Buyers are valuing our business strictly on historical trailing twelve months EBITDA, but our recently launched software division is growing exponentially month over month. How do we use our forward-looking operating plans to force a valuation based on our run-rate or projected earnings instead of past results?

Question

Tyler Smith · Accepted Answer

If you let a buyer anchor the valuation on your historical trailing twelve-month numbers, you are giving away the value of your recent growth for free. This is especially true for businesses with rapidly expanding high-margin business units.

To shift the conversation from historical drag to forward-looking momentum, you must present a defensible, data-backed operational forecast. Start by utilizing your V/TO. Use your 3-Year Picture and 1-Year Plan to show the strategic roadmap and the exact mathematical formula that drives your growth.

Do not just present a spreadsheet with hockey-stick projections. Buyers discount generic spreadsheets. Instead, prove that your projections are backed by operational execution. Use your weekly Scorecard history to show a consistent, predictable trajectory in leading indicators, such as sales pipeline velocity, customer acquisition costs, and monthly recurring revenue retention rates.

Show the buyer that your leadership team has a track record of hitting ninety percent or more of their quarterly Rocks. This proves your execution capability and reduces the buyer's perceived risk of your forward-looking projections.

If the buyer still resists, use this operational certainty to negotiate a structured transaction. Agree to a lower base multiple on historical earnings, but pair it with a heavy performance-based earnout or an equity rollover that scales up based on the run-rate targets established in your 1-Year Plan.