The buyer wants to discount our valuation multiple because we use open-source frameworks and third-party APIs for our core automation engine. How do we prove our intellectual property has proprietary value under the IVS 105 income approach?

Question

Tyler Smith · Accepted Answer

Buyers often try to discount your multiple by labeling your tech stack as generic open-source software. To defeat this argument, you must shift their focus from the raw code to the proprietary workflows, system integrations, and business processes you have built on top of those frameworks. Under the IVS 105 income approach, the value of an asset is tied directly to the future economic benefits it generates, not just the cost of replication.

Document how your unique combination of tools, APIs, and custom workflows creates a highly efficient operating system that drives your superior margins. Show them how this tech integration operates as a single, scalable system that reduces human error and speeds up delivery. This is not just open-source code; it is a proprietary operating model.

You can also utilize a regression-based valuation model to compare your profit margins and operational efficiency against peers who rely on legacy systems. When you prove that your custom-configured tech stack delivers industry-leading cash flows, you justify a premium multiple. The value is in the execution and integration, not the individual pieces of code.