The Wealth Gap: The Real Number Business Owners Overlook Before Selling

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Do you really know how much you need to get from selling your business? Most business owners don’t. They assume the sale proceeds will be “enough,” like winning the lottery. A big number shows up in their head — perhaps ten million, twenty million, or some multiple of EBITDA they heard from a peer — and they assume that must be plenty. But most owners have no idea what they actually live on, how much the business is subsidizing their lifestyle, or what it would take to replace all the income it provides.

The result is a gap between the value they’ve built and the assets they need. Understanding the wealth gap, the risks of ignoring it, and how to close it before it’s too late will help you avoid post-exit regrets.

Defining the Wealth Gap

The wealth gap is based on simple math:

Wealth Gap = Lifestyle Goal – Current Net Worth

It’s the amount it will take to fund your lifestyle at the level you have (or want) minus the assets you already own outside the business.

A quick, back-of-the-napkin way to think about it is to take the amount of money your business pushes into your personal account each year — salary, distributions, and personal expenses run through the company — and divide it by 4%. That’s the portfolio you would need to sustain your lifestyle without the business.

If you live on $500,000 annually, you’d need $12.5 million invested to replicate that income stream. Subtract your current net worth and the difference is your wealth gap.

For many owners, this calculation comes as a shock.

Why Owners Miscalculate

Most owners carry an arbitrary wealth goal in their head. But do you know whether that number can actually sustain your family’s lifestyle? It’s easy to miscalculate due to:

Overconfidence in headline numbers. A “big number” like ten million looks sufficient, but it ignores the nuance of what the business is really funding.
Hidden lifestyle costs. Owners often know their W-2 salary but forget to factor in K-1 distributions plus country club memberships, cars, or other lifestyle expenses they run through the business. Recasting EBITDA is not just about valuation; it’s about understanding what the business is already doing for you.
Taxes and fees. Professional fees can run into six figures, and taxes can reduce sale proceeds by 20–40%. On an eight-figure sale, that means millions gone before the money ever reaches you.
Overwhelm. Exit planning involves sorting out myriad legal, tax, financial, and deal terms. Paralysis is understandable, but deadly.
Women’s blind spot. Many women business owners have never been exposed to exit planning — partly because few women have sold companies. One study showed that female-founded businesses represented just 1.37% of U.S. sales of a majority stake. (https://thebigexit.co/blog/exit-gap-report-2024)

The statistics tell a sobering story:

At least 80% of the average business owner’s net worth is tied up in their company. (Exit Planning Institute, https://exit-planning-institute.org/hubfs/Member%20Center%20Resources/2023%20National%20State%20of%20Owner%20Readiness%20Report.pdf)
Seventy percent of owners say they will need the proceeds of their business to support their lifestyle after exit. (Diversified Asset Management, “The 2023 National State of Owner Readiness Report,” March 4, 2025, https://www.diversifiedassetmanagement.com/blog/our-fourth-podcast-the-2023-national-state-of-owner-readiness-report)
About 75% of owners regret their exit within twelve months. (https://blog.exit-planning-institute.org/emotional-considerations-transitions)

These numbers align with what I see every day. Owners agree that most of their wealth is in the business. They know they rely on it. But few have sat down with an advisor to work through the crucial question: What happens when the income spigot turns off?

Closing the Gap

Closing the wealth gap requires intentional focus and taking defined steps as you start building transferable value.

1. Scenario-Test

Think of your wealth gap as a bogey and run different assumptions. If you sell for ten million, is that enough? What about twelve million after fees and taxes? Will a 4% withdrawal rate sustain your lifestyle? Scenario testing makes the math real.

2. Grow Transferable Value

A transferable business commands more value. If your business can’t run without you, it’s not truly transferable. Try to reduce the company’s dependence on your personal efforts and connections.

3. De-Risk the Business

Buyers pay more for certainty. Reduce customer concentration, document processes, and invest in clean financials. These steps not only make your company more attractive, they also protect you if life events force an unplanned exit.

4. Hire a Value Advisor

Certified Exit Planning Advisors (CEPAs) and value growth specialists help owners prioritize the drivers that increase value. They work on the levers that move the needle. Without them, many owners focus on the wrong things or miss critical opportunities.

5. Appoint a Quarterback

Without a quarterback, everyone works in silos. The CPA, attorney, M&A advisor, and financial planner may all be competent but if they aren’t coordinated, the owner ends up acting as project manager. That doesn’t work very well, but it’s a lot of extra work for you.

Where the Plan Gets Real

You only get one shot at your exit so don’t waste it, because you cannot afford to mess this up. If you sell without closing the wealth gap, you risk jeopardizing the lifestyle you worked decades to build.

Lifestyle math is as important as valuation math for avoiding regret. The business already funds your life through salary, distributions, and expenses. When you sell, that income spigot shuts off. The sale has to replace it without missing a beat.

The first step is to know your number. Then focus on increasing the value of the business so that it can fully fund your next chapter. You may not exit for ten or twenty years, but every intentional step you take now moves you closer to a secure outcome.