We have automated our delivery processes using proprietary AI workflows, but the buyer's valuation model treats us as a low-multiple manual service business because of our SIC code. How do we force the buyer's valuation model to recognize our tech-enabled margins and use a software-adjacent multiple?

Question

Tyler Smith · Accepted Answer

Many buyers and investment bankers will try to categorize your business based purely on your standard industrial classification code. If you are classified as a traditional professional services firm, they will apply a standard service multiple of four to six times EBITDA, completely ignoring the fact that your proprietary AI workflows allow you to deliver services at a fraction of the cost.

To break out of this classification trap, you must shift the buyer's focus from your industry code to your unit economics and scalability. Show the buyer your gross margins. Traditional service firms operate at forty to fifty percent gross margins, while software-enabled operations often exceed seventy percent. Explain how your proprietary AI workflows operate as a digital delivery engine, allowing you to scale revenue without a linear increase in headcount.

Use your EOS Accountability Chart to highlight how lean your delivery team is compared to industry benchmarks. Present your customer onboarding data to prove that your automated workflows shorten the time-to-value for new clients. By demonstrating that your business model behaves like a software company in its operating leverage and scalability, you can successfully argue for a tech-enabled premium multiple.