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Valuation Multiples for Professional Services Firms

Valuation multiples for professional service firms vary depending on the industry/sector. For example, analytics companies have a higher revenue multiple than recruiting/staffing. 

From a data set of ~90 professional services companies, the median revenue multiple for professional services firms is 1.2x and the median EBITDA multiple is ~12x. 

valuation multiples for professional services firms 1

Gross Margin For Professional Services Firms

Gross margin is an important metric for professional services firms, because it’s a reflection of how much the company is directly selling and profiting from clients. 

The revenue is the rate that the services are charged at and the costs are the salaries paid to the employees. 

Professional services firms in industries that require more specialized skills can demand a higher charge rate to the clients, so their gross margin is typically higher than more general professional services skills. 

For example, in the data set analyzed, analytics companies had an average gross margin of 54% and science companies had an average gross margin of 60%, both of which are higher than the overall average of all the companies, which was 43%. 

Gross margin is a good indicator of whether a professional services firm should and would have a higher valuation multiple. 

Valuation Multiples For Professional Services Firms By Industry

Similar to what we found with gross margins being higher for professional services firms with more specialized skills and knowledge, this trend is also found with valuation multiples. 

This makes sense since valuation is the price tag of a firm, and if the firm has higher margins, then the price tag of the company would be higher.

valuation multiples for professional services firms 2

Analytics companies had the highest revenue multiples with an average of ~8x. But what’s interesting is that the average EBITDA multiple is not the highest. 

An explanation could be that analytics companies leverage an analytics platform, so below the gross margin line, there might be higher operating cost like software licenses and software development costs that eat into the EBITDA margin. 

(By the way, this is a key lesson to not just take the numbers at face value, but think about narratives that fit the company’s performance. If you’re interested in this, you can read more about it in the book, Narrative and Numbers

Another interesting analysis is that companies that require more specialized skills and knowledge and training to perform the professional services ranked higher in terms of the valuation multiples – Analytics, Engineering, Science, Legal, etc. 

(Ahem, I’m a little hurt that Financial and Consulting have lower valuation multiples, since this makes me question whether the field I’m in is not specialized enough! Jokes aside, this is interesting data that is reflective of competition and margins and a myriad of other factors within the industry.) 

How To Use Valuation Multiples To Value a Company

For those who are not familiar with using valuation multiples to value companies or those who are but need a refresher, I wrote posts detailing exactly how you can do that. 

Hopefully you can use them as helpful guides. Click on the link below to go to the post.

Data Set of ~90 Professional Services Firms Used in the Analysis

The following is a list of the ~90 companies used in the analysis. The data set contains public companies that are professional services in various industries in the US, Canada, and the UK.

Professional Services Firms
Stantec Inc. (TSX:STN)
Morneau Shepell Inc. (TSX:MSI)
IBI Group Inc. (TSX:IBG)
People Corporation (TSXV:PEO)
DLA Piper International LLP
Intertek Group plc (LSE:ITRK)
WS Atkins International Limited
Towers Watson Limited
PageGroup plc (LSE:PAGE)
Hays plc (LSE:HAS)
RWS Holdings plc (AIM:RWS)
Mott Macdonald Group Limited
SThree plc (LSE:STEM)
AlixPartners UK LLP
Robert Walters plc (LSE:RWA)
ALS Environmental
Gateley (Holdings) Plc (AIM:GTLY)
GlobalData Plc (AIM:DATA)
DWF Group plc (LSE:DWF)
The SimplyBiz Group plc (AIM:SBIZ)
Lightspeed Research Ltd.
Capital Economics Ltd.
Alpha Financial Markets Consulting plc (AIM:AFM)
NOP Research Group
Mind Gym plc (AIM:MIND)
Johnston Carmichael LLP
K3 Capital Group PLC (AIM:K3C)
The Ince Group plc (AIM:INCE)
RBG Holdings plc (AIM:RBGP)
Wilmington plc (LSE:WIL)
Milliman LLP
Methods Consulting Limited
Keystone Law Group plc (AIM:KEYS)
SMART Modular Technologies (Europe) Limited
Saville Assessment Limited
John Thompson & Partners LLP
Tekcapital plc (AIM:TEK)
GFT Financial Ltd.
Honda R&D Europe (U.K.) Ltd.
Knights Group Holdings plc (AIM:KGH)
Lucideon Limited
British Ceramic Research Ltd
BMT Nigel Gee Limited
AXA Assistance (UK) Limited
National Milk Records plc
RTC Group plc (AIM:RTC)
Begbies Traynor Group plc (AIM:BEG)
Levitt Bernstein Associates Ltd.
Aukett Swanke Group Plc (AIM:AUK)
BMT Reliability Consultants Ltd
Manpowergroup UK Limited
SGL1 Limited
Hydrogen Group Plc
Wise Employment (Swindon) Limited
Aquila Services Group plc (LSE:AQSG)
Development Initiatives Poverty Research Ltd
Lane Clark & Peacock LLP
Verisk Analytics, Inc. (NasdaqGS:VRSK)
Equifax Inc. (NYSE:EFX)
Robert Half International Inc. (NYSE:RHI)
TransUnion (NYSE:TRU)
TriNet Group, Inc. (NYSE:TNET)
CoStar Group, Inc. (NasdaqGS:CSGP)
CoreLogic, Inc. (NYSE:CLGX)
ASGN Incorporated (NYSE:ASGN)
FTI Consulting, Inc. (NYSE:FCN)
Insperity, Inc. (NYSE:NSP)
Navigant Consulting, Inc.
ManpowerGroup Inc. (NYSE:MAN)
Exponent, Inc. (NasdaqGS:EXPO)
ICF International, Inc. (NasdaqGS:ICFI)
Kforce Inc. (NasdaqGS:KFRC)
Barrett Business Services, Inc. (NasdaqGS:BBSI)
Korn Ferry (NYSE:KFY)
Resources Connection, Inc. (NasdaqGS:RGP)
CRA International, Inc. (NasdaqGS:CRAI)
Forrester Research, Inc. (NasdaqGS:FORR)
Mastech Digital, Inc. (AMEX:MHH)
GP Strategies Corporation (NYSE:GPX)
DLH Holdings Corp. (NasdaqCM:DLHC)
Hill International, Inc. (NYSE:HIL)
Whitehouse Analytical Laboratories, LLC
BG Staffing, Inc. (NYSE:BGSF)
Command Center, Inc.
Where Food Comes From, Inc. (OTCPK:WFCF)

Englewood Lab, Inc. (KOSDAQ:A950140)


6 thoughts on “Valuation Multiples for Professional Services Firms”

  1. Ryan

    Hi – when was this analysis done? It’s quite interesting.

    Is there a way to get the data for each of the 90 companies mentioned in this?


      Hey Ryan, the analysis was done in 2021. Once I update with latest numbers, I’ll have the data set available to be downloaded. Thanks for your interest!

  2. Mahesh

    Hi, Thanks for the informative article. Is it possible to send me the data set as I am interested in the classification of a couple of companies in your list.

    Thanks in advance.


      Hey Mahesh, thanks for reading! If you put your email in the field at the bottom of the article, the data set will be sent to you automatically. Sometimes it takes a few hours or a day for the email to go through. Hope that helps!

  3. Hi, great article, thanks for posting. Would it be possible to get a copy of the underlying data? I’ve input my email at the bottom of the page. Thanks in advance. Mike


      Thanks Mike, the file should’ve been sent to you after you entered your email address by now as sometimes it takes a few hours. Let me know if you didn’t get it yet!

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