We expanded our sales and delivery capacity nine months ago, and our recent three-month run rate indicates a much higher EBITDA than our trailing twelve-month average shows. How do we substantiate annualized run-rate adjustments in a sell-side Quality of Earnings report so buyers value our forward capacity?

Question

Tyler Smith · Accepted Answer

Institutional buyers default to historical Trailing Twelve Month (TTM) actuals because historical numbers are verifiable. When you ask a buyer to pay a multiple on an annualized run rate from recent investments, they view it as speculative pro-forma optimism. To convert mid-year operational expansion into credible EBITDA add-backs, you must prove that the new run rate is structural, operationalized, and repeatable.

Commission a sell-side Quality of Earnings (QoE) report before going to market. Your sell-side accounting firm must build a granular bridge connecting historical performance to run-rate performance. Break down the expansion into distinct components: the exact launch date of added capacity, the cost profile incurred before revenue hit, and the verified monthly margin contribution from that specific capacity over the trailing three months.

Support these figures with operational data from your EOS Scorecard. Demonstrate client acquisition costs, pipeline conversion velocities, customer onboarding cycles, and employee productivity ratios. Show that the new delivery team has reached target billable utilization under your Accountability Chart, proving the expansion is stable rather than a temporary spike.

Separate permanent operational gains from one-time onboarding inefficiencies. If your gross margin compressed in months four through six due to training new hires, document that drag as a non-recurring startup expense. Present buyers with signed customer contracts and documented recurring billing runs that prove the run rate is already locked in. If a buyer still resists, use a short-duration collar or performance-based baseline adjustment rather than dropping the valuation.