Two businesses in one transaction. The software leads your price.
The discount on services shows up in revenue multiples far more than in earnings multiples. If your services are profitable, that is a position you can take before a process starts.
Request a Pre-Market Assessmenttrailing revenue is the median for health IT software vendors. For outsourced services providers it is 2.8 times. On earnings, the two medians are 16.6 and 14.5 times.
A healthcare technology advisory firm’s market review, July 2026: global M&A and buyout transactions, 2021 to the first half of 2026. Medians of enterprise value to revenue and enterprise value to EBITDA, as published.
A services arm is the first thing a buyer separates out. Separate it first.
A services arm is not a problem. The split decides whether you are priced as software or as a services business with a product.
Benchmarkit, 583 companies, May 2025. A healthcare technology advisory firm’s market review, July 2026. SaaS Metrics Standards Board. The services-share thresholds are practitioner opinion, reported as such.
Six lines a buyer recomputes from your own records.
Two businesses in one transaction. The split decides whether you are priced as software or as a services business with a product.
Revenue, cost of revenue and gross margin for each, by month. A buyer builds the split if you have not, and prices the whole company on the result.
Practitioners put the threshold that changes how you are priced somewhere between 15 and 35 percent of revenue. Nobody publishes realized multiples by share. A buyer decides case by case, from your split.
Implementation fees bundled into the subscription inflate ARR. Billed apart, they are services. A buyer restates them to the standard.
Median subscription gross margin in the published survey is 81 percent against 30 percent on services. A buyer reads yours after allocating the shared costs.
A customer who keeps the services and drops the software is churn. A buyer rebuilds retention on the software line alone.
If the services team sells the software, the buyer prices the services as a cost of sale. If the software sells the services, the services are a margin a buyer may not keep.
As owners keep it. As a buyer reads it.
| Area | As most owners keep it | As a buyer reads it |
|---|---|---|
| Revenue | One revenue line, sometimes two. | Subscription, implementation, managed services and project work, each recognized under its own policy and reported apart. |
| Cost of revenue | Hosting and salaries, combined. | Hosting, support and third-party software against the subscription; delivery labor against the services; shared costs allocated by a written rule. |
| ARR | Everything that recurs. | Subscription only, under the standard. Recurring services reported as recurring services, not as ARR. |
| Retention | Accounts that stayed. | Software retention by cohort, with services-only accounts counted as lost software customers. |
| Headcount | One team. | Engineering, implementation, support and delivery, each with its cost, so a buyer can see which business each person belongs to. |
| Working capital | The bank balance. | Deferred subscription revenue, unbilled services, receivables and payables on a monthly trend. |
Five things worth fixing before a buyer prices them.
In order of what moves the price, from the records the review reads.
- Build the splitRevenue and gross margin by line, by month, for the trailing 24 months, with the allocation rule written down. The split is the price.
- Restate ARR to the standardSubscription only. Move implementation and recurring services to their own lines before a buyer does it less kindly.
- Rebuild software retentionOn the subscription line alone, by cohort. Decide what the number is before a buyer decides it.
- Price the services honestlyIf the services run at a 30 percent margin, show it. A buyer who finds a 30 percent margin reported as 77 percent reopens every other number.
- Document every adjustmentOwner compensation, personal expenses, one-time costs, each with the document behind it. Undocumented add-backs are removed, not argued.
Three steps, and you decide what happens after each one.
About the business, its market and your timing.
Starts with an agreed information request under a signed NDA. Scope is agreed in writing before any work begins.
A report and workbook you keep. Act on it, wait, or hand it to your own advisor.
Sell now, sell later or keep building. Nothing reaches a buyer without your written permission.
Plain answers, then a conversation if you want one.
Should I shrink the services before going to market?
Not necessarily. Profitable services with their own margin are a position you can take. Unprofitable services bundled into software revenue are a finding. The review shows which you have.
At what services share am I priced as a services business?
Nobody publishes a threshold with data behind it. The practitioner range is 15 to 35 percent of revenue. The split, the margins and the retention on the software line decide it case by case.
Does implementation revenue count as recurring?
Not under the standard, even where every customer buys it. A buyer restates it to services.
Will the review raise my price?
We will not promise that. It shows what your numbers support and gives you the chance to fix what they do not before a buyer prices it.
Who sees the findings?
You. Nothing reaches a buyer, an advisor or anyone else without your written permission.
Know which business a buyer will say you are, before a buyer says it.
This is non-attest preparation. It shows you what a buyer’s quality of earnings is likely to find, while there is still time to act on it.
Revenue reconciled to bank deposits, and reported earnings tied to the records behind them.
Each add-back you or your advisor proposes is marked supported or unsupported, with the document that decides it.
Concentration, retention and contract terms, read the way a buyer will read them.
Assignability, change-of-control terms, and the compliance items a buyer’s counsel will ask about.
What was found, what it affects, and what to fix first. Yours to keep. See the full review.
Come prepared.
Capital Row is the M&A firm that reads your numbers the way a buyer will, before you go to market. Every figure is traced to a source document, every adjustment is marked supported or unsupported, and the findings are yours to keep.
Scope is agreed in writing before any work begins. Nothing from your review reaches a buyer, or anyone else, without your written permission.