Since the value gap boils down to a complicated, individualized relationship between factors, there is no one-size-fits-all formula we can print here. Increasing the value of your business will mean working on each of the eight fundamentals in turn, and your approach will depend on which areas need attention.

There are three main points we find apply to most clients we work with:

• Owner dependence is an easy trap to fall into. Remember to work on your business, not in it. Owners take the value of their business for granted because they allow themselves to be too close to it. A business must be able to run without its owner to be transferable — and without transferability, there is no value beyond selling the parts for scrap.

• Owners underestimate what goes into closing the value gap. It will take work and time; there is no silver bullet solution. But it is the surest way to achieve an attractive and transferable business. Last month, we quoted Ken Sanginario of Corporate Value Metrics, and his point is worth repeating here: business owners make a mistake when they “treat revenue and profitability as the inputs to creating value, when in fact, revenue and profitability are the outputs. They’re the byproducts.” In other words, the way to close the profit gap and wealth gap is to work on the value gap.

• The fruits of your labor in closing the value gap will last.By addressing the value gap, you’ll improve the overall quality of each aspect of your business, leading to incremental gains that benefit all areas. Once people form habits to do things the right way, these habits stick.

Closing your business’s value gap is a win-win: it will earn you more money now, while the business is in your possession, and it also makes your business more attractive to buyers, resulting in more money for you down the road. Beyond money, closing the value gap also gives you more time, as you establish yourself as an owner instead of an essential employee, and more freedom, as you will have more choices on when and how to exit your business.

Remember this as you are in the thick of fine-tuning each little lever of your business fundamentals. The work you put in will pay off in multiple ways. Many owners come to Eagle hoping to sell quickly because they feel burned out. Then, after some work increasing the value of that business, many decide they can keep their business running as a less involved owner, letting the business continue to grow. This offers them flexibility where before they only saw a one-way exit sign.

Want to know your value gap? Take our free Altitude Assessment to get started on obtaining an idea of what your value gap looks like right now.