A Key to Exit Planning Success
When preparing to sell or transition your community association management company, one of the most critical concepts to understand is your “wealth gap.”
Simply put, your wealth gap is the difference between the financial resources you have today — including personal savings, investments, and your company’s current value — and the amount you’ll need to achieve your long-term personal and retirement goals.
How to Determine Your Wealth Gap
Start by defining your financial objectives.
Ask yourself: What lifestyle do I want after exiting my company?
To gain a full picture, consider every aspect of your life — not just where you’ll live, or what hobbies you’ll pursue. Reflect on these key areas:
- Spiritual: What brings you joy and gives you purpose each day?
- Things: What items would you like to acquire or enjoy — a new boat, a vacation home, cars for your grandchildren?
- Experiences: What do you still want to do or share with others — travel to Africa, learn to paint, take your grandkids to Disney World?
- People: Who do you want to spend more (or less) time with? Where do they live, and how will you make that happen?
Once you’ve outlined your vision, estimate how much annual income you’ll need to support it. Then, compare that target against your current net worth — including all personal assets and the realistic value of your business if you sold it today.
Tip: Be honest about your company’s worth. If you don’t know its current market value, consider obtaining a third-party valuation.
The shortfall between your target wealth and your current resources is your wealth gap.
Why the Wealth Gap Matters
Understanding your wealth gap brings clarity and confidence to your exit plan. Many business owners assume their company is worth “enough” without running the numbers — only to face unpleasant surprises later.
Knowing your wealth gap early helps you:
- Set realistic expectations about your business’s value.
- Plan the right timing for your exit.
- Avoid unnecessary financial pressure when it’s time to sell or transition.
Using the Gap to Build Business Value
Here’s where opportunity lies: if your wealth gap is larger than you’d like, use that insight to set goals that increase your company’s value.
Focus on the key drivers that make your business more attractive to buyers:
- Strong client retention
- Transferable systems and documented processes
- Consistent financial performance
- Scalable operations
- A capable, independent leadership team
Each improvement narrows your wealth gap and strengthens your company’s position for a successful — and profitable — sale.
Closing the Gap
By identifying and actively addressing your wealth gap, you shift from hoping your business will fund your future to strategically ensuring it does. That’s the cornerstone of successful exit planning.
If you’d like a free self-assessment tool to evaluate how ready your company is for sale, contact lsanchez@keystonepacific.com.