What Is My IT Services Company Worth? How Buyers Value It
A plain-English valuation guide for owners of $5M–$200M IT services and MSP businesses — what a buyer actually pays, and the levers that move your multiple by two to four full turns.
Updated 2026-06-12·Updated 2026 · 12 min read·Technology & Tech-Enabled Services
Typical multiple
4x – 14x
Priced on Adjusted EBITDA · Typical 8.9x
N2M Capital Advisors Mid-Year 2026 dataset of 120 MSP transactions (median deal $38.5M); cross-checked against Aventis Advisors tier framework and Breakwater M&A 2026
- Adjusted EBITDA multiple range
- 4x – 14x
- Median (120 MSP deals, N2M 2026)
- 8.9x
- Best-in-class EBITDA margin
- 15–20%
- Share of 2025 MSP deals with PE involvement
- ~69–72%
The short answer
A lower-middle-market IT services company or MSP is worth a multiple of its normalized adjusted EBITDA, not its revenue. In 2026, most $5M–$200M IT services businesses sell at 4x to 14x adjusted EBITDA, with the N2M Capital Advisors median at 8.9x across 120 transactions [1][2]. MRR percentage and cybersecurity capability are the two variables that move your multiple more than anything else.
Estimate vs. reality
A calculator estimate is not what a buyer pays
Type your revenue into a free calculator and you get a generic SaaS or tech-services multiple that tells you very little. A PE platform buyer pays for defensible, recurring, documented earnings — and the gap between an online estimate and a real process routinely moves value 50–200% in either direction for IT services companies.[12][13]
- Revenue or earnings × a generic tech or managed-services multiple
- One point estimate with no MRR or retention segmentation
- Public SaaS multiples not adjusted for private illiquidity or break-fix discounts
- No view of contract assignability, deferred revenue, or working-capital peg
- No adjustment for owner dependence or cyber capability premium
- Adjusted EBITDA validated in diligence, with owner comp, capex, and software-dev add-backs documented
- A multiple set by MRR percentage — the single strongest driver PE platforms screen on first
- Cyber/MSSP and CMMC compliance capability as a separate underwriting line item
- Logo retention rate, contract length, and auto-renew penetration
- A structured price — cash at close, rollover equity, and an earn-out tied to MRR retention
In owner-operated IT services firms, reported EBITDA understates the buyer's number once owner compensation, expensed software development, and deferred infrastructure capex are normalized — the adjusted figure commonly runs 15–40% above reported EBITDA.[13][14]
Earnings basis
SDE or EBITDA? It depends on your size
The most important framing question for an IT services company is which earnings metric applies to your size — and for most PE-backed MSP buyers, the answer is always adjusted EBITDA. SDE applies only to the smallest owner-run shops where the buyer is an individual, not a platform.
| Business size | Priced on | Typical multiple | What's going on |
|---|---|---|---|
| Under ~$2M value | SDE | 2.0x – 5.0x (3.5x median) | Break-fix/project-heavy owner-dependent shops; individual SBA-financed buyers; owner is senior technician and sole salesperson. Valzura cites a 3.5x SDE median for this tier.[3] |
| $2M – $10M EV | Adjusted EBITDA | 4.0x – 7.0x | Crossover zone where PE platform tuck-in buyers (Evergreen, New Charter, The 20 MSP) enter. MRR percentage is the gating factor — 60%+ MRR earns 5–7x; sub-50% MRR gets repriced to 4–5x.[1][2] |
| $10M – $50M EV | Adjusted EBITDA | 7.0x – 9.0x | Mid-sized MSPs; N2M median sits here at 8.9x. Recurring + cyber/cloud capabilities push to the top; Aventis cites ~8.1x for this tier with strong recurring.[1][2] |
| $50M+ EV | Adjusted EBITDA | 11.0x – 14.0x | High-maturity platforms; Aventis cites 11.2x median for $500M+ EV platform deals. Premium cyber/scale exits reach 12–15x; CMMC Phase 2 readiness is the top differentiator.[1][4] |
Per the IBBA/M&A Source framing, businesses valued under ~$2M are priced on SDE (which adds back the owner's full pay); $2M and above are priced on adjusted EBITDA (which subtracts a market-rate replacement manager). For IT services, most PE platform buyers underwrite EBITDA regardless of size — SDE is reserved for sub-$1M individual-buyer deals.[15]
Interactive estimate
Estimate what your it services company is worth
Move the sliders. The range reflects how each driver pushes the multiple up or down for a it services company. Treat it as a planning anchor — not a formal valuation.
