The profit gap is the difference between what a business currently earns and what it would need to earn to achieve the enterprise value required to fund exit goals.
The profit gap connects the personal financial plan to the business plan. Once the owner’s real number is defined and converted to a required enterprise value, by dividing it by the expected exit multiple, the profit gap becomes clear: the EBITDA the business needs to generate to reach that value, minus the EBITDA it currently generates.
Closing the profit gap is the operational work of value growth. It may involve revenue expansion, margin improvement, cost restructuring, or a combination. What it always involves is a clear understanding of where the business currently stands and what specific changes in financial performance would move the needle on enterprise value. A business that knows its profit gap has a growth target that is directly connected to the owner’s exit outcome rather than to an arbitrary revenue goal.
See also: Wealth Gap · Value Gap · Owner’s Real NumberThe profit gap is a specific number that connects business performance to personal financial goals. See how Wefinx approaches value growth.