Sell a service business
How buyers value and price a service business
People businesses are bought for the earnings that survive the owner leaving. Here is how buyers price them, which revenue they treat as durable, and what preparation closes the gap between the number you hope for and the number you get.
How you get priced
Size and recurring revenue set the multiple
Small service firms sell on a multiple of what the owner takes home. Larger ones are priced on adjusted EBITDA, and the multiple moves with how much of it renews and how far it runs without the owner. Managed service providers show the spread most clearly.
- Small accounting practices sold for a median 2.04 times owner earnings (BizBuySell, 2021 to 2025)
- Small IT and software services firms sold for a median 2.93 times owner earnings (BizBuySell, 2021 to 2025)
- In marketing services, the higher multiples go to firms with a spread-out client list, strong margins and real expertise (Capstone Partners, 2023)
Same sector. Scale and recurring revenue make the difference.
Durable revenue
What a buyer counts, and what they discount
Two service businesses with the same revenue can be priced very differently. The difference is how much of the income arrives again next year without the owner in the room.
Counted
- Contracted and recurring work
- Accounts that renew without you on the call
- A team that can deliver without your review
- Documented processes, so the work runs the same way without you
- Clean monthly financials, with the owner's pay set at market
Discounted
- Project work won on your relationships
- One client carrying a large share of revenue
- Delivery that only works when you do it
An M&A adviser at Evergreen, the most active buyer of managed service providers in Aventis's count, called 70 to 75 percent recurring revenue a solid position for one (Channel Insider, 2026).
Founders on film
Owners of people businesses, in their own words
No case studies written by us. The founders say what the work asked of them, including the parts that took longer than they wanted.
Questions
What service business owners ask first
Small firms sell on a multiple of owner earnings: a median of about two times for accounting practices and about three times for small IT firms (BizBuySell, 2021 to 2025). Larger firms are priced on adjusted EBITDA, and the multiple rises with size, recurring revenue and how little depends on the owner. Managed service providers under $1.5 million of EBITDA trade at about five to seven times; scaled platforms with strong recurring revenue at sixteen to eighteen (Drake Star, 2026). The exit score shows where yours sits today.
Yes, but a buyer discounts revenue that has to be won again every month against revenue that renews on contract. The more of your project work comes from repeat clients on agreed terms, and the less of it depends on your relationships, the more of it a buyer will count.
As risk. In marketing services, the higher multiples go to firms with limited client concentration (Capstone Partners, 2023). A large client can be priced as a lower multiple, held back in an earn-out, or both. Widening the list before a sale is one of the changes that shows up in the number.
It depends on the buyer. The platforms that buy managed service providers tend to keep the founder's team and brand in place (Aventis Advisors, 2026). A strategic buyer with its own staff may combine teams. What happens to your people is one of the terms we negotiate, alongside your own role after close.
There is no standard length. An earn-out is part of the price paid later, only if the business hits agreed targets. Whether to accept one depends on whether you can influence the result and whether the buyer can influence the metric. In a people business, an earn-out is often how a buyer prices owner dependence.
A well-run process usually takes seven to twelve months from signing to the wire: preparation, going to market, selecting a buyer, then diligence and closing. Preparation can add time before that, and the preparation is where most of the value is created.
Find out what your service business is worth today
One conversation, founder to founder, and a clear read on the gap between the number you hope for and the number a buyer would pay.