Two owners run the same kind of shop with the same revenue. One spends five years chasing sales, working harder every season. The other grows more slowly but spends those years fixing the things a buyer would worry about. Who ends up with the bigger number? The forecast page has a clear answer, and it might surprise you.
Here’s the short version. In the page’s sample, about half of the value gain comes from a higher multiple, not from earnings. A good business exit strategy works on both. And honestly, most exit planning conversations only talk about the first one, which is why this page is worth a slow read, with a pencil nearby. It’s a useful page for anyone who’s been told to just grow revenue and wait.
Splitting the $731K
The sample shows EV growing from $500K to $1.23M, a total gain of $731K. The page splits that into two buckets. Growing earnings adds $379K, as SDE climbs from $200K to $352K. Raising the multiple adds $352K, as the EVO Score moves from 45 to 60 and the multiple moves from 2.5x to 3.5x.
The page says almost half comes from the multiple. It also draws two lines on a chart, one showing earnings plus value drivers, the other showing earnings only, stuck at 2.5x. The gap between those two lines is what it calls your GAP Number. For anyone serious about exit planning, that gap is the most useful figure on the page.
The earnings engine
Where the $379K comes from
SDE is earnings plus add backs, and the page treats it as the true owner benefit. In the sample, revenue grows 8% a year, gross margin sits at 41% and overhead grows 5%. Because overhead grows slower than revenue, margin expands. That’s how earnings climb from $110K at the start to $220K by year five.
Say you run a landscaping company and every spring you add a truck, a crew and an office hire. Revenue rises, but so does overhead, sometimes faster. The page’s advice for this lever is plain: grow revenue faster than overhead, protect gross margin, and keep add backs clean and documented. It’s dull advice. It works because it’s dull, and because it’s repeatable year after year without a big bet on any single customer.
A limit to growth alone
Now picture the earnings only line. Using the page’s own figures, $500K plus the $379K from earnings growth lands near $879K. That’s my arithmetic, not a number printed on the page. Still, it makes the point. A business can grow well for five years and finish roughly $350K short of the version that also built value drivers.
Growing earnings is the part owners already know how to do. They’ve done it every year. The second engine is less familiar, and that’s where the leftover money hides. Running only one engine isn’t a failure, exactly, and plenty of good businesses do it. It’s more like driving a two engine plane on one and wondering why the trip takes longer.
The multiple engine
What the EVO Score is doing
The sample starts with an EVO Score of 45, which the page places in the weak tier, and moves it to 60, the adequate tier. That’s about 3 points a year. The multiple follows, climbing from 2.5x today to 3.5x in year five, roughly 0.2x a year. The page describes the higher multiple as what the higher score is worth.
So how does an owner lift the score? The page points to the nine Value Makers, naming owner independence, recurring revenue and clean books. Picture a shop where the owner can take a week off and the monthly customers keep paying. A buyer looks at that and sees less risk. Less risk is what a higher multiple is made of. The page doesn’t use those words, but its nine Value Makers point the same direction.
Why buyers pay for it
The page makes a related point about add backs. Keep them growing with revenue, it says, because buyers discount add backs that outpace revenue growth. In other words, a buyer is checking whether your numbers hold up. Clean, documented books make that check easy, and that easy check is part of why a business earns a better multiple.
Putting both engines together is what a smart business exit strategy does. It doesn’t treat sales as the only goal. It asks which value makers are weak, what they’d be worth if fixed, and how many years you’ve got. The sample answers that with a score, a multiple and a plan you can track yearly.
Don’t forget the third lever
The page lists three levers you control, and the third is reducing debt. Every dollar of debt paid down, it says, goes straight to what you keep at the closing table. In the sample, $50K of debt gets paid down at $10K a year, which is why equity value finally matches EV in year five at $1.23M.
It’s the quietest of the three. Say you’ve been paying a loan for years without thinking about it as part of your exit. Each payment shrinks the gap between what the business is worth and what you actually take home. That gap sits outside the earnings engine and outside the multiple engine, so it’s easy to overlook.
The takeaway
Nearly half of the sample’s gain came from something owners rarely track, and a third lever sat quietly in the background. So track it. Pick a starting EVO Score, set a target, and check each year. Write it somewhere you’ll see it. Solid exit planning makes room for both engines, and a business exit strategy gives you a reason to keep running them. Chartwell Value is based in Austin, TX, if you want a hand.
FAQs
How much of the gain comes from the multiple?
In the sample, $352K of the $731K total gain comes from raising the multiple, which the page describes as almost half. The other $379K comes from growing SDE, as it rises from $200K to $352K over five years.
What is the GAP Number?
The page uses it for the gap between two lines on its chart: earnings plus value drivers, and earnings only, stuck at 2.5x. It’s the value you’d leave on the table by skipping the multiple.
What lifts the multiple?
The page says to lift your EVO Score by strengthening the nine Value Makers, such as owner independence, recurring revenue and clean books.
Can I skip exit planning if my earnings are growing fast?
Growth helps, but the sample shows the earnings only path finishing well below the path that also raises the multiple. Fast earnings growth is a good start, not a full plan.
Do I need a business exit strategy that covers both?
Yes. The page’s three levers, grow SDE, raise the multiple and reduce debt, work best together. Treat them as one plan with three parts.
