MSP Valuation
Multiples

How MSPs Are Valued: Revenue vs. Adjusted EBITDA Multiples

Buyers value most MSPs on a multiple of adjusted EBITDA, not revenue. Adjusted EBITDA takes your reported earnings and adds back owner-specific or one-time expenses that a new owner would not carry, which gives buyers a cleaner picture of the profit the business actually produces. For a fuller walkthrough of how adjusted EBITDA is built and why it differs from the number on your tax return, see Salt Creek's EBITDA and business valuation basics guide. For any deal of meaningful size, that adjusted profit figure, times a multiple, sets the enterprise value.

Revenue multiples show up mainly as a rough shorthand, and they mislead more often than they help. Two MSPs with the same revenue can be worth very different amounts because one earns a healthy margin on recurring contracts and the other resells hardware at thin margins. The public-comparable data makes the gap plain. Aventis Advisors reports that a group of listed companies with managed-services exposure traded at a median of about 1.3x revenue but 11.4x EBITDA in the second half of 2024, with the EBITDA figure ranging from 7.8x in the second half of 2018 to a peak of 17.5x in the first half of 2021 (Aventis Advisors). A revenue multiple tells you nothing about which end of that spread a business lands in, because it ignores how much profit sits behind each dollar of sales.

Revenue multiples do surface for smaller or thin-margin shops, often because reliable EBITDA is hard to pin down when owner compensation and personal expenses run through the books. In those cases a revenue figure serves as a proxy, not a precise measure. The fix is not to accept the proxy; it is to clean up the financials so the better metric becomes available to you.

What the Transaction Data Says About Size

Deal size moves the multiple more than any other single factor, and the mechanism is buyer competition and perceived risk. Larger MSPs carry deeper management teams, more diversified customers, and lower single-owner dependence, so more buyers can underwrite them and each buyer discounts them less. Two published datasets describe that gradient from different angles.

The first is a ladder by earnings rather than deal value, which is the more useful frame for an owner who knows their own EBITDA. A ConnectWise post citing GP Partners puts MSPs at about 4 to 5 times EBITDA in the $250,000 to $1 million bracket, 5 to 6 times at $1 million to $2 million, and 6 to 8 times at $2 million to $5 million (ConnectWise). Two cautions on that ladder: these are third-party reported estimates rather than transaction records, and the post dates to 2021, so it describes an earlier market. It is useful for the shape of the gradient more than the precision of any single bracket.

Those brackets are as published by GP Partners via ConnectWise in 2021. They are third-party reported estimates, not Salt Creek valuations.

The second dataset works from completed transactions and shows something the earnings ladder does not: MSPs trade at a discount to the broader IT services category at every deal size. Aventis Advisors, using data it attributes to Mergermarket, reports IT services transactions rising from 5.9x EV/EBITDA under $5 million to 13.0x above $500 million, with implied MSP multiples in the same brackets running 5.2x to 11.2x.

Source: Aventis Advisors analysis, attributed to Mergermarket. Third-party reported figures, not Salt Creek valuations.

Two things in that table are worth sitting with. First, the discount to IT services is not a rounding error and it widens with size, from about 0.7 of a turn at the bottom to 1.8 turns at the top. IT services is a broader category that sweeps in software-adjacent, consulting, and product businesses carrying different margin structures, so the category a buyer files you under changes the comparison set they reach for. Second, the same source reports a median near 8.9x EV/EBITDA across 120 MSP transactions, but at a median deal size of $38.5 million. That median is real, and it is also describing businesses several times larger than most owner-operated shops. An owner who anchors on 8.9x because it is the headline number is anchoring on a different market than the one they are in.

Who This Article Is For

This article is for you if you own an established MSP and want to understand where your business likely sits before you sit down with an advisor. It builds on Salt Creek's MSP M&A advisory page, which covers the buyer landscape and sale-process basics for managed IT services companies, and goes deeper on the multiples question specifically. Most owners we work with run founder-owned or family-owned companies in the range of roughly $2 million to $75 million in revenue, generally with at least $500,000 of adjusted EBITDA. The segments and ranges below help you place your business roughly within the market, not to the decimal. Your actual number depends on details no article can see, including your recurring revenue quality, customer concentration, and how much of the business runs without you. Treat what follows as a map, not an appraisal.

