IT services and MSP valuations for Melbourne owners, built on recurring contracts.
For selling or buying an IT business, a founder or shareholder exit, bringing in a partner and moving the business between entities. Fixed fee, set by turnover.
A Melbourne IT services business or managed service provider is valued on the profit from its recurring contracts, the work it can count on each month, with project work and hardware resale weighted as less certain. Our valuers test contract terms and churn, client concentration, gross margin on each revenue stream, and how much depends on the founder or a few senior engineers, then capitalise the maintainable earnings a buyer could expect to keep.
Recurring revenue first, everything else second
IT businesses earn money in very different ways. Managed services, billed monthly per user, per device or as a fixed fee, are the most valuable because they repeat. Project work, such as an email and cloud migration, an office fit-out network or a server replacement, is real income but has to be won again. Hardware and software resale brings revenue but thin margin. So the valuation splits revenue into these streams, works out the gross margin on each, and gives most weight to the recurring part. A business with a smaller turnover but a high share of monthly contracts can be worth more than a larger one that lives on projects, and the report shows why.
Contracts, churn and client concentration
A monthly fee is only as good as the agreement behind it. The valuer reads a sample of client contracts: their term, notice period, price review clause, and whether they can be assigned to a new owner. Then it measures churn from the business's own history: how many clients left each year, how much monthly revenue went with them, and why. Concentration matters too. An MSP looking after small businesses across Melbourne's eastern suburbs, the inner south and around Cremorne and Richmond, with no client above a modest share of revenue, is a steadier asset than one where a single school group or professional firm pays a large slice. Many MSP contracts with small business clients are standard form contracts. The ACCC says that from 9 November 2023, proposing, using or relying on unfair terms in standard form contracts with small businesses is banned and penalties apply. Whether any clause in your contracts is unfair is a question for your lawyer, but a buyer will read the auto-renewal and termination terms closely.
Engineers, the founder and the tools
Clients of a small IT business often call the founder directly, and the founder may hold the admin passwords, the vendor relationships and the knowledge of how each client's network fits together. The valuation looks at how much of that has been handed to a service desk, documentation and a second tier of engineers, because a buyer is paying for a business that runs without the founder on call. Senior engineers with key certifications and long client relationships are worth naming as a retention risk. The valuer sets a market salary for the founder and every technical role, and keeps in the real cost of the tools an MSP depends on: remote monitoring, ticketing, security software and backup licences, which rise with the client base.
Contractors, payroll tax and security incidents
Many Melbourne IT businesses use contract engineers for overflow or after-hours work. The State Revenue Office says payments under relevant contracts are deemed wages and subject to payroll tax unless an exclusion applies, and lists exclusions such as work done for 90 days or less in a financial year. A buyer will ask whether contractor payments have been treated correctly, because past liabilities can follow the business. The valuer records the position your accountant gives us; whether payroll tax applies is for your accountant or the SRO. A buyer will also ask about security incidents, cyber insurance cover and how client backups are tested, since one serious incident at a client can cost an MSP both the account and its reputation.
When Melbourne IT businesses are valued
- ·Sale of the business to another MSP or a larger IT group
- ·A founder or shareholder leaving and the others buying their share
- ·Bringing a senior engineer or manager into ownership
- ·Moving the business between family entities or a new company
- ·Testing an offer from a buyer that is acquiring several MSPs
- ·Market value evidence for small business CGT concessions on exit (your accountant applies them)
Common questions.
How much is my IT business worth?+
Mostly what its recurring contracts earn after paying a market salary to everyone, including you. Monthly managed services revenue counts for more than projects or hardware sales, and low churn and a spread of clients lift value. The report shows each revenue stream, its margin and how it was weighted, so you can see where the value sits.
Are MSPs valued on a multiple of recurring revenue?+
Buyers often talk that way, and the report states the figure as a cross-check. But revenue multiples ignore margin and churn, so two MSPs with the same monthly revenue can be worth different amounts. The valuation is based on maintainable earnings, with the revenue measure used to test the result.
Does it matter if my clients are on month-to-month agreements?+
Yes, but it is not fatal. Month-to-month clients can leave quickly, so the valuer looks at how long they have actually stayed. A long history of low churn can support value even without fixed terms, while fixed-term contracts with assignment clauses give a buyer more certainty.
How is hardware and software resale treated?+
As revenue with a thin margin. Resale can make turnover look large without adding much profit, so the valuation focuses on the gross margin it actually earns. Recurring software licences billed monthly are treated closer to managed services than one-off hardware sales.
What if most clients deal directly with me?+
A buyer will see that as a risk, because those relationships may not transfer. The valuer looks at how much work goes through the service desk and other engineers, how well client systems are documented, and how long you will stay for handover, and reflects the answer in the valuation.
What does it cost and how long does it take?+
The fee is fixed before work starts and set by annual turnover: $1,495 + GST under $2 million, $2,495 + GST for $2 million to $3 million, $3,495 + GST for $3 million to $10 million, and a written quote above $10 million. Small reports take 2 business days and medium and large reports 3 business days, counted from when payment and all required information have been received.
- ·Unfair contract terms, Australian Competition and Consumer Commission
- ·Payroll tax: contractors, State Revenue Office Victoria
Talk to a valuer
Tell us what you need valued.
A fifteen-minute call confirms the package, the fixed fee and the delivery date, before you commit to anything.
03 8375 4177Mon to Fri, 9am to 5:30pm Melbourne time
Send the form and we reply within one business day. No documents needed to start.
Small Business Valuation
$1,495 + GST
For a business with annual turnover under $2 million. Signed report in 2 business days. Delivery time starts once payment and all required information have been received. The fee is fixed in writing before we start and never tied to the outcome.
Larger business? Tell us in the form and we recommend the right package. All fees
Last reviewed 11 November 2026 by Business Valuations Melbourne, Level 7, 55 Collins Street, Melbourne.