Business Valuation Guide
What Is an IT Company Worth?
Most IT companies sell for 2.5x to 4.2x Seller's Discretionary Earnings, with the midpoint near 3.4x. An IT company with $250,000 of SDE would typically fall between $625,000 and $1,050,000.
By Curtis Hinds, Hedgestone Business Advisors · Updated 2026-08-19
IT companies split into two very different valuations. A managed service provider with contracted monthly recurring revenue behaves like a subscription business and earns the highest multiples on this list. A break-fix shop billing hourly does not, because every month starts at zero.
How to value an IT company
Start with Seller's Discretionary Earnings: net profit plus the owner's compensation, personal expenses run through the business, interest, depreciation and any genuinely one-time costs. That figure, not revenue, is what a buyer is purchasing.
Then apply the industry multiple. For IT companies that band runs 2.5x to 4.2x, and where a specific business lands inside it is decided by the factors below. Typical SDE margin for this category runs around 22% of revenue, which is a useful sanity check: if your margin is far off that, the multiple moves with it.
Above roughly $1M to $2M of EBITDA the buyer pool changes. Individual buyers give way to private equity platforms and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x rather than a multiple of SDE.
What raises the value of an IT company
- Contracted monthly recurring revenue under managed service agreements
- Client retention above 90% with multi-year agreements
- Documented systems, tooling and runbooks rather than knowledge in one head
- Certified engineers who stay, and a service desk that runs without the owner
- A client base spread across industries rather than concentrated in one
What lowers it
- Break-fix or hourly billing with no contracted base
- The owner personally being the senior technical resource
- One client representing a large share of revenue
- Undocumented client environments that only staff know
- Reselling hardware at thin margin inflating revenue without profit
Who buys IT companies
Larger MSPs rolling up smaller ones, private-equity-backed IT platforms which are unusually active in this category, and technical buyers acquiring their first firm.
Selling an IT company: what to expect
A typical sale runs 6 to 12 months from going to market to closing, assuming your financials are ready when you start. Managed service providers with contracted monthly recurring revenue are among the most sought-after small businesses in any category right now, and there are active acquirers in nearly every metro.
The sequence is broadly the same in every category: establish the number, prepare a confidential profile, approach qualified buyers under NDA, negotiate a letter of intent, then survive diligence. Most deals that fail do so in diligence, and almost always because the books could not support what the marketing said.
IT Company appraisal vs market valuation
These are different instruments and the distinction costs owners money. A market valuation estimates what a buyer would actually pay, and is what you need to decide whether and when to sell. A formal appraisal is a certified document written to a defined standard, normally required only for litigation, divorce, estate or tax matters, or by a lender on the buyer's side.
For planning an exit, the market valuation is the right tool and costs a fraction of the appraisal. The value of an IT company in a sale is set by what a buyer will finance and pay, not by a certificate.
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IT Company valuation: common questions
What is the valuation of an IT company?
Most small IT companies sell for roughly 2.5x to 4.2x Seller's Discretionary Earnings, among the highest bands of any small business category. Managed service providers with strong contracted recurring revenue reach the top; break-fix shops billing hourly sit well below it.
How do MSP valuations differ from break-fix IT?
Substantially, and it is the single biggest factor here. Contracted monthly recurring revenue survives an ownership change, so buyers underwrite it as durable. Hourly break-fix work does not transfer with the same confidence, and is priced accordingly.
What IT company valuation multiples do acquirers use?
SDE multiples of 2.5x to 4.2x for owner-operated firms. Above roughly $1M of EBITDA the buyer pool becomes private equity platforms and pricing restates onto a 4.0x to 6.5x EBITDA multiple, sometimes higher for MSPs with exceptional retention.
What is the average price of an IT company?
There is no single average, because price tracks earnings rather than revenue. At the midpoint multiple of 3.4x SDE, IT companies at $500,000 of SDE sell around $1,675,000, and at $1,000,000 of SDE around $3,350,000. Typical SDE margin in this category runs near 22% of revenue, so an IT company doing $1,000,000 in revenue would often carry about $220,000 of SDE and land near $737,000.
How much can I sell my IT company for?
Take your Seller's Discretionary Earnings and multiply by 2.5x to 4.2x. Where you land inside that band is decided by owner dependence, customer concentration, recurring revenue and the quality of your books. An IT company at the top of the range looks materially different from one at the bottom, and most of those differences can be improved in the twelve months before a sale.
What EBITDA multiple do IT companies sell for?
SDE multiples of 2.5x to 4.2x apply to owner-operated IT companies. Once earnings pass roughly $1M to $2M of EBITDA the buyer pool shifts to private equity and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x. The two are not comparable: SDE includes the owner's compensation and EBITDA does not, so the same business shows a higher SDE multiple than EBITDA multiple.
How long does it take to sell an IT company?
Typically 6 to 12 months from going to market to closing, assuming financials are ready. Managed service providers with contracted monthly recurring revenue are among the most sought-after small businesses in any category right now, and there are active acquirers in nearly every metro.
What is the IT company valuation formula?
There is no formula unique to IT companies. The method is the same one used across small business sales: recast earnings into Seller's Discretionary Earnings, then multiply by the industry band, which for IT companies is 2.5x to 4.2x. Three valuation methods exist in principle. The income approach, applying a multiple to earnings, is what nearly every real transaction uses. The market approach compares against recorded sales of similar businesses and works as a cross-check. The asset approach values equipment and inventory and generally sets a floor rather than a price.
Is there an IT company valuation calculator?
Yes. The calculator on this page applies the same 2.5x to 4.2x band used throughout this guide, adjusted for owner dependence, margin quality and business age. It takes five inputs and returns a market range rather than a single figure, because real transaction prices move with deal structure and buyer type.
Do I need an IT company appraisal or a valuation?
A market valuation estimates what a buyer would likely pay and is what you need to decide whether to sell. A formal appraisal is a certified document prepared to a defined standard, and is normally required only for litigation, divorce, estate and tax matters, or an SBA loan on the buyer's side. For planning an exit, a market valuation is the right instrument and is far cheaper.
Multiples reflect broker transaction data including the BizBuySell Insight Report and aggregated 2024-2025 USA small business sales, and mirror the bands used by the Exit Ready valuation calculator. They are planning estimates, not a formal appraisal, and not investment advice. Market multiples move; this page was last updated 2026-08-19.