For businesses valued from $5M to $100M+
Considering selling your business services company?
Business services companies are valued on the quality of the revenue: how long the contracts run, how much of it repeats, and how much of it depends on the founder personally.
- Contracted versus project revenue
- Average contract term
- Net revenue retention
- Customer concentration
- Gross margin by service line
- Owner dependence
- Staff utilization
- Pricing power
- Adjusted EBITDA add-backs
What business services buyers are actually underwriting
The question underneath every other question is whether the business will keep performing once the founder is no longer in it every day.
Contracted revenue with real terms answers that better than anything else. So does a client base where the relationships sit with the firm and its delivery team rather than with one person. Buyers test this directly, and they test it early.
Concentration is the other decisive factor. A single client above roughly a quarter of revenue changes the structure of the deal, usually through escrow, an earnout, or both.
What gets examined closely
- Contracted versus project revenue, and the average contract term
- Net revenue retention and churn, examined by cohort rather than in aggregate
- Customer concentration and the tenure of the top ten relationships
- Gross margin by service line and where it is actually earned
- Whether new business depends on the owner's personal relationships
- Delivery capacity, staff utilization and bench depth
- Pricing history and whether cost increases have been passed through
- Systems, documentation and how much process is written down
Who buys business services companies
Private equity platforms and their add-ons
Services platforms want contracted revenue and delivery that repeats without heroics. They will pay for documented process and a management team below the owner, and they will discount for the absence of both.
Strategic acquirers
Larger firms buying capability, client relationships or geography. A strategic that can cross-sell into your client base may justify a higher number and a faster close.
Which type of buyer suits you depends less on the multiple than on what you want afterward: a clean exit, a second bite through rollover equity, or a few more years running the business with someone else's balance sheet behind it. That is worth deciding before you go to market rather than during.
- Revenue that follows the founderIf clients are loyal to you rather than to the firm, the buyer moves value into an earnout you have to earn twice
- Contracts that renew on a handshakeUndocumented renewals get treated as project revenue, at a project multiple
- Concentration above roughly a quarter of revenueOne client carrying the P&L generally means escrow, an earnout, or both
Where business services owners lose value
Almost always in the same three places, listed alongside. None of them are inevitable, and all three are decided well before a letter of intent is signed.
Introducing a second relationship owner on your largest accounts, well ahead of a process, is unglamorous work that materially changes how a buyer prices the business.
Request a confidential valuation.
An advisor who works with services businesses will review your company and give you a real range.
- No cost, no obligation, strictly confidential
- Grounded in what buyers in your sector are paying now
- Useful whether you sell next year or in five