The buyer is using subjective market multiples to value our business, but we want to use the IVS 105 framework to push for a valuation based on our predictable cash flows. How do we steer them toward the Capitalization of Earnings Method?

Question

Tyler Smith · Accepted Answer

Under the International Valuation Standards, specifically IVS 105, valuers must evaluate the respective strengths and weaknesses of all potential valuation approaches for a given asset. When a buyer relies solely on subjective market multiples from comparable transactions, they often overlook the unique operational stability of your specific business. To steer them toward the Capitalization of Earnings Method, you must prove that your historical financial results are a highly reliable proxy for future operations. Show them that your business operates with a predictable cash flow stream that does not fluctuate wildly like the public comps they are referencing. Use your V/TO® to demonstrate long-term strategic planning and operational discipline. Provide concrete evidence of your consistent execution by sharing your historical quarterly rate of completing company Rocks. When you show a buyer that your leadership team hits eighty percent or more of their quarterly targets year after year, your future earnings cease to be a hopeful projection and become a statistical probability. This operational predictability justifies dividing your normalized earnings by a highly favorable capitalization rate. It shifts the entire conversation away from volatile market multiples and toward your stable, systematic cash flow.