23 Mar Determining the Value of your IT Services Firm
How do you determine the valuation of your IT Services Firm? The simple answer is: multiply the revenue. Business valuation can be used to determine the fair value of a business for a variety of reasons, like positioning it for sale.
Driving the Valuation of your IT Services Firm:
Sustainable and growing profitability is what drives valuations for IT Services providers. This is a key factor in creating buyer interest. Especially if your firm has more than 50% recurring revenue. The buyer has to get to a forecasted return rate to successfully be in a position to buy your business.
The truest meaningful metric of a valuation is having a willing buyer and a willing seller coming to an agreement on a purchase price.
1 + 1 = 3
Get somewhere your business can’t get to alone. 1+1 = 3 to a successful merger or acquisition. RRCG does around 400 valuations a year across the IT Services space which gives us a great perspective on knowing how to help value a business.
When calculating the valuation of your business:
- You can expect your business to be worth 6-8 times trailing EDIBTA
- walk a mile in the shoes of a seller and walk a mile in the shoe of the buyer
- get to a forecasted return rate: that is in excess of a 5-year return based on a cash flow basis
- Have a willing buyer and a willing seller to set the MBP (market-based price)
Try our Valuation Calculator!