If the business continues on this path, will it support your ownership goals?
Your goal describes what you want. The forecast tests what the business could produce under stated assumptions. A useful forecast makes the difference visible, even when the answer falls short.
Milestone 12 connects the annual budget to a supported five-year model, three views of value and alternative scenarios. You review the consequences for Time, Cash Flow and Wealth, then choose what to continue, change or investigate.
Extend the annual plan with supported assumptions
Year one starts from the identified adopted annual budget. If the current outlook has changed, preserve that budget and explain the bridge to the latest forecast. Years two through five need supported assumptions across all three statements.
Revenue growth requires an explanation of customers, pricing, retention and capacity. Margin assumptions need delivery support. Leadership changes need start dates, costs and realistic effects. Equipment, working capital, debt and tax affect cash even when they are easy to overlook in a profit projection.
The 5-Year Rolling Forecast Build organizes the longer view in the ongoing model. Annual totals beyond year one can make the plan readable, while retaining the detail needed to support material decisions. State the calendar, reporting cutoff and what changes in each year.
Your finance lead builds and maintains the connections. You challenge the assumptions and examine the ownership consequences. The plan should not assume that every additional hour of your work is available indefinitely.
Keep the three value questions distinct
| View | The question it answers | What the forecast must make clear |
|---|---|---|
| Owner’s Value | What is the supported future cash stream worth on the chosen basis today? | Cash-flow definition, discount rate, terminal assumptions and valuation date. |
| Market Value | What might the business be worth to buyers under supported market assumptions? | Dated earnings and multiple evidence, then the bridge from enterprise value to equity value. |
| Transaction Value | What could actually reach you from a particular deal structure? | Ownership share, eligible cash, debt, fees, taxes, closing cash and later or conditional proceeds. |
The DCF Valuation Model needs the correct cash flow and discount-rate pairing. Enterprise cash flow and equity cash flow use different bases. Do not discount Normalized EBITDA as if it were distributable cash, or mix enterprise WACC with cash already measured after financing for equity holders.
The Market Value Tracker carries the dated earnings, market assumptions and equity bridge. Improving the business may reduce risk, but a Velocity Score does not mechanically set a multiple or guarantee an increase in value.
A transaction scenario is a planning comparison, not an offer or proof of financing. Debt, eligible cash, working capital and transaction deductions must be treated consistently, without counting the same value twice.
Compare the same value at the same date
Your Value Gap Analysis Worksheet separates three things:
- Current position: the supported value at today’s stated date.
- Target-year forecast: what the model projects at the future date.
- Chosen goal: what you want on that same future date and basis.
For a hypothetical 100% owner, current company equity might be $4 million, target-year company equity might be projected at $8.5 million, and the chosen company-equity goal might be $10 million. The current distance to the goal is $6 million. Projected improvement is $4.5 million. The remaining target-year gap is $1.5 million. None of that projected improvement has been achieved today.
If your goal is personal net worth, also account for ownership share, outside assets and personal liabilities on the same date. If the question is spendable sale cash, apply the transaction and tax assumptions. Today’s enterprise value cannot be subtracted from a future personal wealth goal and called a comparable gap.
Now examine the operating choices behind the gap: earnings growth, supported market assumptions, debt and cash, and working-capital improvement. A debt payment funded from existing cash does not create the same value as paying debt from new cash the business generated. Keep the full bridge visible.
Compare Time and Cash Flow too. A higher forecast valuation does not automatically meet your goal for personal income or a different working week.
Test the alternatives before committing
The Scenario Analysis Worksheet preserves the baseline and names every changed assumption. Maintain a supported base case, upside case and downside case, plus sensitivities on the three main drivers.
Choose drivers that matter to this company. They might include retention, gross margin and hiring timing, rather than three arbitrary growth percentages. Change one assumption at a time in a sensitivity to understand its effect; use a complete scenario to test how several conditions interact.
Consider a hypothetical leadership hire. Compare its cost, ramp-up time and expected effect on your responsibilities and the company’s capacity. Test what happens if the benefit arrives later than planned. The owner then has a supported choice about timing, conditions or a different approach.
