What Is a Managed Service Provider Worth?

What a Managed Service Provider Is Worth

Most managed service providers sell for 3.5x to 6x SDE if seller's discretionary earnings are under $1 million, and 6x to 10x EBITDA once adjusted EBITDA clears $1 million. A second, faster check that buyers run in the first ten minutes: 1.0x to 2.0x annual recurring revenue. An MSP doing $3M in revenue with 75% of it under contract and $600K of SDE typically lands between $2.4M and $3.6M. The same $3M of revenue sold as break-fix project work lands closer to $1.2M.

The gap is not the revenue. It is the contractual quality of the revenue. Before you anchor on a number, run your own figures through the business valuation calculator so you are arguing from data rather than a forum post.

Why the Recurring Revenue Mix Drives Everything

Buyers price an MSP on how much of next year's revenue is already spoken for. Four numbers decide the multiple:

• Monthly recurring revenue as a share of total. Above 70% earns a premium. Below 50% and most acquirers reclassify you as an IT project shop and cut the multiple by 1.5x to 2x.
• Logo churn. Under 5% annually is strong. Above 12% and buyers model the decline into their return math.
• Contract term and auto-renewal. Three-year agreements with assignment clauses transfer cleanly. Month-to-month handshakes do not, and buyers discount them heavily or push them into an earnout.
• Customer concentration. Any single client above 15% of revenue triggers a discount, often 10% to 25% off enterprise value.

Gross margin on the managed services line matters almost as much. Healthy MSPs run 50% to 60%. If you are at 35% because you are absorbing licensing costs you never repriced, you are handing a buyer a margin fix and they will pay you for the business you have, not the one they can build.

How to Use This Number

Treat the range as a starting diagnostic, not a listing price. Pull your last twelve months, separate contracted MRR from project and hardware pass-through, and calculate what percentage is truly recurring. That single percentage moves your valuation more than any other lever you control this year.

Then look at who is buying. PE-backed platform acquirers rolling up regional MSPs pay above the range for clean, standardized shops on a single RMM and PSA stack. Individual operators using SBA financing pay at or below it, because their debt service caps what they can offer. Strategic buyers, usually a larger MSP in an adjacent market, fall in between and pay more when your client base plugs into their existing coverage. The mechanics behind those differences are covered in how strategic and financial buyers value your business differently, and much of the premium you are chasing is booked as goodwill in a business sale.

For the full method, including normalizing add-backs and stress-testing your contract book, see how to value an MSP in 2026. YourExitValue tracks these drivers for you as they move, so the number is current when a buyer finally calls. Start with the MSP valuation overview and work backward from the multiple you want.