We need a certain net payout to fund our post-exit lifestyle, but our current valuation is well below that target. How do we structure our three-year V/TO® to specifically close this financial gap?

Question

Tyler Smith · Accepted Answer

Many business owners face a painful reality check when they discover their business is not worth enough to fund their next chapter. This is your valuation gap, and you cannot ignore it. If you want to close this gap, you must treat your target valuation as your primary three-year goal on your V/TO®.

Begin by working backward from your target net payout. Determine the exact enterprise value and EBITDA required to hit that number, taking taxes and fees into account. Once you have this target EBITDA, write it directly into the three-year target section of your V/TO®.

Next, look at the operational levers required to reach that EBITDA. This is not just about growing top-line revenue. You need to focus on margin improvement, customer retention, and operational efficiency. Identify the core initiatives required to scale profitably and break them down into annual goals.

For each annual goal, your leadership team must agree on quarterly Rocks that directly support those financial objectives. For example, if you need to improve gross margins by four percent, set a Rock to renegotiate supplier contracts or eliminate low-margin services.

Review your progress every single week during your Level 10 Meeting™ by tracking leading indicators on your Scorecard. If your gross margin or sales pipeline metrics start to slip, raise it as an issue and solve it immediately through IDS®.

By aligning your entire operational engine around closing this financial gap, you turn your valuation target from a hopeful wish into a structured, trackable execution plan.