Every business owner has goals they want to achieve that lie outside the world of work. In order to achieve those personal success goals, business goals are often prioritized as the way to make the capital to realize these dreams. But many business owners focus all their attention on business goals, letting their personal goals slide out of reach. Plus, many business owners don’t realize that their business value could increase if they addressed key areas within the company. Without a formal way to close your twin value gap, CEOs or business owners who have worked hard to finance personal goals may end up never quite reaching their full potential.
What Is the Twin Value Gap?
Put simply, the twin value gap is the combination of the business value gap and the gap between where you are in your personal life and where you would like to be. We’ve addressed the business value gap in detail in some of our previous articles. But, it’s important to look at your business success and personal success as a combined and cohesive outlook on your life. Why? Because ultimately, your happiness is based on achieving the goals that are important to you and aligning your long-term plans with the aspects you want to prioritize as you move forward with your life. These aspects of life might include:
- Health and fitness
- Travel
- Family life
- Hobbies
- Socializing
- Work in the community
- Spiritual and religious commitments or growth
- Philanthropy
This is, of course, in tandem with the goals you want to achieve within your business, and once you monetize your business and exit to focus on your next stage in life.
Fixing Your Twin Value Gap: Planning for Business and Personal Goals
Applying a value to your twin value gap can be tricky as a CEO. How do you understand if your business success will provide the resources needed to fund your desired personal success? The best way to evaluate this is to create a formal financial plan with the assistance of a business and financial advisor who can accurately assess what’s required to grow your business and monetize it to achieve your goals.
The Exit Planning Institute recently conducted a survey of business owners, and an alarming 83% state that they don’t yet have a transition plan in place for a successful business exit strategy. Or, they have a plan, but it has not been either documented or communicated effectively. Sometimes this lack of planning is due to a belief that business growth is inevitable. However, in our ever-changing and unpredictable world, we know this is not the case.
Another reason for a lack of planning is a misunderstanding of the business in relation to personal goals. Your business is, in most cases, your biggest personal asset, so when planning for business success and growth, you must consider how this will affect your personal success and goals too.
Is Your Business Ready?
This is about understanding the worth of your business in terms that relate to the current market. In addition to this being related to the earnings of the business, it can also relate to business reputation, customer satisfaction, how well the company is run, and various other factors. Today’s consumers are very focused on business values and environmental impact, so an entity that wants to buy your business will consider all these variables, potentially increasing or decreasing the value of your business despite how successful it is in terms of revenue.
Identifying and addressing points that impact your business value is what we mean by determining your business value gap. It’s always easier to increase the value of your business than to stockpile resources or save funds to help you meet your personal goals. Business monetization is always more successful when the business itself has a higher value.
Is Your Financial Planner ready?
The Wall Street Journal states that a Certified Financial Planner™ is absolutely the most important resource when creating personal wealth. These financial planners have to pass tests from the Certified Financial Planner Board of Standards which hold certified planners to extremely high standards.
One aspect of assessing your readiness is to explore your personal success goals. A Harvard study proved that when you write down your goals and are specific about what you want and when, you’re more likely to achieve these goals. For personal financial planning, that might involve:
- Writing or recording a full list of your assets and liabilities.
- Listing your goals and what resources you need to fund each one.
- Listing the date you would like to achieve each goal by.
A financial planner will run various tests on your current business value to assess if you’re ready to transition, and if not, what needs to happen to allow you to take the next steps.
Is the Market Ready?
In 2020, almost half of the 28 million privately owned businesses in the U.S. were owned by baby boomers. With so many business owners on the edge of retirement, there’s a serious concern that, should all these owners decide to sell at once, it could depress the market. That’s why timing is so important when it comes to successfully exiting your business. A financial business advisor will help you consider this, plus the current interest rates and other economic factors that could help you get the maximum value from your successful business.
Work with a business advisor and a financial advisor to discover what your twin value gap is and how to combine your business and personal goals into one cohesive, formalized plan. The Association for Enterprise Growth can help. Contact us at https://enterprisegrowth.org/ today.
Image Credit: Photo by Mark Fletcher-Brown on Unsplash
