As a business owner and entrepreneur, the importance of planning for the future of your IT business is likely at the forefront of your mind, especially in today’s economic climate. The forward-thinking nature of an entrepreneur, especially in the technology space, is a valuable trait for staying a step ahead of trends and cycles of business. But, time and again, we have seen a business owner’s forward-thinking mindset stop short of considering an exit strategy for their business.
While the question of “when should I sell my IT business?” may not be immediate, it is wise to take steps today that will help you secure a better price when that time arrives. The best place to begin is to understand how to value an IT business.
Businesses in IT services encompass a range of types, all geared for significant growth, including network project and support companies, IT consultants, Managed Service Providers, software developers and publishers, website developers, and SEO and internet marketing companies. The growth in 2020 throughout the COVID-19 pandemic has propelled IT businesses and consultants forward at an accelerated pace. Couple constant growth with unlimited opportunities, and you can see why IT businesses are viewed as low-risk, and thus attractive, to buyers and investors.
How to Value an IT Business
There are important Market Multiples that can play into valuing any business, and these multiples vary by industry. Helpful factors for looking at how to value an IT business include the EBITDA Multiple and Revenue Multiple. A professional advisor can help provide the appropriate multiple best associated with your business.
EBITDA Multiple for IT Services & Consulting Business
- EBITDA = Earnings Before Interest, Taxes, Depreciation & Amortization
- EBITDA X Multiple = IT Business Value
Revenue Multiple for IT Services & Consulting Business
- Revenue = Annual Sales + Inventory
- Revenue X Multiple = IT Business Value
Want to learn more? Check out these 4 Tips for Getting the Most for Your IT Business. But remember, only a professional can tell you the real value of your business. Be sure to contact us for a no-cost, confidential business valuation.