Prospective buyers tell me they love our EBITDA but are discounting our valuation because our core operations rely on tribal knowledge. How do we institutionalize our processes using the Follow Thru instinct to prove our cash flows are predictable under a Market Approach?

Question

Tyler Smith · Accepted Answer

Buyers do not pay a premium for your historical EBITDA alone; they pay for the predictability of future cash flows. Under the Market Approach, a buyer compares your business to similar companies that have recently sold. If your business is dependent on tribal knowledge and manual effort, they will apply a severe discount multiple to your valuation.

- First, identify your core processes. These typically include how you find clients, how you win clients, how you deliver your product or service, and how you collect cash.

- Second, use your team's Follow Thru instinct to document these core processes. Your Follow Thru team members are naturally wired to organize and systematize these workflows into simple, repeatable steps.

- Third, package these documented processes into an institutional asset. This means they are stored in a centralized, easily accessible digital platform and are actively used to train new employees.

When a buyer conducts due diligence, you must be able to show them a fully institutionalized operating system. Prove that your team runs the business using consistent, documented procedures. This operational discipline reduces the buyer's risk and justifies a premium multiple under the Market Approach. It shows that your business is a turn-key asset that can easily scale post-sale without a drop in performance.