As a business owner, you’ve worked long hours to build your business and refine it. You’ve faced problems over the years, some of which threatened the success or even the existence of your business, but you found a solution to each one, learning vital lessons along the way. Each decision you make in your business is informed by past successes and failures. You’ve enjoyed the ups, and sometimes the downs, and now you’re looking down the road and considering what defines your successful business exit and what your retirement could mean to you and your family.
Small Business: Alaska’s heartbeat
Over 77,000 small businesses in Alaska employ over 54% of our workforce, playing a role in Alaska’s culture and economy that would be challenging to replace. Alaska is home to thousands of entrepreneurs, but each one chooses their own definition of a successful transition to retirement. At Alaska Wealth Advisors, we believe that a clear personal financial plan is an important part of defining your ideal business transition.
Your Vision of Retirement
What a successful transition to retirement means is unique to you. A few retirement ideas you may want to consider as you think about exiting your business:
- Where will I retire, and how does the cost of living there compare to my current situation?
- Should I purchase a second home, stay in Alaska, or relocate?
- What hobbies or activities do I want to continue or begin?
- How will I replace the fulfillment provided by my role as a business owner, a mentor, a professional community member?
- Will retirement mean a transition to volunteering more time to organizations I support?
- Is leisure travel a retirement goal?
- What business expenses will now become personal expenses (autos, travel, etc.)?
- Am I ready to give up the recognition or prestige my profession and business ownership brings?
- Does my preferred transition involve a continued role in the business?
Once you’ve put some thought into your ideal retirement and the associated costs, your financial planner can help you calculate your wealth gap.
The Business Owner’s Wealth Gap, Defined
Your wealth gap is the amount you will need to receive from your business sale, after taxes and fees, to fund your desired retirement. It can be calculated as the difference between your investable assets apart from your business and the amount needed to provide for your financial goals after your exit.
Consider the following example:
- After 10 years as an engineer, Rob started his own firm. Now after 20 years as an owner, Rob is considering selling his business.
- With the help of his financial planner, Rob has calculated his retirement spending goal at $260,000 net per year (in 2026 dollars after tax).
- Rob’s investable assets are $2,000,000 outside of his business value.
- Rob’s financial planner has calculated that Rob will need $8,600,000 to generate his desired retirement income.
- Rob’s wealth gap – the net value he needs to receive from his business sale to fund his desired lifestyle in retirement – is $6,600,000.
$8,600,000 Retirement funding need
– $2,000,000 investable assets
= $6,600,000 Wealth Gap
Knowing your individual wealth gap provides a frame of reference for evaluating your next steps. If an accurate valuation of your business, less taxes and fees, results in a number below your wealth gap, will you work on the business in addition to the work you do in the business, adjust your retirement expectations, or choose another path?
If a reliable business valuation indicates that selling the business now will provide the number you need to fund your desired retirement, you may have the flexibility to negotiate your exit in the near future. Will you choose an internal transition, such as a sale to management, or an ESOP? Does an external transition, such as a stock or asset sale, sound more attractive?
Knowing your wealth gap is not only vital to your personal financial plan, it is necessary for evaluating your exit options.
Planning Your Next Move
As a recently Certified Exit Planning Advisor (CEPA®), I specialize in helping business owners navigate the complex intersection of their professional legacy and their personal financial future. Understanding your “wealth gap” is just the first step in in seeing how your situation compares to the retirement you’ve envisioned.
I’m Matt Knell, and I am here to help you gain a clear understanding of your business’s value and develop a strategic plan that serves you and your family for years to come. If you’re ready to begin defining your successful exit, let’s start the conversation.
Matt Knell, CFP®, AIF®, AAMS®, CEPA®
Financial Advisor
This material is not intended to be investment, tax, or legal advice and is provided for illustrative purposes only. Alaska Wealth Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, which is available upon request.
Sources:
2025 Small Business Profile, SBA Office of Advocacy. https://advocacy.sba.gov/wp-content/uploads/2025/06/Alaska_2025-State-Profile.pdf
2025 State of Owner Readiness Generational National Report, Exit Planning Institute. https://exit-planning-institute.org/hubfs/25SOOR-Generational.pdf
