The buyer is relying solely on the market approach and comparing our business to highly volatile public software companies to justify a lower multiple. How do we force them to include the income approach and look at our long-term stable cash flows instead?

Question

Tyler Smith · Accepted Answer

Buyers frequently use the market approach because public market benchmarks are easily manipulated to favor their valuation targets. To counter this, you must insist on a multi-method valuation framework that aligns with international standards like IVS 105. This means combining the market approach with the income approach, specifically the Capitalization of Earnings method.

If your business has a long history of stable, predictable cash flows, you must demonstrate that these historical results are an exceptionally reliable proxy for future performance. Present the buyer with a clean, normalized EBITDA calculation that strips out all non-recurring expenses and owner-specific benefits. Show them how your documented operating systems and automated workflows ensure this cash flow is highly repeatable.

By dividing this normalized cash flow by a realistic capitalization rate, you establish an intrinsic value that is grounded in your actual financial reality rather than the volatile stock prices of unrelated public companies. Use your V/TO® to show your clear historical growth trajectory, proving that your business is a stable machine. Do not let the buyer buy your business based on public market noise when your private enterprise delivers consistent, low-risk cash flows year after year.