The Four MSP Market Segments

Buyers tend to sort MSPs into four rough groups when they think about value: subscale and break-fix shops, pure-play recurring-revenue MSPs, cloud and infrastructure specialists, and security-forward MSPs and MSSPs. Each group tends to trade in a different multiple range for reasons we explain below.

These lines are qualitative, not rigid. Most real businesses blend characteristics, and a shop can sit near the top of one segment while carrying weaknesses from another. Treat the groupings as a way to orient yourself, not as fixed categories a buyer applies mechanically.

Subscale and Break-Fix Shops

Subscale and break-fix shops sit at the bottom of the market. Most of their revenue comes from hourly work and one-time projects rather than recurring contracts. A buyer looking at project revenue sees income that resets to zero each month and has to be re-earned. That uncertainty is the main reason these businesses trade at a discount to larger recurring-revenue MSPs.

The published figures reflect that discount, and one of them prices the revenue mix directly. Aventis Advisors reports that multiples drop to roughly 3 to 4 times EBITDA for the smallest businesses, generally those with revenue under $1 to $2 million (Aventis). More usefully, a buyer framework published by Jaken Equities separates the two revenue types and applies different multiples to each: roughly 6.0x to 8.0x EBITDA for recurring revenue against 3.5x to 5.0x for project revenue. That is the clearest statement available of what the mix actually costs. A shop split evenly between the two is not being valued at a blended average by accident; it is being valued as two businesses stapled together, one of which the buyer is far less interested in owning.

The path out of this range is straightforward to describe and hard to execute. Converting break-fix clients onto recurring managed-services contracts raises the share of revenue a buyer can count on, which is the single largest lever at this size. Cleaning up documentation and ticketing records helps too, because a buyer can only credit revenue and margin they can verify. A shop that makes both moves may stop being valued as a break-fix business and start being compared against recurring-revenue MSPs, where the ranges are meaningfully higher. Because that work takes quarters rather than weeks, it belongs in the planning window covered in our guide on when to start exit planning.

Pure-Play Recurring-Revenue MSPs

Pure-play recurring-revenue MSPs are the segment most owners picture when they think about what an MSP is worth. These businesses run on multi-year managed-services contracts rather than project work, and they form the reference point most sellers benchmark against. An analysis of 120 MSP transactions found a median of about 8.9x EV/EBITDA at a median deal size of $38.5 million, according to Aventis Advisors. As noted above, most owner-operated shops sit well below that deal size, so the median reflects larger, more mature businesses than the typical seller.

Where a specific business lands depends heavily on its size. The size-segmented data drawn from Mergermarket shows implied MSP multiples rising from roughly 6.8x EV/EBITDA in the $5–20 million range to about 8.9x in the $20–50 million range. Larger deals command more because buyers view scale as lower risk and easier to integrate.

Raw recurring-revenue percentage matters less than the quality of that revenue. Two shops at 80% recurring mix can be valued very differently if one holds signed multi-year contracts with 90%-plus retention and the other runs on month-to-month arrangements that any client can cancel. A buyer-underwriting framework from Auxo Capital Advisors states plainly that buyers do not pay a premium simply because revenue is recurring, and instead test whether the base is “durable, profitable, documented, transferable, and likely to survive after a change in ownership.” Contract length, assignability, and gross revenue retention move a business toward the top of its range far more than the headline mix figure.

Owners with more than $1 million of EBITDA also face a favorable dynamic, since Aventis observes consistently more buyers than sellers at that size. That imbalance is worth understanding before you run a process, because it is the condition that makes a competitive sale process worth running rather than negotiating with the first buyer who calls.

Cloud and Infrastructure-Focused MSPs

MSPs built around cloud migration, hosting, and infrastructure management often sit toward the higher end of the generalist range. Margin and client stickiness explain why. Once you manage a client's infrastructure, moving that workload to a competitor is disruptive and expensive for the client, so retention stays high. High-margin recurring managed services also convert more cleanly to EBITDA than resale-heavy revenue, and buyers pay for durable EBITDA.

