Are You Falling for the Planning Fallacy?

One of the most common “value enhancement” sales pitches goes something like this:

“I’ve reviewed your company and believe it’s worth $4.2 million today. With the right planning, it could be worth $7.7 million. Would you rather exit with $4.2 million or $7.7 million?”

That’s not really a question—it’s a setup. Of course, no business owner would choose the smaller number. But the real issue isn’t preference. It’s what it actually takes to bridge that gap—and whether you’re being shown the full picture.

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The Planning Fallacy at Work

Psychologists call this overly optimistic thinking the planning fallacy. A private equity group I follow once cited a study in the Journal of Personality and Social Psychology that illustrates it perfectly:

Academics carry home briefcases stuffed with work every Friday, fully intending to tackle every task. Yet, weekend after weekend, they barely scratch the surface. Despite knowing this, they remain convinced that this time will be different.

Business owners often fall into the same trap. Even with years of evidence about how long growth takes and how unpredictable it can be, it’s easy to believe that this time will match our best-case forecast. When someone dangles a big valuation jump in front of you, it’s tempting to say, “Yes, that’s what I’ve always wanted. I just needed a plan.”

But a plan alone isn’t enough. It’s a start—not the whole story.

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What It Really Takes to Close the Gap

Here’s a more realistic version of that pitch:

“To grow from $4.2 million to $7.7 million in five years, you’ll need planning, dedicated effort, some strategic hires, and reinvesting a significant portion of profits. That requires growing the business 19% annually, starting now—that’s more than double your best year. If you take a year to build the foundation first, then you’ll need 25% annual growth over the next four years. And if you keep growing at your best year’s pace of 7.5%, it will take over 12 years to get there.”

Those are the facts. And the truth is, very few owners hit those growth rates without serious changes—and trusted advisors to help them.

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The Power of Perspective

You may already have a strong company. It supports your lifestyle, your team, and your reputation. Maybe you’ve dreamed of taking it further. But the risk, the effort, or the lack of a roadmap have held you back.

That’s where experienced advisors come in—not to promise easy wins, but to help you chart a realistic path. They align what you want (your proceeds) with what you’re willing to do (your effort) and how much time you have (your exit timeline).

Once those last two are clear, the conversation changes. It’s no longer just about a number—it’s about what you’re willing and able to do to achieve it.

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The Real Fallacy

The real planning fallacy isn’t believing in growth—it’s believing it’s just about hitting a number. The outcome you want depends on seeing the full picture—and working with an advisor who helps you navigate it with honesty, strategy, and clarity.