Every owner runs a valuation eventually. The only question is whether the first one happens in private, with a spreadsheet and a pot of coffee, or in public, anchored by a buyer’s number that you have no independent way to judge. We built our MSP Valuation Workbook for the first scenario, and this post walks through what it asks, what it computes, and what the answer does and doesn’t mean, whether you use our workbook or build your own.
The workbook is a spreadsheet, free, and gated behind an email on its download page. What follows is the tour.
Input one: revenue, taken apart
The first tab makes you do the thing most owners have never done precisely: split trailing-twelve-month revenue into contracted recurring, month-to-month recurring, project, T&M, and product resale, using the strict definitions a buyer would apply. Contracted means paper, with a term, that survives assignment. Not “they’d never leave.”
This tab produces the number that anchors everything downstream (your true contracted MRR percentage), and it delivers the workbook’s first common surprise: the strict figure typically lands 10 to 20 points below the number owners quote at conferences. Better to meet it here than in diligence.
Input two: the adjusted-EBITDA builder
The second tab rebuilds your earnings the way a buyer’s accountant would: reported net income, plus interest, taxes, depreciation, amortization, then a line-by-line addback schedule: owner compensation above (or below) market, personal expenses, one-time items, rent normalization if you own the building. Each line has a documentation column, because an addback you can’t evidence is worth an argument, not a multiple.
The discipline this tab enforces is the market-rate replacement question: what would it actually cost to hire the jobs you do? Answer honestly and you have the two numbers that matter, SDE and adjusted EBITDA, and you know which one your size class trades on.
Input three: the risk profile
The third tab scores the things that move your multiple within its band: top-client concentration (percentage of revenue in your largest one and largest five), client tenure, contract quality (what share of MRR sits on assignable multi-year paper), owner dependence (can the business run 30 days without you), and team depth. None of these require judgment calls fancier than honesty. The concentration math and the owner-dependence discount have their own posts; the workbook just makes you apply them to yourself.
The output: a range, and why it refuses to be a number
The workbook then does what any honest valuation does: multiplies your adjusted earnings by a multiple band selected by your size and risk profile, and hands you a range whose width might be 30% or more. First-time users sometimes read the width as evasion. It’s the opposite: the width is information. A $500k-EBITDA shop scoring well on mix and risk might see something like $2.2M to $2.9M; the same earnings with heavy concentration and owner dependence might see $1.6M to $2.2M. Where you land inside any band depends on things no spreadsheet holds: buyer synergies, competitive tension, structure, and timing.
So the output is not a price. It’s three other things, each more useful. A reality check, so the first buyer number you ever hear (high or low) lands on a calibrated ear instead of an anchored one. A sensitivity map, because the workbook lets you change one input and watch the range move: convert $200k of project revenue to contracted MRR, watch what happens; document $40k of addbacks, watch what happens; grow the anchor client’s denominator, watch what happens. That’s your pre-sale work plan, ranked by payoff, generated by your own numbers. And a gap statement: the distance between the range and the number you actually need for what’s next, which is the most clarifying arithmetic in this entire subject and deserves the separate post it will eventually get.
What it can’t tell you
Fair warning about the limits. A workbook can’t see buyer appetite in your specific geography this specific year, can’t price the strategic premium someone might pay because your service area fills a hole in their map, can’t detect the diligence problems you don’t know you have, and can’t negotiate structure, where much of the real outcome lives. It also inherits every honesty shortcut you feed it. Garbage in, confident-looking garbage out.
Which is why the workbook’s real product isn’t the range. It’s the conversation you’re finally equipped to have: with your spouse, with your CPA, and eventually, on your schedule rather than anyone else’s, with a buyer whose number you can now hear without flinching. Download it, block a quiet morning, and run your business through it before anyone else does. The owners who’ve done this exercise are unmistakable across a table, and it’s not because their numbers are bigger. It’s because nobody can tell them a story about their own company.