Menu
Free Ownership Assessment →
Free Ownership Assessment

Conversations about ownership

Ep. 516: How to Measure and Forecast Your Business Value with the Three-Statement Model

Connect your five-year valuation target to today's budget, cash and ownership choices through the three-statement model.

On this page

Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS

Episode Summary

What is your business worth if you keep it, what might a buyer pay, and what would you actually take home from a sale? In this episode, we walk through all three using the three-statement model, connecting today’s cash flow and annual budget to your five-year ownership goals. We trace earnings, leadership costs, operating risk, debt and working capital through the three-statement model. More growth can eat the cash you want to take home. A higher sale price can leave you waiting on money you don’t control. Your monthly budget connects those trade-offs to the five-year plan; quarterly reviews show whether the plan is working. You choose the goals and assumptions, then use the numbers to challenge the choices. We finish by reading the difference between revenue and margin performance: in the Advanced Solutions example, sales beat budget while weaker margins leave gross profit about $105,000 short.

Watch on YouTube

Top 10 Takeaways

  1. Your valuation target belongs beside the time and cash flow you want from ownership.
  2. Connect your five-year target to today’s numbers before choosing reinvestment or distributions.
  3. Value keeping your company through future distributions and the business you still own.
  4. Trace earnings through all three statements to see cash after reinvestment and leadership costs.
  5. Support your planning multiple with operating evidence and a defensible market range.
  6. Debt, cash and working capital determine how much enterprise value belongs to you.
  7. Faster growth can consume distributions and force borrowing or dilution you don’t want.
  8. Compare take-home sale proceeds with your wealth goal, including money still at risk.
  9. Your monthly budget and quarterly reviews connect today’s performance to the five-year valuation.
  10. You choose the goals and strategy; the model shows what those choices require.

Sound Bites

“Like, what are you going to work for every day if you don’t have a target in mind?” — Kim Clark

“If we can’t see how it creates more cash, there was no return.” — Ryan Tansom

“We want to plan around probable, Not possible.” — Ryan Tansom

“So, like, all of the goals, all of the assumptions, all of the strategies, all of the sales stuff, all the operations, all the ownership decisions are 100% your call. The math is not.” — Ryan Tansom

About Kim Clark

Kim Clark is a partner and Chief Revenue Officer at Independence by Design™. She leads iBD’s revenue function and Predictable Revenue work, including customer acquisition, systems and forecasting. In this conversation, she brings the revenue leader’s questions to the valuation model: what the targets mean, how the pieces connect and what the business must do to reach them. Meet the iBD team.

Resources Mentioned

  • Prairie Capital Advisors and Dave Diehl. Ownership transitions and valuation; the team Ryan references for the upcoming workshop. Dave’s profile.
  • iBD valuation workshop. The workshop discussed near the close of the episode. Workshop details.
  • Episode 427 with Dave Diehl. Deal structures, working capital and the proceeds an owner actually receives. Listen.
  • Pepperdine Private Capital Markets Report. Market reference for private-company financing and valuation assumptions. Ryan mentions the study without naming an edition; the current 2026 report is available from Pepperdine University.
  • Casey Brown and Boost Pricing. Referenced in the example connecting sales training, pricing and margin improvement to cash. Boost Pricing.
  • ITR Economics. Referenced in the discussion of Kim’s experience and forecasting. ITR Economics.
  • BizEquity. Referenced during the discussion of understanding the assumptions behind a valuation number. BizEquity.
  • ChatGPT. Referenced while discussing model development and exploring choices within the owner’s constraints. ChatGPT.
  • Andrew Huberman. Ryan references the idea of understanding what you are doing while retaining your own decisions. Huberman Lab.

Contact

Connections