Valuation of Professional Service Firms
November 18, 2021
by a searcher from Lousiana State University in Houston, TX, USA
Given the need for previous owner/partner involvement, lack of asset base, typically short term agreements vs long term contracts, and need for buyer involvement; what are typical valuation multiples for professional service firms in the $5MM - $10MM revenue range?
from The College of New Jersey in La Verne, CA 91750, USA
^redacted - Unfortunately, I think you're going to find it difficult to find market data that will give you multiples with the criteria mentioned above. You can certainly find data from professional services with the revenue range in databases like DealStats, but detail on typical client contract terms, client relationship ties to the partners/owners, etc. will be difficult to pinpoint. As you probably already know, the importance of being able to transfer client relationships to a new owner, terms of non-compete (and the ability to enforce the non-compete given location), deal structure, etc. all play into the value of any business.
^redacted puts on a great webinar for M&A considerations in various industries. He put one on in September (https://youtu.be/KtYiGuGEMzg) on the professional services industry. The discussion is fantastic, highly recommend a listen. You may be able to glean some information on multiples from the webinar.
Hope this is helpful.
from Harvard University in Indianapolis, IN, USA