Average valuation multiples of consulting firms Consulting firms are not valued more because they are larger; on average, consulting firms are valued between 1.0x and 2.0x in terms of revenue multiples. Earnings multiples typically range from 6 to 8 times earnings before interest, taxes, depreciation and amortization (EBITDA), or 11 to 14 times net income after tax. These are rather moderate multiples, reflecting the limited scalability and growth potential of people-based services, where capacity is always a limiting factor. Sales multiples usually range from 1.3 to 2.2 times revenue, depending on profitability.
Professional services companies are very profitable; typical profit margins range from 15% to 30% of revenues (EBITDA). Benefit multiples usually range from 6 to 8 times EBITDA, or 11 to 14 times net income after tax. These are rather moderate multiples, reflecting the limited potential for scalability and growth of people-based services, where capacity is always a limiting factor. Valuation multiples are an essential metric to consider if you are the owner of an IT company and are thinking about an exit strategy.
If you're selling a consulting company, a business valuation can help you understand how to increase its value. A valuation expert can determine the implied value of the company by multiplying the amount of revenue a consulting firm earns by the multiple of the REV. Whether you buy or sell a consulting company, it's important to learn how to value a consulting company. When determining the fair market value of a consulting firm, there are two common methods that business appraisers can use.
Peak can provide you with a business valuation and answer any questions you may have about valuing a consulting firm. Whether you're entering or leaving the consulting industry, it's critical to know the valuation multiples of a consulting firm.