The single strongest multiple driver in MSP. Under 50% MRR caps the business at break-fix / staffing pricing (3–5x). 60–75% MRR earns the median band. 80%+ MRR earns the Aventis high-quality recurring premium. 90%+ MRR is the threshold platform-tier PE buyers underwrite to.
Cyber-capable MSPs trade at 10–14x vs 4–6x for commodity break-fix. CMMC Phase 2 (C3PAO assessments began November 10, 2025) means cyber-capable MSPs carry a 1–2 turn premium over pure IT break-fix shops. SOC 2 Type II, CMMC Level 2, and HIPAA compliance-as-a-service each add as separate underwriting line items.
Vertical compliance moats add 1–2 turns on top of the base. A 50%+ financial services or healthcare concentration is rewarded as defensible expertise — unlike generic commercial customer concentration, which is penalized. An illustrative top-quartile MSP cleared 11x with 54% financial services concentration and CMMC Level 2 readiness.
96%+ logo retention with no single customer above 10% of revenue earns the top of the band. Logo retention below 90% or a top customer above 25% of revenue triggers multiple compression and pushes consideration into an earn-out tied to MRR retention. Multi-year (24+ month) contracts with auto-renew clauses score materially higher than month-to-month agreements.
Estimated enterprise value
$12.0M – $18.0M
Implied multiple: 6.0x – 9.0x Adjusted EBITDA
Illustrative planning range only, based on typical IT services / MSP multiples and driver sensitivities — not a formal valuation or an offer.
Methodology
The three ways a it services company gets valued
A credible valuation triangulates across all three. Any single number in isolation is suspect.
Market approach — comparable MSP transactions
The default for any healthy IT services businessThe market approach values your business against actual sale prices and multiples of comparable IT services and MSP companies. It dominates because the comp set is unusually deep — N2M Capital Advisors tracked 120 MSP transactions through mid-2026 [2], Omdia/Canalys tracked 169 publicly announced 2025 deals, and Aventis Advisors maintains a public tier framework updated annually [1]. Buyers and advisors apply three mandatory breakouts when building the comp set: size band (sub-$5M EBITDA vs $500M+ EV differs by ~55%), MRR mix (break-fix at 2–4x vs 90%+ recurring at 11–15x), and cyber/MSSP capability (a 1–2 turn premium on the clock through 2026).[1][2]
Income approach — DCF on the MRR annuity
Cross-check for MRR contract qualityThe income approach (DCF) is uniquely useful for IT services because the MRR book can be modeled as an annuity with explicit assumptions for contract end dates, auto-renew penetration, logo retention rate, and MRR-per-seat upsell from cyber attach. Breakwater M&A confirms that MSPs with 80%+ MRR command materially higher DCF-derived values than those at 40% MRR on identical reported EBITDA.[9][11] The key trap: anchor terminal value to a market exit multiple (the N2M 8.9x median or Aventis 11.2x platform tier [1][2]) rather than a perpetual-growth assumption, which overstates value for MSPs with real reinvestment requirements in tooling and compliance audits.
