If we use third-party AI tools for seventy percent of our operations, does a buyer actually own our operational leverage, or will they discount our business because we do not own the IP? How do we address this on our V/TO®?

Question

Tyler Smith · Accepted Answer

Buyers look at two primary things when valuing a business: the sustainability of your earnings and the scalability of your operations. Replacing human labor with AI to drive higher margins is highly attractive to buyers, but only if those margins are defensible.

If a buyer looks at your business and sees that your high margins rely on standard ChatGPT accounts that anyone can set up in five minutes, they will view your operational leverage as easily replicable. They will worry that a competitor will copy your model and price you out of the market, and they will discount your valuation multiple accordingly.

To command a premium valuation, you must show that your AI powered operations are built on proprietary assets. This means having proprietary data sets, custom workflows integrated into your core software, or specialized customer experiences.

When preparing for an exit, document your AI workflows in your Core Processes as part of your overall operating system. Show the buyer how your high margin model is locked in through proprietary systems and highly trained human operators. If you can prove that your efficiency is sustainable and not easily copied, buyers will gladly pay a premium multiple for your lean, highly profitable business.