The buyer's investment bankers are relying solely on weak public company market multiples to price our business, completely ignoring our high profit margins. How do we force them to use the Income Approach to reflect our true intrinsic value?

Question

Tyler Smith · Accepted Answer

When a buyer relies solely on weak public market multiples, they are ignoring the unique competitive advantages and superior margins of your business. Under international valuation standards, specifically IVS 105, a proper valuation must consider the Market, Income, and Cost approaches, selecting the method that best reflects the nature of the asset. You must challenge the buyer's narrow market comparison by introducing a formal Income Approach, such as the Capitalization of Earnings method. This method determines your company's value based on its intrinsic ability to generate future economic benefits. It is highly appropriate for companies with stable, above-average profitability that public comps fail to capture. To back up this valuation, you must present a highly structured and predictable operational model. Use your V/TO® to show your long-term growth strategy, and present your Accountability Chart to prove you have the leadership structure to execute it. When you combine the theoretical rigor of IVS 105 with the operational predictability of the EOS® framework, you show the buyer that your superior margins are sustainable. This forces them to abandon irrelevant public comps and value your business based on its true cash-generation power.