Record the actual review, evidence, conclusion, responsible person and next quarterly review. Continuing the present course or deferring a commitment can be valid use. There is no requirement to buy something or complete a new transaction inside an arbitrary 90-day window.
A remaining goal gap can be the useful result
A complete reviewed forecast can be Installed while showing that the present plan falls short. That finding informs the next strategy work. Do not increase revenue or a valuation multiple solely to make the worksheet hit the owner’s number.
Bring a proposed priority to the Value Growth Plan and Game Plan. Preserve the current adopted plan until the owner approves a replacement. A financial model can inform the decision; it cannot make the decision for you.
Complete the five owner actions
The five-year statements, valuation bases, comparable goal gap, scenarios and actual owner review all need support. Achieving the five-year goal is not a requirement for completing this milestone.
Open the five actions and their completion requirements
1. Build the five-year path
- What supports the change in revenue, margin, people, investment and cash each year?
Show: Year one tied to the identified adopted budget; supported years two through five across all three statements in the ongoing model.
Supporting work: Outyear instructions; 5-Year Rolling Forecast Build.
State the calendar, cutoff and assumptions. If a current forecast differs from the original budget, preserve the budget and explain the bridge. A revenue-growth percentage without the required capacity, investment, working capital and funding is not a complete path.
Record the evidence location/date, what was inspected and any unresolved issue in your existing project. Mark it complete only when the evidence supports it.
2. Calculate Owner’s Value
- What cash flow is discounted, at what rate, and on which enterprise or equity basis?
Show: Supported forward cash flows, discount and terminal assumptions, and a transparent present-value calculation.
Supporting work: Valuation instructions; DCF Valuation Model.
Use the reviewed Module 2 method and match the cash-flow definition to the discount-rate basis. Keep the owner’s chosen goal separate from a calculated model result, even where the worksheet is named Valuation Target.
Record the evidence location/date, what was inspected and any unresolved issue in your existing project. Mark it complete only when the evidence supports it.
3. Build the market and transaction views
- What supports the earnings basis, multiple and bridge to the owner’s possible proceeds?
Show: Dated earnings/multiple evidence, enterprise-to-equity reconciliation, ownership share and explicit transaction assumptions separating closing and later proceeds.
Supporting work: Market Value Tracker; Milestone 05 - Market Value; Milestone 06 - Transaction Value.
A scenario is not an offer or proof of financing. Treat debt, eligible cash, fees, taxes and contingent/deferred payments explicitly. The Velocity Score does not determine a market multiple or establish sale-cash eligibility.
Record the evidence location/date, what was inspected and any unresolved issue in your existing project. Mark it complete only when the evidence supports it.
4. Explain the goal and value gap
- How does the forecast compare with the owner’s Time, Cash Flow and Wealth goals on a consistent basis?
Show: Current position, target-year forecast, chosen goals, outside assets, ownership share and a like-for-like target-year gap, with priorities to investigate.
Supporting work: Value Gap Analysis Worksheet; Net Worth Target Worksheet; Owner’s Scorecard™.
Do not subtract today’s enterprise value from a future personal wealth goal. Show dates and distinguish company equity, personal net worth and after-tax sale proceeds. A remaining supported gap is useful information; the milestone does not require the goal to have been achieved or the Module 5 strategy already completed.
Record the evidence location/date, what was inspected and any unresolved issue in your existing project. Mark it complete only when the evidence supports it.
5. Review alternatives and choose the next priority
- What changes in the downside case, and what does that mean for your next decision?
Show: Supported base/upside/downside cases, sensitivities on three main drivers, an actual owner review and recorded priority or capital-allocation conclusion.
Supporting work: Scenario Analysis Worksheet; the dated quarterly decision record.
Identify every changed assumption and preserve the baseline. Choosing to continue, defer or change the plan is valid use when the reasoning is supported. Name the responsible person and next quarterly review. A new transaction or a decision inside an arbitrary ninety-day window is not required.
Record the evidence location/date, what was inspected and any unresolved issue in your existing project. Mark it complete only when the evidence supports it.
