Milestone 3. Net Worth & Valuation Targets
Lock the wealth target and the enterprise value the business has to deliver to fund it so every capital allocation decision has a scoreboard instead of a guess.
Phase 1 (Plan) · Module 1 (Ownership Goals) · Milestone 3 of 27
The owner’s question
Do you know your wealth target, the year it has to be hit, and how much of it the business has to deliver?
If you can’t answer that in dollars with a time horizon and a three-bucket breakdown (savings, real estate, business), you’re not at a 3 yet.
TL;DR
Every owner asks “what’s my company worth?” and most never get a clean answer. They guess, they hope, they default to chasing revenue, or they let advisors talk them into whatever the advisor sells. Milestone 3 is where the guessing ends. You set a specific wealth target in dollars at a specific time horizon. You decide your ownership end state (sell, ESOP, family transfer, hold, hybrid). You back-calculate what the business has to be worth to fill the gap between your portfolio today and the target. Those numbers populate the Wealth dimension of your Owner’s Scorecard™ and become the constraint every reinvest-versus-distribute decision is measured against.
Why this matters
Every time an owner asks “what’s my company worth?” out loud, the vampires come out of the woodwork. Consultants. Customers. Suppliers. Peer groups. Wealth managers angling for assets under management. The CPA starts talking about taxes. The banker starts talking about loans. Employees think you’re selling. Everything turns into a nightmare conversation.
You should be able to ask what your company is worth without any stigma. Growing your company without understanding how valuations work is insane. Without it, every reinvestment decision is a gut call. Every distribution is a reaction. Every “should we buy / should we sell” question gets answered by whoever talks loudest in the room.
Two traps kick in when the valuation question isn’t clear. Trap one: solve only for annual income. Grow, take some distributions, hopefully cover taxes, K-1, repeat. This mindset doesn’t compute with capital allocation. A half-million-dollar ERP system or a major hire isn’t an expense, it’s an investment against valuation. Solving only for annual income makes every investment look unaffordable. Trap two: hope. Just double down, roll the dice, and hope you have a valuable company when it’s time. Hope is not a strategy.
Milestone 3 is the escape from both. You lock a wealth number, lock a date, decide an ownership end state, and back-calculate what the business has to be worth to fill the gap. The math is the math. The trade-offs become visible. The conversation with your CPA, your banker, your spouse, and your team can finally happen with context instead of guesses.
What this looks like when it’s installed
The owner of Advanced Solutions entered Year 1 with $7.48 million in total net worth. $5.78 million was the business (the $6.78 million enterprise value minus $1 million of net debt). $1 million was savings and investments. $700,000 was real estate. By Year 5, total net worth had grown to $23.29 million. The business equity drove most of the move, going from $5.78 million to $21.01 million as EBITDA grew from $1.5 million to $3 million and the multiple expanded from 4.52× to 6.67×. Savings grew to $1.46 million at 10 percent compounded. Real estate grew to $819,000 at 4 percent.
That tripling of total net worth in five years is what “installed” looks like for Milestone 3. Not a vague aspiration. A specific wealth target in dollars, a specific date, a three-bucket forecast (savings, real estate, business equity), an explicit ownership end state, and capital allocation decisions that close the gap between today and the target. The number gets reviewed quarterly at the Quarterly Boardroom against actuals. When the gap shifts, the conversation about what to do happens against context instead of gut feel. Full walkthrough: see the Case Study Reference.
Score yourself
Score yourself honestly against where you are right now. The verification test at the bottom is what separates a real 3 from a wishful 3.
0 (Not Started). You haven’t engaged with the material. The valuation question is still vague. No wealth target, no time horizon, no enterprise value target, no Scorecard Wealth numbers. Default starting point.
1 (Learning). You can articulate the wealth-target framing. You can explain the 4 percent rule, the buildup methodology, and the difference between revenue and valuation. You understand that net worth is the destination and that the business is one of three buckets that has to fill it. No specific dollar targets drafted yet.
2 (In Progress). Wealth target drafted with a time horizon. Enterprise value target back-calculated. Ownership end state under consideration. Wealth dimension of the Scorecard partially populated with at least best-guess numbers across all three buckets. The documents exist but aren’t yet being reviewed quarterly and aren’t yet shaping capital allocation decisions.
