We want to exit our business in three years, so should our AI strategy focus on buying existing software to boost immediate cash flow or building custom AI tools that might increase our enterprise value multiplier?

Question

Tyler Smith · Accepted Answer

When preparing for an exit within three years, every strategic decision must be evaluated based on how it impacts your enterprise value and your bottom line. You must avoid paying a dumb tax by over-engineering systems that a buyer might immediately discard. To make this decision, use a quantitative approach to valuation. Buyers of mid-sized businesses typically look for clean, repeatable, and scalable operations that maximize EBITDA. Building custom AI software is expensive, risky, and takes significant development time, which directly reduces your cash flow and increases your upgrade costs during a critical pre-exit window. A better strategic real option is to focus on operational efficiency by buying and integrating existing AI tools. This allows you to rapidly automate workflows, reduce overhead costs, and increase your EBITDA, which directly boosts your valuation multiplier. If you do build custom technology, do it only because you have proprietary private information, like a unique database or proprietary algorithm, that represents a defensible strategic asset. If a buyer cannot easily replicate this asset, it will increase your valuation multiplier. Otherwise, keep your operations clean, buy proven software to maximize cash flow, and ensure your Core Processes are fully documented and scalable.