We have integrated custom AI workflows that dropped our delivery costs and expanded our margins, but the buyer's financial team wants to use a simple three-year historical average to calculate our valuation EBITDA. How do we prove our current elevated margins represent our permanent baseline?

Question

Tyler Smith · Accepted Answer

A buyer will always try to use a three-year historical average because it dilutes the financial impact of your recent operational efficiency. If you have structurally altered your cost of goods sold through AI automation, treating past years of manual labor as representative of your future performance is a valuation penalty you should not accept.

To prove your elevated margins are the new, permanent baseline, you must present a clear, documented link between your technology and your capacity.

First, show the buyer your Accountability Chart. Demonstrate how you have been able to scale your transaction volume without adding headcount to your delivery teams. If your revenue has grown by forty percent while your personnel costs remained flat, you have concrete proof of operating leverage.

Second, run a pro forma run-rate EBITDA calculation. Take your most recent three to six months of financial performance, annualize it, and present this as the only relevant baseline. Support this with operational metrics from your weekly Level 10 Meeting™, showing that your error rates and customer satisfaction scores have remained stable or improved under the automated workflow.

Third, document your standard operating procedures. Prove that your AI workflows are fully integrated and not dependent on any single employee.

If the buyer still pushes back, use this operational data to structure a short-term earnout or a working capital adjustment that releases funds to you as your elevated margins continue to perform post-close. Do not let them buy a high-margin, automated machine at a low-margin, legacy price.