3 (Installed). All four deliverables complete. Wealth target locked in dollars at a specific year. Enterprise value target back-calculated with growth rate assumptions. Ownership end state decided (or the decision matrix is filled and you’ve chosen which path you’re working toward, even if the final commitment comes later). Wealth dimension of the Scorecard fully populated with all three buckets and Year 5 projections. Reviewed quarterly at the Quarterly Boardroom against actuals. At least one capital allocation decision in the last 90 days (a hire, a reinvestment, a distribution policy change, a portfolio decision) made deliberately based on the gap between current state and target.
The verification test. Walk through your wealth math out loud right now. “Net worth target: $X by Year [N]. Today: $Y. Gap: $Z. Savings bucket: $A today growing at __ percent to $B at Year 5. Real estate: $C today growing at __ percent to $D. Business equity: $E today. Has to be worth $F by Year 5. That requires __ percent compounded EBITDA growth and a multiple expansion from ___ to ___.” If you can do that in 90 seconds with specific numbers, you’re at a 3. If you say “I want to be set up someday” or “$100 million is the goal” without showing the math, you’re at a 1 or 2.
Build these four things
Four deliverables. Roughly 2-3 hours of focused work spread across one to two weeks. The full canonical Exercise templates and AI Interview Protocols that walk you through each one live inside the Member version of the iBD Ownership OS™ that paying clients fork.
| # | Deliverable | What it does |
|---|---|---|
| 1 | Net Worth Target Worksheet | Locks the dollar net worth target at the independence horizon, the year it has to be hit, and the annual income that target supports (using the 4 percent rule or your own withdrawal-rate assumption). |
| 2 | Ownership End State Decision Matrix | Surfaces the trade-offs between sell, ESOP, family transfer, hold-and-distribute, and hybrid (e.g., partial recapitalization). Doesn’t force a final answer. Makes the choice explicit. |
| 3 | Enterprise Value Target Calculator | Back-calculates what the business has to be worth at the time horizon from the wealth target, accounting for portfolio growth in savings and real estate. Outputs the required compounded growth rate. |
| 4 | Owner’s Scorecard, Wealth dimension | Populates the Wealth section of your Owner’s Scorecard™ with net worth target, three-bucket breakouts (savings, real estate, business equity), growth rate assumptions per bucket, and Year 5 projections. The reference point for every capital allocation decision going forward. |
Run them in this order:
- Net Worth Target first. What’s the dollar number, by what year, supporting what life? The 4 percent rule (target net worth = annual after-tax income needed × 25) is a useful starting point. Adjust based on the life you designed in M1 and M2.
- Ownership End State Decision Matrix second. Sell, ESOP, family transfer, hold, hybrid. Each has different tax, valuation, and timeline implications. You don’t have to commit yet, but you have to acknowledge it’s a decision.
- Enterprise Value Target Calculator third. Subtract savings growth and real estate growth from the wealth target. Remainder = what the business has to be worth at Year 5. Calculate the compounded growth rate that gets you there. Sanity-check it against industry norms.
- Scorecard Wealth dimension fourth. Consolidate everything into the Wealth section of the Scorecard. The Scorecard now has Time (M1), Cash Flow (M2), and Wealth (M3) all populated. Module 1 closes.
And then the move that separates a 2 from a 3. Make a capital allocation decision (reinvest, distribute, hire, buy, sell) using the gap between current enterprise value and the target as the deciding factor. Not “what feels right.” The math the M3 Calculator produced. One real decision is what flips this milestone from documented to alive.
Take your next action
At Level 0 (Not Started). Get exposure to the wealth-target distinction first. The fastest path is the iBD Ownership OS™ Workshop — three hours, $100, walk out with your Velocity Score baseline and the framework to start your Net Worth Target work.
At Level 1 (Learning). Block 90 minutes on your calendar this week. Draft a Net Worth Target in dollars with a time horizon. Surface the ownership end state options for your situation and name which one you’re leaning toward. The full canonical templates and the AI Interview Protocols live in the Member version of the OS that paying clients fork; the Workshop gives you working drafts to start.
