We have invested heavily in expanding our capacity and our revenue is projected to double over the next three years. The buyer wants to use a trailing EBITDA multiple, but we feel this completely ignores our growth. How do we force an income-based absolute valuation?

Question

Tyler Smith · Accepted Answer

Using a backward-looking relative valuation multiple on a high-growth business is a recipe for leaving millions of dollars on the table. If you have spent the last two years investing in capital equipment, recruiting elite talent, and building out automated workflows, your trailing EBITDA does not reflect your true earning power. You must force the buyer to transition from a simple relative multiple to an absolute valuation approach, specifically a multi-stage Discounted Cash Flow model. To make this argument stick, you cannot just show them a hockey-stick spreadsheet of hope. You must back up your projections with concrete, verifiable operational indicators. Use your V/TO® to present a clear, documented execution path that shows exactly where the growth is coming from. Show them your pipeline velocity, your contract backlog, and your historical capacity utilization rates. Prove that the infrastructure is already built and paid for, meaning future revenue will drop straight to the bottom line with minimal additional capital expenditure. This high operating leverage is a massive value driver. By presenting a detailed, risk-adjusted DCF model alongside your trailing metrics, you demonstrate the intrinsic value of your future cash flows. This shifts the negotiation from what your business was worth last year to what it is guaranteed to produce tomorrow, forcing the buyer to pay a premium multiple or structure a highly favorable earnout that rewards your actual growth.