Public comparables give directional support for this pattern, though they reflect larger, tech-forward companies rather than a typical lower-middle-market shop. Aventis Advisors tracked the median EV/EBITDA multiple for listed companies with significant managed-services exposure ranging from a low of 7.8x in the second half of 2018 to a peak of 17.5x in the first half of 2021, standing at 11.4x in the second half of 2024, based on publicly reported data. Those figures describe public markets, not private MSP deals, so treat them as a ceiling reference rather than a number a smaller cloud MSP should expect.

Cloud specialization carries one qualitative risk worth naming. Depending on a single hyperscaler or a single platform concentrates your business in one vendor's pricing, program terms, and roadmap. A buyer may read heavy dependence on one provider as fragility, which can offset some of the premium that stickiness and margin would otherwise earn. Public data does not put a number on that discount. A buyer weighs it during diligence rather than applying a fixed adjustment.

MSSP and Security-Forward MSPs

Security-forward MSPs and true managed security service providers (MSSPs) sit at the top of what buyers say they will pay for, though the available data describes that premium in words rather than numbers. Moore Kingston Smith frames the reason as demand and defensibility: cybersecurity is growing faster than other IT segments, and boards, regulators, and insurers are all pushing more spend toward it.

The distinction that matters to buyers is whether a business is a true MSSP or an MSP that has bolted security onto an existing stack. Moore Kingston Smith describes true MSSPs as “built on core security operations centre capabilities” with regulatory-grade infrastructure such as ISO 27001 and CREST accreditation. Those accreditations, skilled personnel, and continuous threat-intelligence spend raise the barrier to entry, which the source says produces higher average revenue per user and more defensible market positions.

When buyers underwrite these businesses, Moore Kingston Smith points to four diligence priorities: operational maturity, meaning defined processes and a skilled team; scalability, meaning whether the shop can onboard clients without service degrading; client concentration, because a diversified base lowers risk; and platform versus bolt-on fit, which separates a real security platform from marketing language dressed up as one.

The same source states that MSSPs using AI-powered threat detection, automation, and extended detection and response command premium valuations. That claim is qualitative and directional. No source attaches a specific multiple or percentage premium to AI capability or security attach, so weigh any number you see for this segment with caution, including numbers published by firms that compete with us. A security story only supports a higher multiple when the revenue behind it is recurring, profitable, documented, and spread across the customer base. Attach that is thin or aspirational tends to get discounted back to a generalist range.

Segment Comparison at a Glance

The table below places the four segments side by side using publicly reported figures. Real businesses often blend characteristics across these segments, so treat the ranges as directional benchmarks rather than a formula for any single company.

The subscale, recurring, and mid-size figures draw from Aventis Advisors analysis of 120 MSP transactions and size-segmented data sourced to Mergermarket. The MSSP premium reflects qualitative commentary from Moore Kingston Smith, which describes premium valuations without publishing a specific multiple. None of these ranges are Salt Creek's own valuations. They are third-party estimates we use as market context, not a substitute for reviewing your financials.

What Pushes a Business Toward the Top or Bottom of Its Range

Two MSPs in the same segment can trade at very different multiples, and the gap usually comes down to a handful of qualitative levers. Each one cuts both ways. The same factor that lifts a business toward the top of its range can drag another toward the bottom.

Recurring revenue durability matters more than the headline percentage. Buyers do not pay a premium simply because revenue is recurring, according to the buyer-underwriting framework from Auxo Capital Advisors. What they test is whether the recurring base is profitable, documented, and likely to survive after the owner leaves. A book of month-to-month clients reads as fragile even at a high recurring mix.

Customer concentration works the same way, and here the published benchmarks are unusually specific. Jaken Equities describes a clean book as one where no single customer exceeds 5% of revenue. Most owner-operated MSPs do not meet that standard, which is normal rather than disqualifying, but the further you sit from it the more of your price arrives contingent rather than at closing. Auxo states that buyers often address concentration through “lower valuation, higher escrow, earnouts, or customer-retention conditions,” which is the mechanism worth understanding: concentration frequently shows up in the structure of a deal before it shows up in the headline number. Vendor and industry concentration raise similar questions, though published data offers little to quantify them.