At Level 2 (In Progress). Back-calculate the Enterprise Value Target. Populate the Wealth dimension of your Owner’s Scorecard with all three buckets (savings, real estate, business equity) at Year 1 and Year 5. Bring the filled Calculator and Scorecard to your next coaching call.
At Level 3 (Installed). Maintain. Review quarterly at the Quarterly Boardroom. Re-rate yourself if the gap has widened (business equity falling behind target), if savings or real estate growth assumptions have proven wrong, or if life goals have shifted the wealth target itself.
Where this lives once it’s running
The Wealth dimension of your Scorecard runs at a slower cadence than Time and Cash Flow. The numbers move slower, so the review moves slower. But the math is the most important math you’ll do in the OS.
Quarterly. The Quarterly Boardroom re-rates the Wealth dimension. Current enterprise value versus target (using the latest Owner’s Scorecard™ valuation update from Module 2 work). Savings and real estate updates. Has the gap closed? Has it widened? Capital allocation decisions for the next 90 days get governed against the gap, not against gut feel.
Annually. The Annual Owner’s Reset is where the wealth target gets recalibrated alongside the Time and Cash Flow targets. New net worth target if life goals shifted. New time horizon if the path moved. New ownership end state if the conversation evolved. Growth rate assumptions get updated against actual portfolio performance.
Triggered events. Major business decisions (acquisition opportunity, recapitalization conversation, leadership departure, exit inquiry, large reinvestment) trigger a Wealth-dimension review. The question gets asked: does this move us toward or away from the target? Capital allocation discipline lives here.
If you don’t have the cadence built yet (you’re in Phase 1, working M3 for the first time), run your own quarterly review until the Module 3 cadence is installed. Pull up the Scorecard. Compare current enterprise value to Year 5 target. Adjust the assumptions. The cadence formalizes later. The discipline of reviewing quarterly starts now.
How this fits in the OS
Prerequisites. Milestone 1: Time & Role Goals and Milestone 2: Cash Flow Targets & Sources. Your role design drives your cash flow target. Your cash flow target informs your wealth target (because annual after-tax distributions plus W-2 plus other income compound across years). M1 first, M2 second, M3 third.
What this feeds. Everything downstream in Phase 2 (Build) and Phase 3 (Elevate) exists to close the gap M3 just made visible. Module 2: Expand Knowledge replaces your best-guess valuation with real numbers (DCF, market value, transaction value). Module 4: Sustainable Financials builds the financial model that proves the path. Module 5: Predictable Revenue, Module 6: Transferable Margins, and Module 7: Leadership Team build the engine, margin, and team that deliver it. Module 9: Operator Transition executes the operator-to-owner handoff that monetizes the end state.
Where it sits. Third milestone of Module 1 (Ownership Goals). Third of three Ownership Goals milestones in Phase 1 (Plan for the Future). Together with M1 and M2, M3 closes Module 1 and completes Point B for the entire OS.
Want help getting from a 1 to a 3?
The iBD Ownership OS™ Workshop is the paid filter where you experience the OS for yourself. Walk out with your Velocity Score baseline across all 27 milestones, the framework to set your Wealth target, and a sense of where Module 1 needs to land for your business specifically.
Related notes
- Module 1 (Ownership Goals) — module hub framing M1-M3
- Milestone 1: Time & Role Goals — first Module 1 milestone (Time)
- Milestone 2: Cash Flow Targets & Sources — second Module 1 milestone (Cash Flow)
- Module 2: Expand Knowledge — the three lenses of value framework that fills the valuation question M3 surfaces
- The full iBD Ownership OS™ — all 9 modules, 27 milestones
- Owner’s Scorecard™ — the scoreboard the OS runs on. M3 fills the Wealth section
- Capital Allocator — the role the owner becomes when reinvest-versus-distribute decisions are deliberate
- Independence Escape Velocity — the state M3 makes mathematically explicit
- Three Lenses of Value — Module 2 framework that fills the valuation question M3 surfaces
- The Owner-Operator Trap™ — why owners default to revenue chasing instead of valuation building
- Case Study Reference — full Year 1 to Year 5 wealth walkthrough
- Full podcast catalog
← Back to Module 1: Ownership Goals · ← Milestone 2: Cash Flow Targets & Sources · → Module 2: Expand Knowledge