Sell a service business
Service business valuation multiples, by type
Small service businesses sell on owner earnings: BizBuySell's medians for sales from 2021 to 2025 run from 2.04 times for accounting and tax practices to 2.93 times for IT and software services firms. Larger firms are priced on adjusted EBITDA, and the multiple rises with size, recurring revenue, and how little depends on the owner.
The table by type
What do service businesses sell for, by type?
It depends on the type and its size, so each has its own row, on its own measure: four service types from BizBuySell's reported sales, each with the middle half of its sales around the median; managed service providers large enough to price on EBITDA, by size (Drake Star, 2026) and across 80 deals with a disclosed multiple (Aventis Advisors, 2026); and marketing services (Capstone Partners, 2023). Read a row against its own source, not against the row above it.
| Figure | Measure | What it covers | Source | Checked |
|---|---|---|---|---|
| 2.04x | Median multiple of owner earnings (SDE) | Accounting and tax practices sold on BizBuySell, 2021 to 2025; half sold between 1.61x and 2.66x | BizBuySell, Accounting & Tax Practice Business Valuation Multiples & Financial Benchmarks, 2025 | October 2026 |
| 2.93x | Median multiple of owner earnings (SDE) | IT and software services businesses sold on BizBuySell, 2021 to 2025; half sold between 2.20x and 3.87x | BizBuySell, IT & Software Service Business Valuation Multiples & Financial Benchmarks, 2025 | October 2026 |
| 2.48x | Median multiple of owner earnings (SDE) | Dental practices sold on BizBuySell, 2021 to 2025; half sold between 1.60x and 3.37x | BizBuySell, Dental Practice Business Valuation Multiples & Financial Benchmarks, 2025 | October 2026 |
| 2.58x | Median multiple of owner earnings (SDE) | HVAC businesses sold on BizBuySell, 2021 to 2025; half sold between 1.99x and 3.33xBizBuySell's figures are the deals brokers chose to report to it, mostly small firms. | BizBuySell, HVAC Business Valuation Multiples & Financial Benchmarks, 2025 | October 2026 |
| 5x–7x | Multiple of EBITDA, an adviser's range | Managed service providers with under $1.5 million of EBITDA, 2026 | Drake Star, Managed Service Provider (MSP) Market Update, Q2 2026, 2026 | November 2026 |
| 16x–18x | Multiple of EBITDA, an adviser's range | Managed service provider platforms with over $15 million of EBITDA and strong recurring revenue, 2026 | Drake Star, Managed Service Provider (MSP) Market Update, Q2 2026, 2026 | November 2026 |
| 9.8x | Median multiple of EBITDA (enterprise value to EBITDA) | 80 acquisitions of managed service providers with a disclosed multiple, announced 2015 to 2025; half between 6.2x and 13.5x; median deal $34 millionOnly deals whose multiple was disclosed, a narrower set than every sale. | Aventis Advisors, IT Services Valuation Multiples: 2015-2026, 2026 | November 2026 |
| 12.8x | Average multiple of EBITDA (enterprise value to EBITDA) | Marketing services deals, 2021 to August 2023; one $7.5 million digital agency in the same update sold at 5.6xCapstone's update does not say which deals its average counts, and the figure is from 2023. | Capstone Partners, Marketing Services M&A Update, August 2023, 2023 | November 2026 |
Owner earnings (SDE) multiples for small firms, EBITDA multiples for larger ones; a median, an average, and an adviser's range do not compare.
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.
- 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.
SDE or EBITDA
Is a service business priced on SDE or EBITDA?
Small service firms are priced on seller's discretionary earnings (SDE) and larger ones on EBITDA, and what decides it is who will do the owner's work after the sale. SDE adds the owner's pay and personal costs back to the profit; EBITDA keeps a market salary in for the owner's role. In the table above, the firms sold on BizBuySell are priced on SDE and the managed service providers on EBITDA; IBBA and M&A Source switch from one to the other at $2 million of purchase price (Market Pulse, Q2 2026).
In a service business that work is usually the owner's: the partner who signs the work, holds the client relationships, and reviews every deliverable. A buyer who will step into that seat reads the earnings as SDE; a buyer who will hire someone for it counts that person's salary, and reads EBITDA. The more of the work the team already does, the smaller the salary set against the earnings.
The same firm has a larger SDE than EBITDA, so its multiple of SDE runs lower, and a multiple of one is never set against a multiple of the other.
Durable revenue
What revenue does a buyer count in a service business?
Contracted and recurring work, accounts that renew without you, and a team that delivers without your review count; project work won on your relationships, one large client, and delivery only you can do are discounted. Two service businesses with the same revenue can be priced very differently, and 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
Your recurring share
How do you measure your recurring revenue share?
Take twelve months of revenue from your own ledger, mark every line by whether it renews without a new sale, and divide the recurring lines by the total; then do it again without your largest client, and mark the renewals that still need you on the call.
Step 1
Export twelve months of revenue by client
From your accounting system, export the last twelve months of invoiced revenue by client and by line, not by month. Use what was invoiced, not what was quoted or booked.
Done when every invoiced dollar of the twelve months sits on a line with a client's name.
Step 2
Mark each line recurring, repeat, or project
Recurring is work billed under an agreement that renews or runs on without a new sale: a retainer, a managed services contract, a subscription. Repeat is the same client buying again without a contract. Project is work won once.
Done when every line carries one of the three marks.
Step 3
Divide recurring revenue by total revenue
Add up the recurring lines and divide by the twelve months' total. That percentage is your recurring share, and the contracts behind it are what a buyer will ask to see.
Done when you have one percentage and the list of contracts that make it.
Step 4
Run it again without your largest client
Take your largest client out of both totals and divide again. The difference between the two percentages is how much of your recurring share rests on one relationship, which a buyer reads as concentration.
Done when you have a second percentage beside the first.
Step 5
Mark the renewals that need you
Flag each recurring account whose renewal you negotiate yourself. A buyer counts those with less confidence until someone on your team holds the relationship.
Done when each recurring account has a name beside it other than yours, or a flag.
An M&A adviser on a ChannelCon 2026 panel called 70 to 75 percent recurring revenue a solid position for a managed service provider (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: on BizBuySell from 2021 to 2025, a median 2.04 times for accounting and tax practices and 2.93 times for IT and software services firms. 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.
It depends on the buyer. Among the groups that buy managed service providers, holding groups say the companies they buy keep their identity, while integrating platforms bring them onto one operating model (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 sale usually takes seven to twelve months from signing to the wire, for a company that is ready. It runs in four phases, prepare, market, select, and close, after the Go-To-Market Analysis. How ready and how complex the company is, the buyers and their lenders, and the lawyers on both sides set each sale's own calendar, which we agree with you at kickoff. Every time given here is an estimate drawn from past engagements, not a commitment.
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.