Review the milestone-specific 0–3 score and evidence test
0 (Not Started). You have not begun the five-year forecast and valuation work or demonstrated how it connects to ownership goals. A target alone is not a supported financial path. Identify unreviewed evidence separately from work that has not started.
1 (Learning). You can distinguish the owner’s chosen goal, the model’s forecast and the proceeds from a possible transaction. You can explain the different questions answered by Owner’s Value, Market Value and Transaction Value, and why a value gap needs comparable dates and definitions. The supported five-year model is not yet complete.
2 (In Progress). The out-year assumptions, valuation or goal comparison is being built. One or more of the five requirements remains incomplete: the starting budget, supported forward statements, valuation assumptions, comparable value gap, scenarios or actual owner review. A target entered into a valuation tab or an unsupported growth line is not a completed forecast.
3 (Installed). All five requirements are supported. The ongoing model contains a complete five-year forecast built on the reviewed historical foundation and identified annual budget, with supported assumptions across the income statement, balance sheet and cash flow statement. Out-year and valuation work is complete, with Owner’s Value, Market Value and Transaction Value identified on their appropriate cash-flow, ownership and tax bases. The owner can compare the forecast with the Time, Cash Flow and Wealth goals, showing the current position and the projected target-year gap separately. Outside assets, ownership share, debt, eligible cash and transaction deductions are treated explicitly without double counting. Base, upside and downside cases and sensitivities on the three main drivers are supported. The owner has reviewed the alternatives, recorded a priority or capital-allocation conclusion and assigned the next quarterly review. A supported decision to continue, defer or change a plan counts as use; a new transaction is not required. The forecast may reveal a remaining goal gap. Closing that gap and completing the later strategy milestones are not prerequisites for this score.
The verification test. Open the current forecast, valuation views and Owner’s Scorecard together. Show the identified starting budget, the main out-year assumptions and their effects on profit, cash and value. Explain the target-year gap using the same date, ownership share and value/tax basis; show the current position separately. Compare the base and downside cases, identify the assumptions that matter most and show the priority or decision recorded from the review. Confirm the next quarterly update. Unsupported assumptions, mismatched comparisons or an unreviewed forecast remain incomplete. Use the model and finance lead rather than answering from memory.
Review suitable existing work before creating more documents. Record each action as complete, incomplete or not reviewed, with its source and date. You choose the saved score. Keep owner, peer, coach and AI judgments separate, with their reasoning and any disagreement. Unreviewed evidence is not automatically a zero. Preserve earlier reviews and name the next useful action and review date. A score does not substitute for qualified financial acceptance of a particular model.
Review the longer path every quarter
Use the Quarterly Boardroom to revisit the assumptions, goals, alternatives and chosen priority. Monthly actuals identify changes that may need an earlier update.
A material customer loss, acquisition opportunity, leadership departure or financing change can require an out-of-cycle review. During annual planning, roll the horizon after the new plan is adopted, preserving previous actuals and comparisons. Changing the year labels alone does not create a supported new forecast.
Current reports stay in The Numbers. Chosen priorities stay in The Plan. Dated reviews and decisions stay in The Rhythm. Module 5: Predictable Revenue develops the revenue capability behind the financial path.
Explore the idea further
- How to Build a Five-Year Forecast That Shows Your Value Gap with Ryan and Kim, episode 498. Work through the connection between today’s financials and the longer ownership goal.
- Debt Without a Plan Is Just Indigestion with Ami Kassar, episode 381. Consider financing choices in the context of a supported plan.
- Boardroom Ownership and the Capital Allocator Seat with Jim Carlisle, episode 455. Connect ownership decisions to the longer financial consequences.
Choose your next step
Review the wider system. The Ownership Assessment helps you review this capability beside your ownership goals and the other milestones. Keep missing evidence visible and choose the work that matters next.
Connect the work with support. The 90-Day Boardroom Blueprint brings ownership direction, the financial foundation and decisions into a first usable Playbook. You can explore that support directly; completing the Assessment is not a prerequisite.
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