The buy-side advisory firm is treating our custom-built operational AI platform as generic business software with zero standalone value. How do we use the Income Approach to isolate and value this proprietary technology during negotiations?

Question

Tyler Smith · Accepted Answer

When a buy-side firm tries to lump your proprietary operational AI into generic business software with zero standalone value, they are actively hiding the real value of your business. Under IVS 105, you can use the Income Approach, specifically the Relief from Royalty Method or the Multi-Period Excess Earnings Method, to isolate and value your proprietary technology.

To make this defense stick, you must document the direct financial impact of your AI integrations.

Provide the valuation analysts with clear data showing how your automated workflows have lowered your cost of goods sold, reduced client delivery times, and expanded your operating margins far beyond industry averages.

Show them that this technology is a distinct, protected asset that generates quantifiable cost savings or excess earnings.

Document the development costs, system architecture, and operational training protocols within your company processes to prove the platform is fully institutionalized and transferable to the buyer.

By presenting a rigorous financial model that attributes a specific portion of your cash flow directly to your automated systems, you force the buyer to value your technology as a strategic asset. This defense justifies a premium enterprise value and protects you from a generic market multiple valuation.