Ep. 329 — Ryan: Why Your Annual Plan Is Pointed at the Wrong Number

7 min read

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Episode Summary

You’re walking into 2023 planning with revenue targets, employee counts, and a VTO full of rocks, and somewhere underneath it you’re not sure any of it is actually moving you toward something worth the grind. I had a $20M revenue business with my dad. We lost $900K in ‘09. It was worth nothing. So when an owner tells me the goal is $25M in revenue, my first question is: so what? In this solo episode I rebuild annual planning around the only number that decides whether owning the business was worth it, which is your target equity valuation at a point in time. I get into how to back into the constraints (fund the growth plan, take a real salary, pay taxes, decide on distributions), why Normalized EBITDA and the multiple are the only two numbers that produce enterprise value, how the Weighted Average Cost of Capital (WACC) actually builds a multiple from the buildup method, and why the financials have to sit on top of your VTO so every executive’s KPIs roll up to the equity target instead of a revenue line that doesn’t tell you a damn thing about whether the year was worth it.

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## Top 10 Takeaways
  1. Revenue is not a goal. $20M in revenue can be worth nothing the day you turn the lights off.
  2. Plug in point B. Without a target equity valuation at a date, every decision is a distraction in disguise.
  3. Every big decision (new product, acquisition, key-employee equity, investor) has to bring you closer to the equity target. Otherwise it’s noise.
  4. You have a job and you have an asset. If you’re not paying yourself a salary, you’ve conflated the two.
  5. Fund the growth plan first, then salary, then taxes, then distributions. If the order is wrong, the math is fiction.
  6. Pulling cash out for boats and lifestyle without knowing what your growth plan needs is flying blind, regardless of revenue.
  7. Normalized EBITDA times the multiple equals enterprise value. Those are the only two numbers your annual plan should be moving.
  8. Same EBITDA, same industry, same revenue, double the value. The difference is sustainable, predictable, transferable cash flow.
  9. Company-specific risk is the piece of WACC you actually control. That’s where every de-risking project earns the multiple bump.
  10. Your financial KPIs should sit on top of your VTO so every executive’s rocks roll up to the equity target you set.

Sound Bites

“I had a $20 million business with my dad that we lost, you know, 900 some thousand dollars in 09 and it was worth nothing. So like, great, you have a $20 million business, but so what?” (@TBD) — Ryan Tansom

“If you are sucking all of the cash out of the company through salaries, perks, and distributions, and you’re solving for annual income or for that K-1 without understanding how that’s impacting your ability to fund your growth plan on the way to getting equity valuation you want at a point in time, you’re flying blind.” (@TBD) — Ryan Tansom

“It’s not that complicated what our business does in our industry. We make a shitload of money by buying a company, increasing the normalized EBITDA, increasing the multiple, and paying down debt. If I hit all three of those levers at the same time, our net proceeds and internal rate of return go through the roof. You can do that too while you own your company.” (@TBD) — Ryan Tansom

“The story of the business is told through the financials, and I’ve never met an entrepreneur that can’t tell one hell of a story of where they’ve been, where they are, and where they’re going. And my follow-up question is, prove it, truly prove it.” (@TBD) — Ryan Tansom

“I want to put that clarity and that confidence into you to say, okay, here are your ideas. Roll those into the financials. Put those on the VTO and know that the projects that you’re working on are going to get you closer to that goal.” (@TBD) — Ryan Tansom

About This Episode

Solo Ryan teaching episode kicking off a year-end miniseries on rethinking annual planning before owners walk into 2023. Ryan pulls slides directly from the Intentional Growth Bootcamp and the Vistage talks he gives, and walks through the framework he uses with clients: target equity valuation as the constraint, the cash cascade (growth capital, salary, taxes, distributions), normalized EBITDA × multiple, and the weighted average cost of capital buildup that actually produces the multiple. The arc sets up the next several guest episodes (Patrick Donohue on Breakout Valuations, Jeff Campbell on tying marketing spend to EBITDA, Chris Ronzio on SOPs and Trainual) as continuations of the same throughline.

Resources Mentioned

  • Intentional Growth Vision Board — Worksheet linked in the show notes covering vision, financial targets, exit options, and value growth score.
  • Intentional Growth Bootcamp / Training — Where Ryan teaches the five principles in depth.
  • Financial Assessment — 22-question assessment Ryan and Pat built that produces a results page with five videos walking through a case study.
  • Simon Sinek — The Infinite Game — Referenced for the trap of confusing means with goals.
  • Norm Brodsky — Past podcast guest, referenced for scaling to $100M and going bankrupt vs. building $25M with $10M EBITDA.
  • Ken Sanginario — Value Opportunity Profile — The eight functional areas framework Ryan uses in Principle 4.
  • Patrick Donohue — Breakout Valuations — Upcoming episode on financials and focus.
  • Jeff Campbell — Upcoming episode on marketing KPIs tied to normalized EBITDA and CAC.
  • Chris Ronzio — Trainual — Upcoming episode on SOPs that make the business sustainable, predictable, and transferable.

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