Contract terms sit close behind. Multi-year, assignable agreements with renewal and price-escalation language protect margins and give a buyer confidence the revenue transfers cleanly. Weak termination clauses or informal handshake arrangements do the opposite and slow diligence. Assignability in particular is worth checking before you go to market, because a contract that requires client consent on a change of control converts every major account into a diligence condition.

Management depth is often the largest single swing for owner-operated shops. When the founder still controls sales, escalations, vCIO relationships, and the biggest accounts, buyers see the value sitting in one person rather than the company. Auxo notes this frequently produces earnouts, rollover equity, or extended transition requirements, even when recurring revenue looks strong. Salt Creek's guide to how a sale process typically unfolds covers how buyers structure around founder dependence in more detail, and our guide on what buyers look for in an acquisition target covers the same dynamic across the lower middle market.

Documentation and tooling hygiene shows up as a discrete diligence line rather than a soft impression. Auxo notes that PSA and RMM maturity affects how buyers assess ticketing discipline, endpoint visibility, automation, billing accuracy, SLA performance, account profitability, and post-close integration risk, and that weak systems lead buyers to preserve “price optics while shifting more risk into deal structure.” That is worth reading twice: poor tooling does not always cut the headline price, it moves money into escrow and earnout where you may never collect it.

Growth, margin, and retention round out the picture, and each has a published benchmark. Jaken Equities cites gross margins of 45% to 65% for managed services, reflecting labor efficiency and pricing power, and EBITDA margins of 25% to 35% after operating expenses. On retention it gives 90%-plus annual renewal as the target, 85%-plus as acceptable, and below 80% as a level that raises concerns; Aventis likewise describes retention ideally above 90% as a signal of stability. Aventis also reports that MSPs above $1 million of EBITDA face more buyers than sellers, which supports pricing on its own.

How MSP Multiples Compare Across the Lower Middle Market

MSPs are a business services business with an unusually good revenue model, and the comparison to neighboring sectors explains both the premium and its limits.

• Against the broader lower middle market. GF Data reported average purchase price multiples of roughly 5.5x trailing EBITDA at $1–5 million of enterprise value and 6.2x to 6.7x at $10–25 million across all industries. A recurring-revenue MSP at the same size generally sits at or above that, which is the contract base being paid for. Our guide to EBITDA and valuation basics covers those cross-industry brackets in detail.
• Against other business services. Contracted revenue is rewarded over project revenue in every services vertical, but few of them have a metric as clean as managed-services MRR to prove it. See our guide to M&A advisors for business services companies.
• Against industrials and manufacturing. Capital intensity puts weight on maintenance capital expenditure, which EBITDA deliberately ignores, so a sophisticated buyer looks past EBITDA to earnings less required reinvestment. MSPs are asset-light by comparison, which is part of why the multiple is higher. See our guide to M&A advisors for industrials and manufacturing.
• Against consolidating sectors generally. MSP buying is substantially a roll-up story, and negotiating against a serial acquirer is a different exercise from negotiating against a one-time buyer. See why roll-ups are heating up for how that changes leverage, and our guide on strategic versus private equity buyers for who shows up at each size.

Getting a Range Specific to Your Business

The published ranges in this article tell you where MSPs generally trade. They cannot tell you where your business would land, because that depends on the details buyers examine in your financials and contracts. A preliminary valuation conversation is how you turn a market range into an estimate that reflects your recurring revenue, customer mix, and management depth.

Jack and Connor handle these conversations directly. We work on a success-fee basis with no upfront retainer for standard M&A engagements, so an early discussion carries no cost or obligation to sell. That founder-level involvement is the reason a direct conversation gives you more than any multiple you read online.

If you want to understand your options, start with our MSP M&A advisory page, then review how Salt Creek approaches business valuation and how a sell-side process typically compares to working with a business broker.