During the Quality of Earnings audit, the buyer is trying to treat our high-margin, low-overhead pilot projects for new AI services as non-recurring revenue. How do we prove these pilots represent our future run-rate business model and protect our EBITDA multiple?

Question

Tyler Smith · Accepted Answer

Quality of Earnings auditors look at any new or short-term revenue stream and label it non-recurring to strip it from your EBITDA. To defend your high-margin pilot projects, you must prove these are not one-off events, but the initial stage of your standard sales pipeline.

Start by showing the auditors your marketing and sales seat data from your EOS® Accountability Chart. Demonstrate that you have a repeatable, documented process for converting pilot projects into long-term retainer agreements. Next, present your V/TO®, showing that these AI-driven services are your primary strategic focus for future growth.

Produce historical data on customer conversion. Show that a significant percentage of pilot clients have transitioned into standard contracts, or are actively in the pipeline to do so. This proves the revenue is recurring in nature.

You must also demonstrate that your operating overhead has permanently shifted due to these tools. Show that the low-overhead delivery model is your new operational reality, not a temporary anomaly. By proving that these pilots are a systemic part of your business model, you protect this revenue from being discounted, preserving both your EBITDA and your valuation.