Valuation Benchmarks for Small IT Companies in 2025: What’s Driving Multiples?

If you run a small IT services firm today, chances are an acquirer has either approached you, thought about selling, or wondered, “What’s my company worth?”

Valuation isn’t just a number; it’s a reflection of your business model, reputation, and the story your company tells. And in 2025, the M&A landscape for IT services companies, especially those in the $5M–$25M revenue range, is more dynamic than ever.

Here’s a closer look at how valuations are being set, what multiples we’re seeing in deals, and the factors that truly move the needle for small IT companies.

1. What’s the Market Saying? A Snapshot of Valuation Multiples

Over the past five years, valuation multiples for IT services companies have shifted dramatically.

• Traditional IT services firms often trade at 4–6x EBITDA or 0.8–1.5x revenue, depending on size and profitability. (source: Link)
• Specialised service providers, for example, a Salesforce consulting partner or a firm with deep expertise in cloud migration or cybersecurity, can command 7–10x EBITDA or even 2–3x revenue, especially if they’re US- or UK-facing. (Source: Link)
• Next-gen IT players focused on AI/ML, automation, or niche vertical solutions (e.g., healthcare RPA or fintech cloud services) have seen double-digit EBITDA multiples in some cases—because buyers are betting on future growth, not just current earnings

What this means: Founders shouldn’t just compare themselves to the “IT industry average.” Your specialisation and client base heavily influence where you fall on this spectrum.

2. Geography Matters More Than Ever

One thing that has become clear in 2025: location drives valuation.

• India-based IT service companies serving mostly Indian clients might see modest multiples often in the lower range (4–6x EBITDA) because of price-sensitive markets.
• Indian IT firms with 60–80% revenue coming from the US or UK? That’s a different story. They often trade at a premium, as global buyers see them as cost-effective delivery partners with established offshore capabilities.
• Conversely, US- or UK-based boutique IT firms with strong client relationships are still in demand, especially those in the $10M–$25M range, which are too small for PE giants but highly attractive to strategic buyers.

3. Service Focus is the Big Swing Factor

Here’s the hard truth: not all revenue is created equal.

• Low-margin staff augmentation firms are seeing compressed valuations
• High-value service providers—those delivering complex cloud migrations, cybersecurity audits, or industry-specific AI solutions are where buyers are paying premiums.
• Recurring revenue models (Managed Services) are gold. A company with 40–60% of its revenue locked into multi-year managed service contracts will almost always get higher multiples than one doing purely project-based work.

4. Why Buyers Are Willing to Pay More (or Less)

Buyers today aren’t just looking at your last year’s P&L. They’re asking:

• Is this company recession-resilient?
  Buyers are nervous about global slowdowns. Firms with diverse clients across industries (e.g., healthcare, BFSI, energy) score better.
• Is there overdependence on one or two clients?
  If 70% of your revenue comes from one client, expect a valuation haircut—buyers see risk.
• How healthy is the talent bench?
  A team with certifications (AWS, Salesforce, Microsoft Dynamics, ServiceNow) can push up valuation. A team that’s just commoditised coding talent? Less so.

5. How the Market is Valuing IT Firms This Year

• Mid-tier Salesforce partners in India with $8–15M revenue have been acquired at 2.2–2.8x revenue by US-based firms looking to expand delivery centres— for instance, Mindtree’s acquisition of Salesforce specialist Magnet360 was valued at roughly 2× revenue, illustrating the premium buyers are willing to pay for niche expertise.
• Cybersecurity boutiques in the UK are fetching multiple times their EBITDA, thanks to strong demand from private equity-backed IT rollups—Thoma Bravo’s acquisition of Darktrace, for example, valued the company at approximately 34× adjusted EBITDA, underscoring the premium paid for boutique cyber firms.
• Generic development shops with no niche? Struggling to get 1x revenue unless they have sticky clients or recurring contracts.

6. The Road Ahead – What Founders Should Do

If you’re a founder thinking of selling in the next 12–24 months, you can take specific steps to increase your valuation:

• Build recurring revenue streams – Convert project clients into managed service agreements
• Specialise (and certify) – Whether it’s Azure, ServiceNow, or cybersecurity, niche expertise drives premiums.
• Diversify your client base – No buyer wants to inherit concentration risk.
• Get your house in order – Clean financials, strong contracts, and clear IP ownership make you “diligence ready

Final Takeaway

The valuation of small IT services companies in 2025 isn’t random—it reflects a combination of market position, specialisation, geography, and business model. For founders, these benchmarks aren’t just about planning an exit; they provide a roadmap to build a company that’s attractive, resilient, and future‑ready. For buyers, the takeaway is equally clear: the most valuable target isn’t always the biggest, but the one best positioned to lead the next decade of IT evolution.