What a Buyer Digs Into First
- Monthly recurring revenue under contract and how long the contracts run
- Client churn over the last three years
- Share of revenue from the largest five clients
- Technician certifications and who holds the client relationships
- Security tools, licensing costs and any past incidents
Recurring Revenue Drives the Multiple
Buyers of managed service providers separate monthly contract revenue from project work and hardware resale. Contract revenue earns the highest multiple, because it renews without a new sale. Project and hardware revenue is valued much lower.
A provider with most of its gross profit from managed contracts, low churn and price increases built into renewals is the kind of company buyers compete for.
Concentration and Owner Ties
Small providers often grew around a few anchor clients. If one client is a large share of revenue, expect the buyer to discount the price or ask for an earnout tied to that client staying.
Owner ties matter just as much. If clients call the owner directly, a buyer wonders whether they will stay after closing. Moving relationships to a service manager a year ahead helps.
Local Demand
The Colorado Springs area has many small defense suppliers, medical offices and professional firms that need cybersecurity compliance help. Providers with experience in federal security requirements are attractive to buyers who want access to that market.
Our page on selling a defense contracting company covers related issues.
Who Buys
Regional IT providers buy smaller ones to add clients and technicians. Private equity platforms do the same at a larger scale. Individual buyers with technical backgrounds also look at smaller providers, often with SBA loans.
Getting Ready
- Put every client on a written agreement with a clear term.
- Report recurring revenue separately from projects and hardware.
- Document your tool stack and what each license costs.
- Write down processes so a new owner can run the help desk.
Then read how buyers price an established business and getting your books ready, and request a confidential valuation when you want a number.