Synergy Asset Management

In very basic terms, a GAP analysis is performed to identify the value of a business at a particular point in time. Then, based on the owner’s projected time line for exiting the business for retirement or sale, the needed value is calculated. The GAP analysis then tells us the difference between the two, including factors such as inflation tax rate and required rate of return. Let’s look at an example:

Wendell Construction is owned by Joseph Wendell. As of 12/31/11, Wendell Construction was valued at $2,000,000. In five years, Mr. Wendell wants to retire. Based on his gross income goal, spend down rate, spendable income, inflation, tax rate and required rate of return, Mr. Wendell needs $3,500,000 to leave the business in 2016. With this information, we calculate that he needs a required growth rate of 11.84%. We then develop financial planning and investment strategies that help Mr. Wendell to achieve that goal.

For a more specific example, or to learn how a GAP analysis will help you prepare for exiting your business, contact the Synergetic Finance team today. We’d love to show you how you can set attainable goals to secure your financial future.



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