We want to use a multi-method valuation under IVS 105 to argue for a premium multiple based on our unique intellectual property, but the buyer's broker only wants to use a basic market multiples approach. How do we force a blended valuation model that weights our projected cash flows?

Question

Tyler Smith · Accepted Answer

Brokers and buyers love the market multiples approach because it is simple and typically favors the buyer by averaging your high-performing business with mediocre competitors. If you have built proprietary workflows, unique software, or operational efficiencies, a standard market multiple will fail to capture that value.

To counter this, you must build a defensible valuation framework based on IVS 105, which explicitly highlights the need to select valuation approaches based on the asset's specific nature. You must demand a blended valuation model that incorporates both the Market Approach and the Income Approach, specifically a Discounted Cash Flow analysis.

To make this argument stick, you must back up your projected cash flows with hard operational proof. This is where your business operating system becomes your greatest asset. Use your historical V/TO records, your track record of hitting quarterly Rocks, and your consistent revenue growth to prove that your financial projections are not just wishful thinking.

Show the buyer that your operations are run via a highly predictable engine that regularly hits its targets. When you can prove a high statistical probability of achieving your future cash flows, the buyer's argument for ignoring the Income Approach collapses.

Present a blended model where the Income Approach is weighted at fifty percent and the Market Approach is weighted at fifty percent. This structure forces the buyer to pay for the future cash-generation power of your intellectual property rather than just buying your historical balance sheet.