Our business has scaled dramatically in the last six months due to a new product launch, but the buyer's valuation model is based on a trailing twelve-month average. How do we structure the deal to force them to value us on our annualized run-rate EBITDA?

Question

Tyler Smith · Accepted Answer

Standard investment banker valuation methods, like capitalization of earnings, often rely on historical twelve-month averages. If your business has scaled rapidly in recent months due to operational improvements or a successful product launch, this historical view severely penalizes your current value.

To force the buyer to value the business on your current trajectory, you must negotiate a valuation based on an annualized recent run-rate. For example, use your EBITDA from the last three months and multiply it by four to establish the baseline valuation.

If the buyer resists, use structured deal mechanisms to bridge the gap. You can propose a short-term earnout based on achieving the run-rate targets over the first six months post-close. Alternatively, negotiate a net working capital adjustment that credits you for the increased inventory and accounts receivable generated during the scale-up.

To win this argument, you must prove the growth is sustainable. Use your weekly EOS Scorecard metrics to demonstrate that the increased performance is consistent and driven by repeatable operational processes, not a random spike. Showing predictable weekly indicators builds the buyer's confidence to accept your run-rate valuation.