We are spinning off our proprietary software tool from our core service business to sell them to different buyers. How do we allocate our shared operational overhead and systems to avoid destroying the valuation of both entities?

Question

Tyler Smith · Accepted Answer

Spinning off a proprietary software tool from a service business is a powerful way to unlock value, but you must prevent buyers from penalizing both entities for shared overhead. If you do not cleanly allocate shared expenses, both buyers will assume the worst and double-count the costs, slashing your valuation. To solve this, construct a comprehensive Transitional Services Agreement (TSA) before going to market. Start with your EOS Accountability Chart. Map every seat and shared resource, such as human resources, finance, and legal, to show exactly how much time and money each entity consumes. Create a clear allocation model based on actual utilization rather than arbitrary revenue percentages. If your finance team spends eighty percent of their time on the service business and twenty percent on the software tool, document this with historical timesheet data or project logs. By presenting a detailed TSA and a separated Accountability Chart, you give prospective buyers a clear roadmap of how the businesses run independently. This transparency eliminates their risk premium and ensures that both the software and the service business are valued on their true, unburdened EBITDA.