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A well-established Los Angeles–area IT services firm with over 20 years of operating history developing software is available for acquisition. Founded and operated by the current owner, the business specializes in a niche segment of IT services and holds select provider status in its market. The company serves a loyal client base, across a wide variety of industries, with many customer relationships exceeding ten years.The business employs six W‑2 staff members and utilizes six to eight independent contractors. It operates from an office in the Los Angeles area, which is available for purchase separately. For 2025, the company generated approximately $1.1M in Seller’s Discretionary Earnings (SDE). The largest client accounts for 38% of total revenue.The owner is willing to provide transition support, including training, client introductions, and operational handoff, to ensure continuity post-acquisition. The reason for the sale is retirement.
Why we like it
- Cash Generation Machine: $1.1M SDE on $3M revenue delivers 37% margins with a proven 20-year track record. The business has survived multiple economic cycles and technology shifts, proving durability in a sector known for disruption.
- Sticky Revenue Model: Client relationships averaging over ten years with diverse industry exposure creates predictable cash flows. Long tenure relationships in IT services typically indicate mission-critical work that's painful to replace.
- Asset-Light Scalability: Six W-2s plus contractor model keeps fixed costs low while maintaining delivery flexibility. This structure allows for margin expansion as revenue grows without proportional headcount increases.
- Market Position Advantage: Select provider status and 20-year market presence creates barriers for new entrants. Established relationships and proven delivery track record are difficult competitive moats to replicate in professional services.
How to improve it
- Client Concentration Mitigation: Immediately audit the 38% client relationship to understand contract terms, renewal dates, and expansion opportunities. Develop a 90-day plan to either secure this relationship long-term or accelerate new client acquisition to reduce dependency.
- Revenue Per Employee Optimization: At $500K revenue per full-time employee, there's room to improve productivity through better tooling and process automation. Implement time tracking and project management systems to identify efficiency gains.
- Service Productization: Transform recurring IT services into productized offerings with standardized pricing and delivery. This reduces custom work variability and creates more predictable revenue streams while improving margins.
- Geographic Expansion: Leverage the proven service delivery model to expand beyond LA through remote service capabilities. Many IT services can be delivered virtually, opening national market opportunities without office expansion.
- Contractor-to-Employee Conversion: Evaluate converting high-performing contractors to W-2 status for better retention and service quality. This could improve client satisfaction and reduce recruitment overhead for critical roles.
Diligence notes
- Client Concentration Deep Dive: Verify the 38% client's payment history, contract terms, and satisfaction levels. Understand what specific services drive this relationship and assess replaceability risk if they departed.
- Revenue Recognition Validation: Confirm whether the $3M revenue figure represents recurring services, project work, or software licensing. The revenue mix impacts business quality and predictability significantly.
- Technology Asset Assessment: Evaluate the proprietary software mentioned in the description for IP value, technical debt, and ongoing development requirements. This could be a hidden asset or liability depending on code quality and market relevance.
- Regulatory and Compliance Review: Verify all required IT service certifications, insurance coverage, and client data handling compliance. Any gaps could create immediate post-closing liabilities or client relationship risks.