need to live the life of your dreams — and how far away you are from that number — one of two things will likely happen:

1. You work longer than you need to. Life is short, and while you may enjoy your work, there are probably other things you’d rather be doing if you knew money wasn’t an issue. We recently worked with a business owner who discovered he had actually closed his wealth gap three years earlier. His response: “It makes me sick thinking about the number of family dinners I missed because I was working.”
2. You hang it up too soon. On the other side, if you stop working before you’ve reached your number, you risk running out of money later in life — or relying solely on Social Security.

How Do You Determine the Wealth Gap?

We use financial planning tools like Elements® to help estimate and monitor wealth gap progress over time. These tools incorporate data like:

• Current assets and liabilities
• Lifestyle goals
• Inflation and life expectancy assumptions
• Business value projections

Each quarter, our clients receive a progress report to help stay informed and adapt their plans as circumstances evolve.

We are not affiliated with or compensated by Elements®. It is used as a planning resource only.

What Is the Value Gap?

The value gap is the difference between the current value of your business and its potential value if it were optimized at a “best in class” level within its industry.

Why Is the Value Gap Important?

For many business owners, the company represents their largest asset. Understanding and addressing the value gap can be one of the most effective ways to close the wealth gap.

Knowing what your business is worth relative to its maximum potential value helps establish a timeline for closing your wealth gap — essentially, it shows you when work becomes optional.

The First Step Toward Your Future

Knowing your wealth and value gaps is the first step toward building a solid plan. Even if you’re years away from thinking about selling your business, understanding your numbers makes every decision clearer — from tax planning and estate planning to saying yes to that bucket-list trip you’ve been dreaming about.

In our next article, we’ll explore actionable ways to start closing your value and wealth gaps.