Our leadership team has laid out aggressive growth targets in our V/TO®, but the buyer is using our historical trailing three-year average to determine our multiple. How do we convince them to apply a weighted average that favors our recent, highly profitable quarters?

Question

Tyler Smith · Accepted Answer

Buyers love to use simple historical averages because it allows them to acquire your future growth for free. However, if your business has recently scaled due to AI-driven automation or improved operational systems, a simple average is a highly inaccurate proxy for your future cash flows. To counter this, you must present a valuation built on a weighted Capitalization of Earnings Method. This approach applies a much higher weight to your most recent year or quarters, recognizing that your business has fundamentally changed. To defend this weighting, you must prove that your recent growth is stable and repeatable, not a temporary spike. Show the buyer your EOS V/TO® and demonstrate how your historical performance aligns directly with your quarterly Rocks. This proves your current trajectory is the result of a highly deliberate execution plan, not luck. Provide clear, data-backed evidence showing that your operating margins have permanently expanded because of your automated workflows. When you prove that your recent performance is the new baseline, you make it very difficult for the buyer to justify a trailing three-year average. You must make them realize that valuing your current business on three-year-old data is equivalent to buying a completely different, less efficient company.