Understand what the expected cash from keeping your business is worth today.
Your company may provide income for years while you continue to own a valuable asset. Owner’s Value puts those future ownership benefits on a common basis so you can examine what keeping the business requires and what it could produce.
Bring the Time, Cash Flow and Wealth goals from Ownership Goals. A valuable business can still demand a role you no longer want. A comfortable salary can hide a weak return on the capital you have invested.
Value the cash that ownership can receive
Discounted cash flow, or DCF, calculates the present value of expected future cash and the remaining ownership interest. The discount rate is the required return for taking the risk of receiving that cash.
Start with a dated forecast. Account for operations, taxes, reinvestment, financing and the reserves needed to keep the business healthy. Salary pays for a job. It is not an extra ownership distribution, and the cost of doing that work remains relevant if you hire someone else.
The ending, or terminal, value represents the interest that remains at the forecast’s end. It needs support just like the annual cash. Using the value you want as the ending value makes a conditional goal scenario; it does not prove the business can deliver it.
A future dollar and a dollar today do different jobs
In a hypothetical illustration, receiving $100 at the end of year five is worth about $26.93 today at a 30% required return. At 25%, it is worth about $32.77. These rates demonstrate the relationship; they are not recommended rates for your company.
Holding the cash constant, a higher required return reduces today’s value. Reducing customer concentration or reliance on the owner may improve the dependability of future cash. Those improvements also take money and effort. Include their cost in the forecast before claiming the benefit.
The required return is not promised annual growth or guaranteed income. Explain the evidence behind the rate. Your own Assessment score can identify questions to investigate; it cannot establish the price an investor should pay.
Keep the method consistent
Ownership cash and ending equity belong with a consistent cost of equity. A company-level free-cash-flow valuation uses an appropriate company rate, then reconciles enterprise value to the owner’s equity. Mixing personal distributions with a pre-debt enterprise terminal value can double-count value.
Keep dates, taxes, ownership scope, cash and debt visible. A suitable professional report or existing model can meet the requirements. You need to understand and use it, not create a duplicate model merely to match a template.
Work from the model you already maintain
| Support | What it helps you establish |
|---|---|
| DCF Model Builder directions | The dated forecast, terminal value, discounting and result in your existing model or report. |
| Buildup Methodology guidance | The evidence and rationale for the required return and material risks. |
| Ownership Assessment | Capabilities worth investigating when considering how dependable the business is. |
| Owner’s Scorecard | The role, annual cash flow and future wealth the holding plan must support. |
The maintained Member material includes directions for this same work. These are connected questions, not three mandatory new forms. Keep the model and dated valuation support in The Numbers of your Owner’s Playbook, linked to the goals in The Plan.
Complete the calculation and use it
Calculate the supported value, challenge a consequential assumption, compare the holding plan with your goals, then hold the owner review. Open the detail before choosing your score.
Open the four actions and their completion requirements
1. Calculate a supported DCF value
Identify the business and ownership interest, valuation date, forecast calendar years, currency, cash timing and tax basis. Explain expected ownership cash after business spending, reinvestment, financing and necessary reserves. Separate pay for operating work from ownership income, and distribution goals from a supported forecast. Account for the cost of replacing work you intend to leave.
Retain the dated model or suitable valuation report, source inputs and assumptions. For the ownership-cash approach, discount ownership cash and ending equity at a consistent cost of equity. A company cash-flow approach needs an appropriate company discount rate and a documented bridge to the owner’s equity. Count debt, retained cash, distributions and ownership share once. Label enterprise versus equity value. A desired ending value remains a conditional goal scenario until its assumptions are supported.
Explain why the discount rate fits these cash flows, with evidence for material risks and its components. A coherent professional method can count. If your maintained model uses validated phase scores, retain its documented method and input-review requirements; a self-score or generic band is not a substitute. Unresolved material input gaps remain open.
Complete when: the dated forecast and present-value calculation are supported, traceable and internally consistent. A headline number, conflicting dates or desired growth rate alone does not establish the answer.
