We are transitioning our legacy IT consulting firm to a managed services model to capture a recurring revenue multiple, but we still have high project-based revenue. How do we present this mixed revenue model to buyers to maximize our valuation?

Question

Tyler Smith · Accepted Answer

Buyers value recurring revenue far higher than transactional revenue because of its predictability, but you cannot simply bundle everything together and hope for a SaaS multiple. You must segment your revenue streams cleanly. Under IVS 105, a buyer will value different cash flows using different assumptions. Separate your high-margin recurring managed services contracts from your transactional, project-based consulting revenue in your financial reporting. For your managed services, show a clear cohort analysis that tracks your monthly recurring revenue retention rate over the last twenty-four months. This proves the longevity of the customer relationships. For your project-based revenue, show how it serves as a customer acquisition channel that systematically feeds your recurring contracts. Use your EOS V/TO to clearly define your target market and prove that your marketing engine is consistently attracting high-value clients who convert from one-off projects to long-term agreements. By showing this transition as a deliberate, systemized business model rather than a random mix of services, you allow the buyer to apply a premium multiple to your recurring base while still capturing value for your transactional cash flow. This structured presentation stops the buyer from treating your entire business as a low-multiple consulting shop.