Asset approach — floor check and software normalization
Floor for distressed shops; surfaces capitalized software add-backAsset value lands well below operating value for any healthy MSP — use it as a sanity check. If asset value is within 30% of operating value, EBITDA quality is likely overstated (buried add-backs, one-off project margins normalized into recurring, or unsustainable utilization).[8] One important exception: MSPs that expense internal portal or automation development depress reported EBITDA while building a real asset; buyers often agree to capitalize and amortize over 3–5 years, and the asset review is where this treatment gets surfaced and agreed before LOI.
Value drivers
What moves the multiple for a it services company
MRR mix 80%+ — the single strongest multiple driver
+1.5x to +2.5xMonthly recurring revenue mix is the first thing every PE platform buyer screens. The same $2M-EBITDA MSP at 90% MRR can clear 9–11x; at 40% MRR it clears 4–5x — a $10M+ enterprise value gap on identical earnings.[1][2] Contracted MRR with auto-renew clauses, not month-to-month agreements, is what drives annuity pricing. PE platforms (Evergreen, New Charter, Integris) publicly state MRR mix as their primary acquisition screen; Evergreen's Craig Fulton cites 6–8x for typical MRR-led MSPs.[6]
Cyber / MSSP capability and compliance certifications
+1.0x to +2.0xCyber-capable MSPs with MDR/SOC, vCISO services, and CMMC or SOC 2 certifications command 10–14x adjusted EBITDA versus 4–6x for commodity break-fix.[7] CMMC Phase 2 (DFARS 252.204-7021 became effective November 10, 2025) forces every DoD contractor's MSP to certify — buyers are pricing this catalyst into security-capable targets now. SOC 2 Type II, NIST 800-171 documentation, and CMMC Level 2 audit readiness each stack as independent underwriting line items in PE diligence.[7][8]
Vertical specialization (healthcare / legal / finance / government)
+1.0x to +2.0xCompliance moats stack with cyber capability. Healthcare MSPs (HIPAA + HITRUST), legal MSPs (attorney work-product privilege, e-discovery), and financial-services MSPs (FINRA, SEC Cybersecurity Rule) all command vertical-specialization premiums.[7] An illustrative top-quartile MSP cleared 11x on 54% financial-services concentration — vertical depth turned what would otherwise be a concentration penalty into a compliance-expertise premium.[10] Government-adjacent MSPs earn the steepest CMMC-related multiple lift given mandatory procurement compliance deadlines.[8]
Logo retention 95%+ with multi-year contracted MRR
+0.5x to +1.5xAventis and Solganick both cite logo retention as a primary multiple driver alongside MRR mix.[1][10] 96%+ logo retention with multi-year (24+ month) contracts and auto-renew clauses earns the top of the band. Month-to-month contracts — even at high MRR as a share of revenue — are discounted because the buyer cannot underwrite the annuity durability. Buyers diligence contract terms, auto-renew penetration, and 30-day cancellation rights in the IOI round.[2]
Project-heavy revenue / MRR under 50%
−2.0x to −4.0xBelow 50% MRR, the asset reprices to staffing/break-fix multiples (3–5x) regardless of how strong the project work looks on the income statement.[7] Time-and-materials revenue, one-off cloud migrations, and staff augmentation engagements all underwrite at staffing multiples — roughly 2–4 turns below an equivalent MRR-heavy book at the same EBITDA.[2] IT services firms that describe themselves as managed services in marketing are repriced at diligence once buyers see sub-50% MRR penetration.
Founder-dependent customer relationships
−1.0x to −2.0xWhen the owner is the senior account executive on every top-10 customer, the de-facto vCISO, and the first technical escalation call, PE buyers compress the multiple and shift consideration into an 18–24 month earn-out on retention.[1] This is a primary contributor to the ~55% size discount Aventis documents for sub-$5M MSPs.[1] The structural test: if you disappeared for 60 days, would every customer relationship survive?[6]
Customer concentration above 25%
−0.5x to −1.5xSingle-customer concentration above 25% of revenue triggers either multiple compression or an earn-out tied to retention of that account post-close. Note that vertical concentration (50%+ in financial services) is rewarded as expertise depth — the penalty applies to single-customer concentration, not sector depth.[7][10] Buyers benchmark a no-single-customer-above-10% diversification threshold as the clean underwriting standard.
