Worksheet
Payback vs. Remaining Hold
Every modernization proposal carries a cost and a benefit. Few carry the third number: how many months are left before you sell. That number decides how much of the benefit lands before the sale.
Your numbers
The hold is the stretch you own the business for: months until it is expected to change hands. If the timing is a range, use the earlier end.
Fully loaded: vendor fees, licenses, infrastructure, and the internal salary cost of people pulled onto the program.
From kickoff to the first month the business sees a measurable improvement. Go-live day usually sits earlier than this.
From first benefit to steady state. Adoption, training, and process change live here.
Annual EBITDA impact once the program is fully absorbed. Cost taken out or margin added. Revenue on its own does not count.
EBITDA drag during implementation: overtime, slowed delivery, dual-running two systems.
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The read
Earnings visibility at exit
Amber · Lands, but only in run-rate
Full run rate arrives before exit, with less than a year to spare. The last twelve months of accounts barely move, so the improvement has to be argued as a run-rate adjustment during the sale. That argument is winnable, and winning it costs something.
Paid back by exit
No
At month 24 the program is $1,712,500 down on a cash basis. Payback lands at month 47, after the sale.
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When the benefit lands
Measured over everything the program produces from kickoff through month 60, which is three years past your exit.
Before the sale 23% · $787,500
In the first 36 months after 77% · $2,700,000
Some of the later benefit still reaches you through the sale price, if the program is running at full rate when buyers look at it. How much depends on the multiple, which is a question for your CFO. This worksheet stops at the timing.
What these figures mean
EBITDA is earnings before interest, tax, depreciation and amortisation: roughly, what the business makes from operating, before financing and accounting effects.
- Run-rate EBITDA at exit.
- What the improvement is worth per year at the moment you sell, taken from the exit month and annualised.
- Trailing twelve months at exit.
- The same improvement as it shows up across the twelve months of accounts ending at the sale. A program that finished recently barely registers here.
- Cash position at exit.
- Everything the program has earned minus everything it has cost, by the exit month. A negative figure means it has yet to repay its own bill.
- When the benefit lands.
- How much of the benefit arrives in the months before the sale, and how much arrives in the three years after it.
Payback
Month 47
Exit is month 24.
Full run rate before exit
8 months
Months the program spends at steady state before the sale, counting the exit month.
Run-rate EBITDA at exit
$900,000
Benefit in the exit month, net of disruption, annualised.
Trailing twelve months at exit
$775,000
What the last four quarters of accounts actually carry.
Cash position at exit
-$1,712,500
A cash figure only: the program has not repaid its own bill by the sale. It says nothing about what the improvement adds to the sale price.
Timeline
Where the crossing point sits against the exit
- Cumulative net position
- Before the exit
- After the exit
Resequencing
Trim the program to what the next value initiative needs
The slider moves three of your inputs. Cost and time to first benefit fall in step with the cut. Benefit falls at three quarters of that rate, on the assumption that the part you trim first is the part returning least. Ramp months and disruption hold steady, since a smaller program still has to be adopted. That three-quarters figure is an assumption inside this worksheet and no measurement stands behind it, so treat this panel as a way to see the shape of a trade rather than a prediction.
Full scope
Amber · Lands, but only in run-rate
- Payback
- Month 47
- Program cost
- $2,500,000
- Lands before the sale
- $787,500
At 100% of scope
Amber · Lands, but only in run-rate
- Payback
- Month 47
- Program cost
- $2,500,000
- Lands before the sale
- $787,500
Most proposals are written as a prerequisite: fix the platform, then the business can act. Reversed, the value initiative comes first and only the debt that initiative requires gets paid down. Same work, resequenced, on a clock that fits the fund.
Next
This worksheet tells you whether the timing works. It cannot tell you which constraint is actually binding: technology, process, talent, or data. That takes a read of the business. The Executive Technology Diagnostic is a fixed-price, two-week answer to that question.
Method
Why the finish date decides what the sale process sees
Two versions of the earnings number get argued in every sale process, and the gap between them is where modernization programs either land or disappear.
The first is trailing twelve months: what the business earned over the last four quarters, straight out of the accounts. It needs no argument. The second is run rate: what the business earns per month right now, annualized. Run rate looks forward, and someone has to defend it.
A program that reaches full effect three months before the sale barely touches trailing twelve months. Nine of those twelve months predate any benefit at all, so the reported figure moves by a quarter of the annual improvement at best. Run rate tells a better story, and a seller can raise it, though it arrives as an adjustment inside a negotiation rather than as a fact in the accounts. Adjustments get discounted or traded away against something else.
Push the same program twelve months earlier and both numbers agree. A full year of the improvement sits in the accounts, and the run rate matches what those accounts already show.
So the finish date does more work here than the budget. A program costing half as much that lands after the sale reaches full effect on the next owner’s watch. You fund the disruption, the licenses, the infrastructure, and the people pulled off other work, then sell before the earnings show up in the accounts.
The arithmetic above sets the benefit against the months you have left, and answers one question: when the benefit lands.
Assumptions and limits
This is arithmetic over the numbers you type, and it gives an indication of whether the timing works. The full financial case belongs in your own model. The worksheet assumes the benefit estimate is real and the exit timing holds, and both are usually optimistic. If the benefit number came from a vendor business case, discount it before you type it in.