2. Run a meaningful downside
Change an assumption that could affect the holding decision: available ownership cash, growth, discount rate or ending value. Keep other inputs constant when isolating an effect; identify every change in a combined downside. Save the base and challenged amounts in the same model or review and explain the implication.
Complete when: the challenge has a traceable result and tells you what to investigate or protect. No fixed five-percentage-point change or extra worksheet is required.
3. Compare keeping with the same ownership goals
Use matching dates, ownership interests and money/tax bases. Explain the operating role and hours the holding plan requires, the annual cash it could provide and its future contribution to wealth. Preserve the Scorecard’s Market Equity Value line and keep today’s DCF separate. Subtracting today’s DCF from a future market-equity goal does not establish the growth required.
Complete when: Time, Cash Flow and Wealth implications, meaningful gaps and questions for the later market/sale lenses are explicit. You do not have to achieve or change the future goals to complete this milestone.
4. Review the result and decide what happens next
Complete a dated owner review of the inputs, valuation, downside and Scorecard comparison. Record an action or supported continuation, the responsible person and due date, and the next quarterly input review. The first review can happen now, before Module 3’s meeting rhythm is installed.
Complete when: you have actually reviewed the evidence and chosen the next step. A new hire, investment or transaction is not required. Refresh the valuation annually and sooner when a material change affects the decision. Preserve original reports and prior reviews.
Review the milestone-specific 0–3 score and evidence test
0 (Not Started). You have not begun examining what the future ownership cash flows and remaining business interest are worth today.
1 (Learning). You can explain why Owner’s Value differs from Market Value and sale proceeds, how cash flows and risk affect present value, and why a goal is not a forecast. You have not yet assembled a usable valuation for your business.
2 (In Progress). You have begun reviewing or preparing your valuation. One or more requirements remain incomplete: the inputs or method need support, the calculation or challenge is unfinished, the connection to your goals is unclear, or you have not reviewed the result to decide what happens next.
3 (Installed). You have a dated Owner’s Value calculation with a supported cash-flow forecast, discount rate and terminal value on a consistent basis. You can explain the result and a meaningful less-favorable scenario. You have compared the holding plan with your Time, Cash Flow and Wealth goals, documented a real review and its next action or supported continuation, and set when to review the inputs again. Suitable existing models and professional reports count; three new forms are not required.
The evidence test: Show the dated model or report and its inputs. Explain what ownership interest and future cash flows it values, why the discount rate and terminal value fit those cash flows, and how they produce today’s Owner’s Value. Show the challenged assumption and its effect. Then show how the holding plan compares with your goals at matching dates and on matching money bases, what you decided in your review, and when you will return to it.
You choose your score after reviewing the evidence. Keep peer, coach and AI assessments separate, including what each person could inspect. Unreviewed evidence is not an automatic zero. Preserve earlier reviews and the reasons for your chosen score. A checked box, prepared AI answer or future meeting invitation does not establish actual use.
Keep the valuation useful
Review material inputs quarterly, refresh the full valuation annually and revisit changes that could affect a decision. Preserve the previous assumptions and explain what changed. The first owner review can happen before you install the formal meeting rhythm.
Today’s DCF and your future Market Equity Value target are different measures. Use matching dates and money bases when judging the plan. Milestones 5 and 6 add the market estimate and the consequences of a particular sale.
Explore the idea further
- Intrinsic Value, episode 310 with David Diehl. How expected cash and its risk support a present-value estimate.
- A Five-Year Forecast That Shows Your Value Gap, episode 498. Connect your ownership target with the operations, cash and investment behind a credible plan.
Choose your next step
Put the work in context. The Ownership Assessment helps you examine the capabilities behind your plan, find evidence still to review and choose useful work. It does not turn your self-score into a valuation.
Work through the decisions with support. The 90-Day Boardroom Blueprint connects your goals, financial foundation and decisions in your first usable Owner’s Playbook. You can explore support directly; completing the Assessment is not a prerequisite.