SkillsSkill 4 of 5
Build a plan that grows the business
Judge a value creation plan at exit, and find the growth rate where your choice flips.
Worked example
AI cost-out or growth: which plan goes to IC?
The plan that looks best in year one is not always the one worth owning in year five.
The question
Quillfield, a fictional claims business, earned $40m of EBITDA on $240m of revenue in FY25. The operating team drafted two value creation plans. Plan A automates review and cuts customer success staff. Plan B automates review too, but spends part of the savings on an AI extraction product for carriers.
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Plan A revenue | 235.2 | 225.9 | 216.9 |
| Plan A EBITDA | 56.4 | 54.2 | 52.1 |
| Plan B revenue | 259.2 | 302.3 | 352.6 |
| Plan B EBITDA | 49.2 | 57.4 | 67.0 |
Invented data, from FY25 revenue of $240m. Plan A: 24% EBITDA margin, revenue −2% a year as churn rises. Plan B: 19% margin, revenue +8% a year. Figures rounded to $0.1m.
“Plan A adds $16.4m of EBITDA in year one; Plan B adds $9.2m. Which plan would you take to the investment committee, and what would you need to believe?”
Your turn
Say your answer out loud, or jot notes below. Both work. Or skip to the worked answer.
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Look past year one
What would you do here? Open the move you’d make.
Pick Plan A: $16.4m of extra EBITDA in year one against $9.2m for B.
Tempting, but it misses something. Year one is one of five. A’s lead is gone by year 3, 54.2 against 57.4, and by year 5 B is $14.9m ahead.
Compare at exit: A leads year 1, 56.4 to 49.2, but B leads by year 3 and ends year 5 at 67.0 against 52.1.
The strong move. A plan is judged at exit, not in the first budget. B ends $14.9m of EBITDA ahead.
Lead with cost-out because it’s faster and more certain; growth can come later.
Tempting, but it misses something. Faster isn’t better here. A cuts the customer success staff who protect retention, and its revenue falls every year, from $240m to $216.9m by year 5.
See how a strong candidate says it
“Plan A wins year one, 56.4 against 49.2. By year 3, B is ahead, 57.4 to 54.2, and by year 5 it’s 67.0 to 52.1: $14.9m more EBITDA.”
Why it works: A hold is five years, so the plan is judged at exit, not in the first budget.
Step 2: Ask what the exit buyer pays for
What would you do here? Open the move you’d make.
Value both at exit: at the same 10.0x, B is worth about $149m more, and A’s shrinking revenue may not earn 10.0x.
The strong move. It links the plan to the return: (67.0 − 52.1) × 10 is about $149m, before any difference in multiple.
Compare total EBITDA over the five years instead of exit value.
Tempting, but it misses something. The exit price is exit EBITDA times the multiple. A running total hides that A ends $14.9m behind with revenue still shrinking.
Assume a buyer pays the same multiple for both plans: EBITDA is EBITDA.
Tempting, but it misses something. Buyers pay for growth. A’s revenue falls 2% a year to $216.9m; B’s grows 8% a year to $352.6m. Equal multiples flatter A.
See how a strong candidate says it
“At the same 10.0x, B is worth about $149m more at exit. And A’s revenue is shrinking every year, which is harder to sell and may not earn 10.0x at all.”
Why it works: It links the operating plan to the return, not just to EBITDA.
Step 3: Find B’s break-even
What would you do here? Open the move you’d make.
Accept B’s 8% growth: the extraction product has a large market.
Tempting, but it misses something. 8% is an assumption, not evidence. The useful number is how low growth can go before B stops winning: about 2.7% a year.
Halve B’s growth to 4% to be conservative.
Tempting, but it misses something. An arbitrary haircut gives one more point estimate. It still doesn’t show where the choice flips, which is about 2.7% a year.
Find where the choice flips: B still beats A’s year-5 EBITDA if revenue grows about 2.7% a year.
The strong move. It names the one belief the decision depends on. 2.7% is roughly last year’s underlying growth, so there is some room, but not much.
See how a strong candidate says it
“B’s 8% growth is an assumption. B still beats A’s year-5 EBITDA if revenue grows about 2.7% a year, which is roughly last year’s underlying growth.”
Why it works: It names the one belief the choice depends on and how much room there is.
Step 4: Combine and sequence
What would you do here? Open the move you’d make.
Take B, keep A’s review automation, don’t cut customer success, and make paying extraction pilots within 12 months the first test.
The strong move. It takes the savings that don’t damage revenue and puts a date on the test of B’s growth.
Start with A and switch to B in year 3, once B’s lead would show up.
Tempting, but it misses something. B’s lead depends on investing from the start. By year 3, A’s customer success cuts have already cost the retention B needs.
Present both plans to IC and let the committee choose.
Tempting, but it misses something. The committee wants your view. Two plans without a pick hand over the decision without the 2.7% break-even that would settle it.
See how a strong candidate says it
“I’d take B, keep A’s review automation, but not cut the customer success team that protects retention. First milestone: paying pilots of the extraction product within 12 months.”
Why it works: A strong plan takes the savings that don’t damage revenue and sets a test date.
The answer, in short
- Decision
- Take Plan B to IC, with review automation from Plan A but without the customer success cuts.
- Because
- B passes A by year 3 and ends year 5 with $67.0m of EBITDA against $52.1m, and it keeps revenue growing for the exit.
- What would change it
- If extraction pilots don’t convert within a year, or growth looks likely to stay below about 2.7%, Plan A’s cost focus becomes the better bet.
Common traps
- Choosing the plan with the biggest year-one number.
- Treating AI savings as free, with no effect on revenue.
- Accepting the growth plan’s 8% without a break-even.
- Presenting two plans without picking one.
Check your answer
- Did I compare the plans at exit, not just year one?
- Did I link EBITDA to exit value?
- Did I find the growth rate where the choice flips?
- Did I set a milestone that tests the plan early?
Want feedback on how you’d answer? Practice “Build a plan that grows the business” with an AI interviewer on Socratify.
Last reviewed Nov 9, 2026