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    4 min read

    Your Financial Plan Probably Has a $5M Hole In It

    "$10M valuation" doesn't mean $10M in your client's pocket. The gap between "worth" and "actually receives" is where retirement plans go to die.

    The Valuation Fantasy

    Financial advisors love valuations. Concrete numbers. Plug them into spreadsheets. "$10M business" looks great on the balance sheet.

    Problem: valuations and sale prices are different things. The gap between them can be massive.

    Where the Money Actually Goes

    Between "worth $10M" and "owner gets $10M," a lot disappears:

    • Transaction costs: Bankers, lawyers, accountants, due diligence. Figure 5-10% of the deal value.
    • Deal structure: Earnouts, seller notes, escrows. 20-40% might not hit your account at close.
    • Taxes: Federal, state, depreciation recapture. Say goodbye to 25-40%.
    • Working capital: Buyers often make you leave cash in the business.
    • Timing: Worth $10M today doesn't mean a buyer shows up today. Or that conditions hold.

    Run the real math on that "$10M valuation" and the owner might net $4-5M in actual, spendable money. Still good. Not $10M.

    Why This Wrecks Retirement Plans

    Most owners have their net worth tied up in the business. Retirement, estate, legacy. All of it depends on turning that illiquid thing into cash.

    When the plan assumes $10M and reality delivers $5M, something breaks. Finding out at 65 is too late.

    The Collaboration Problem

    Wealth advisors and exit advisors rarely talk to each other. Wealth folks see a number on a balance sheet. Exit folks see a complex transaction full of landmines.

    When those perspectives don't connect, clients get plans built on assumptions that won't survive the first LOI.

    How to Actually Do This Right

    Don't avoid planning around the business. Just plan with reality:

    • Understand probable deal structures. Not just valuations
    • Stress-test against lower-than-expected proceeds
    • Build in time for value work before going to market
    • Get wealth advisors and exit specialists talking early

    Winners aren't the ones with the highest valuations. They're the ones whose expectations match reality. With time to fix the gaps.