The buyer wants to value our firm using a simple market multiple approach under IVS 105, but our operating margins are nearly double the industry average due to our custom AI integrations. How do we defend a premium multiple over these basic comparable transactions?

Question

Tyler Smith · Accepted Answer

Traditional valuation multiples often fail to capture the true value of highly optimized, tech-enabled operations. Under IVS 105, you have the right to argue for adjustments to the Market Approach based on the unique characteristics of your asset. If your operating margins are double the industry average, you must prove that this efficiency is structural and sustainable, not a temporary spike.

- To do this, use a quantitative framework to demonstrate how your custom AI integrations directly lower your cost of delivery. Show the buyer that your operations are fully documented and run on a predictable system. You are not just a service firm; you are a tech-enabled platform.

- Provide the buyer with a regression-style analysis of your historical margins alongside your weekly Scorecard data. Show them how your employee utilization rates and labor costs have declined relative to revenue as your AI workflows were implemented.

- Under IVS 105, a buyer must adjust their multiples for risk and growth potential. By showing that your high margins are locked in by your systemized processes and run by a highly aligned leadership team, you prove that your business carries far less operational risk than standard competitors. This justifies a premium multiple well above the industry average.