Lesson 5 · Do & interpret
Two figures and one split. The rate tells you whether the plan is credible; the split tells you what kind of work it actually is.
8 minutes · Board’s Number Calculator · Artifact: yearly growth needed
This is the distinction that determines everything that follows, and most plans never make it.
Use the figure from the lower of your two runs. Plan against the harder number.
Trailing twelve months, not this year’s budget.
Until you sell, hand it off, or reach the target you set yourself.
It is a subtraction and a division, and doing it by hand is part of why the number sticks.
Gap = target earnings − what you earn today · Yearly rate = gap ÷ years ÷ what you earn today
Worked through with the business below: it earns $6.192M and has to reach $11.5M in five years. The gap is $5.308M. Divided by five that is $1.06M a year, and against $6.192M of current earnings that is 17.1% every year for five years. Write down the gap in dollars and the yearly rate as a percentage — lesson 9 uses the rate, and lesson 10 uses both.
| Your multiple | Reading | What it means for you |
|---|---|---|
| Below 1.3× | Within reach | Rare. Your risk is not the plan, it is complacency. An easy number tends to get raised, or the business gets sold sooner than anyone told you. Check that an optimistic view of what the business will be worth is not quietly doing the work. |
| 1.3× – 1.8× | Achievable | The common case. Price, product mix and removing complexity can carry this — but only if each piece is named, owned by a person, and reviewed on a rhythm. Working harder will not do it. |
| 1.8× – 2.5× | Requires real change | Running the business better rarely closes this on its own. It requires decisions about what you stop selling, who you stop serving, and where you stop investing. |
| Above 2.5× | Needs a reset | Either you have a proven ability to buy other businesses and integrate them, or the expectation itself needs renegotiating with whoever set it. Pretending otherwise burns two years you cannot get back. |
Second read
Now split it, the way lesson 4 described. Take the total improvement required and divide it into the part that comes from earning more on revenue you already have, and the part that requires revenue you do not have yet.
This is a growth plan, and it carries market risk you do not control. Say so out loud, and price the risk into your timeline.
Better news and harder work. The money is already inside the business, and the answer is subtraction.
If your team cannot produce this split, that is the finding. It means the plan has never been examined at the level where it would either hold or fall apart.
Earning 7.2%, or $6.192M, against a target of $11.5M with five years left. The plan on the wall was a revenue plan: new accounts and two new product lines.
13.2% a year put them squarely in the band where most plans sit and most plans fail. The number was reachable. Nothing in their plan had a single owner and a date attached to it.
The split was the finding. $3.4M of the $5.308M could come from earning more on revenue already in the business — 64% of the requirement, sitting inside a book they already owned. Only $1.908M genuinely needed new customers.
Their entire plan had been pointed at the smaller half. Lesson 7 is how you find the larger one, and nobody had looked because the growth plan had absorbed all the attention.
A composite drawn from real engagements and 30+ years of operating experience; company details are disguised and figures are representative, not audited results of a single client.
Next — lesson 6
