What Is an IT Company Worth?

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.

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.

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.

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.

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.

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.

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.

SDE times the industry multiple. For IT companies that multiple is 2.5x to 4.2x, so $250,000 of SDE points to $625,000 to $1,050,000. Recorded sales of similar businesses serve as a cross-check, and the equipment and inventory value usually sets the floor.

Yes, at the top of this page. It applies the 2.5x to 4.2x band for IT companies, adjusted for owner hours, margin and years in business, and returns a range rather than one number.

To decide whether to sell an IT company, a market valuation: what a buyer would likely pay. A certified appraisal is usually needed only for divorce, estate, tax, litigation or a buyer's SBA loan, and costs far more.