Owner-operated scale below the PE tuck-in threshold
−1.0x to −2.0xAventis documents sub-$5M-EBITDA MSPs trading at roughly a 55% discount versus large peers — about 5.0x average versus 11.2x median at the $500M+ EV tier.[1] Three structural reasons: fewer logos, higher key-man risk, and thinner MSSP/compliance capability. The inflection point is $1M+ EBITDA with documented cyber capability — that is where the buyer pool expands from individual SBA-financed operators to PE platforms paying 6–8x.[1][6]
Worked example
A $10M-revenue MSP, step by step
An illustrative mid-market managed services provider with 75% MRR, SOC 2 Type II certification, light financial-services specialization, a tenured service manager, and 95% logo retention. Numbers are illustrative, not a specific company.
Annual revenue
$10.0M
75% MRR ($7.5M) + 25% project and T&M ($2.5M)
Adjusted EBITDA
$1.8M
≈18% margin after owner add-backs; best-in-class MSP margins run 15–20%[1][5]
Applied multiple
6.5x
Mid-band for solid MRR mix, SOC 2 cert, light vertical — N2M 2026 median 8.9x; solid add-on anchor[1][2]
Enterprise value
≈ $11.7M
Adjusted EBITDA × multiple
Indicative result
≈ $11.7M enterprise value
The spread at identical revenue is wide: the same $10M revenue at 35% MRR and no cyber certifications yields ~$1.44M EBITDA (14.4% margin) × 4.5x ≈ $6.5M — while an 80%+ MRR cyber-capable variant at 20% EBITDA margin of $2.0M × 9.0x ≈ $18.0M.[1][2][7] Revenue is not value; MRR quality and cyber capability are. This is illustrative, not an offer or a formal valuation.
Cost & who does it
What a it services company valuation costs — and who should do it
Before you anchor on any number, get your normalized adjusted EBITDA right — and for IT services companies that means resolving owner comp, expensed software development, and deferred infrastructure capex. The right tool depends on why you need the valuation.
Broker / advisor opinion of value
Free – $5,000
Best for
Testing the market, setting an initial range
Fast; not certified, and not accepted by the IRS or courts. Specialist MSP advisors often provide a confidential range free to orient the conversation.
Formal certified appraisal (USPAP)
$5,000 – $30,000+
Best for
Estate or gift tax, ESOP, litigation, partner buyout, SBA
Performed by a credentialed appraiser (CVA / ABV / ASA); defensible to the IRS and courts.[16][17]
Quality of earnings (QoE)
$15,000 – $75,000+
Best for
Validating adjusted EBITDA before going to market
Not an audit; tests add-backs, contract MRR quality, and working capital — and often pays for itself in re-trade protection. GF Data data shows sell-side QoE associated with ~+0.4x multiple on average.[18][19]
For most $5M–$200M IT services owners, the sequence is: an advisor opinion of value to orient, a sell-side QoE to prepare and defend your adjusted EBITDA (particularly MRR normalization and software-development capitalization), and a certified appraisal only if a tax, legal, or ESOP trigger requires it.[16][17] A standard non-certified valuation typically runs $1,000–$5,000; a certified appraisal $5,000–$30,000+ for complex businesses.[16] With Ad Astra's verified $1B+ in closed transaction value, a confidential opinion of value is a no-obligation place to start — book a confidential call.
Before you sell
How to increase your valuation before going to market
The gap between a 4x project-heavy shop and an 8x+ recurring-first MSP is built, not born. Over a 12–24 month runway these levers move your multiple — and our value enhancement work is built around them.
