Definition
The value gap is the difference between two numbers: what your business would sell for today, and what your business needs to sell for to fund the post-exit life you want. The first number comes from a current valuation — what a buyer would actually pay if you went to market this quarter. The second number comes from your financial planning — what you need to net after taxes to support your retirement, your other goals, and any obligations the proceeds need to cover. When the second number is higher than the first, you have a value gap. Many small business owners discover the gap only when they start seriously thinking about selling, often years later than they should. The size of the gap, and the time available to close it, determines whether you can sell when you want to or whether you need to keep working to grow the business first.
What it means for you
The value gap is what separates what your business is worth today from what it needs to be worth to fund the post-exit life you want. Most owners discover the gap only when they start seriously thinking about selling — often years later than they should have.
The buyer’s lens
Buyers can't see the value gap directly — but they see its symptoms in unrealistic price expectations.