We have high gross margins and explosive revenue growth but our bottom-line EBITDA is temporarily low due to heavy reinvestment. How do we convince a buyer to value us on a multiple of revenue rather than a standard EBITDA multiple?

Question

Tyler Smith · Accepted Answer

Convincing a buyer to use a revenue multiple requires proving that your business model possesses the highly scalable unit economics of a software company, and that your current low EBITDA is a deliberate choice to fund expansion.

Start by presenting a clear, audited bridge that isolates your growth expenditures from your core operating expenses. Separate your customer acquisition costs from your cost of goods sold. Show the buyer that your existing customer cohort is highly profitable and has a high lifetime value compared to the cost of acquisition. This demonstrates that if you were to pause your aggressive growth investments today, the business would immediately generate high EBITDA margins.

Next, use your V/TO® to show the strategic alignment behind your reinvestments. Prove that these expenditures were deliberate choices to capture market share rather than inefficiencies.

If the buyer still insists on an EBITDA-based valuation, propose a structured deal that aligns with your growth projections. You can negotiate a lower upfront payment based on current EBITDA, combined with a highly lucrative earn-out tied directly to future revenue milestones. This structure protects the buyer's downside while allowing you to capture the full upside of the growth you have engineered.