Convert project clients to recurring MRR contracts
+1.0x to +2.5xShifting even 20 percentage points of revenue from T&M into monthly managed-service agreements re-rates the entire business — from staffing multiples to platform multiples.[1][7] Target 75%+ MRR by converting your highest-revenue project accounts into flat-fee or per-seat managed-service agreements with 12-month auto-renew terms. This is the single highest-leverage pre-sale action for an IT services company.
Build or acquire a cybersecurity practice
+1.0x to +2.0xAdding MDR/SOC monitoring, vCISO-as-a-service, SOC 2 Type II certification, and CMMC Level 2 readiness moves the business from commodity break-fix pricing into the 10–14x band.[7][8] CMMC Phase 2 is on the clock through November 2026 — buyers are pricing this capability into targets now. Even a modest cybersecurity attach (15–20% of MRR from security-specific contracts) re-rates the business in diligence.
Reduce owner dependence by building a delivery and account-management bench
+1.0x to +1.5xWithout a hired GM, Service Manager, and Account Manager bench, PE buyers compress the multiple and shift consideration into an 18–24 month earn-out on retention.[1][6] Six or more months of documented operational independence — where the owner is not the first escalation contact on any top-10 account — is the evidence buyers ask for. This is also what unlocks the full PE buyer pool beyond individual SBA-financed operators.
Document contract quality: auto-renew penetration, logo retention, and churn data
+0.5x to +1.0xBuyers underwrite MRR annuity durability in the IOI round — and they ask for contracted MRR by customer, auto-renew penetration, 30-day cancellation rights exposure, and 12-month logo retention before they issue a letter of intent.[2] Having this data clean, auditable, and consistent with your PSA/RMM platform (ConnectWise, Datto, Kaseya) removes a primary due-diligence friction and compresses deal timelines by 30–60 days.[18]
FAQ
Common questions about it services company valuation
Go deeper on it services company multiples
Value another business
From estimate to real number
Get an owner-grade valuation of your it services company
A confidential 30-minute call with Clayton or Joe gives you a real range, the adjustments we'd apply to your reported earnings, and the one or two moves that close the gap fastest — built on technology & tech-enabled services deal data.
- [1] MSP Valuation Multiples (2026) — Aventis Advisors
- [2] MSP M&A Valuation Report 2026 (Mid-Year) — N2M Capital Advisors
- [3] IT Services / MSP Valuation — Valzura
- [4] The MSP Roll-Up Phenomenon — Alternative Payments
- [5] MSP & IT Services M&A Valuation Multiples — Auxo Capital Advisors
- [6] Evergreen Services Group: Inside the MSP Market's Largest Acquisition Machine — Omdia (Jessica C. Davis), April 2026
- [7] Private Equity in Managed IT Services (2026) — CT Acquisitions
- [8] Pentagon Issues Cybersecurity Maturity Model Certification (CMMC) Requirements for Defense Contractors — Latham & Watkins, 2026
- [9] MSP & IT Services Valuation Multiples 2026 — Breakwater M&A
- [10] MSP/MSSP Mergers & Acquisitions Report YTD 2025 — Solganick
- [11] PE-Backed MSP Acquisitions: What Operators Need to Know in 2026 — C4 Solutions
- [12] Are business valuation online calculators accurate? — Wipfli
- [13] Business Valuation Calculator: Estimate Your Business Worth — CT Acquisitions
- [14] Adjusted EBITDA: Add-backs and Common Errors — MidStreet
- [15] Should I Use SDE or EBITDA to Value a Business? — Morgan & Westfield
- [16] How much does a business appraisal cost? — Baton
- [17] How Much Do Business Valuation Services Cost in 2026? — Eton Venture Services
- [18] Quality of Earnings (QoE) Report: 2026 Guide — CT Acquisitions
- [19] New Fields, New Fruit: Digging Into GF Data's Newly-Added Data (sell-side QoE lift) — Middle Market Growth / ACG
Ranges represent typical lower middle market transactions; individual deals may fall outside the band based on buyer thesis, deal structure, and company-specific factors. This page is informational and not a formal valuation opinion.