We have built custom AI-powered tools that automate our client service delivery, but the buyer is questioning the proprietary nature of this IP because it relies on open-source frameworks. How do we protect our valuation multiple from being discounted?

Question

Tyler Smith · Accepted Answer

Buyers will often try to discount your valuation by claiming your technology is not proprietary if it is built on open-source code or third-party APIs. To protect your multiple, you must shift their focus from the underlying code to your unique operational application and data. Your valuation is driven by how your custom tools are integrated into your proprietary workflows to deliver superior margins.

First, present a clear mapping of your tech-enabled operations. Show the buyer how your systems collect, clean, and utilize proprietary client data to train your custom models. This unique data loop is your real intellectual property, and it cannot be easily replicated by competitors.

Second, demonstrate how your team uses these tools by sharing your documented operational processes and your Accountability Chart. Show that your team members are highly efficient system operators rather than standard service providers. This combination of proprietary data, integrated software, and disciplined human execution is what creates a high-margin barrier to entry. By proving that your custom AI tools are deeply embedded in your daily operations and driving your industry-leading margins, you can defend your proprietary value and force the buyer to pay a premium multiple.