If you’re still running a Time and Materials (T&M) shop, it’s time to wake up and smell the depreciation. In today’s MSP world, relying on T&M billing is like operating a lemonade stand in a Starbucks era—quaint, but ultimately not where the money’s at. So, if you’re hanging onto the old way of doing things, here’s why your business might be worth half as much as
it could be.
The Cold, Hard Numbers on T&M vs. Managed Services
As we’ve explained before, a dollar of T&M revenue is typically valued at about $0.50. That means if you’ve got $1 million in T&M revenue, it’s worth roughly $500,000 to a buyer. Ouch. Meanwhile, managed services revenue is valued at about 1.5 times. So, $1 million in managed services revenue could fetch around $1.5 million. The math isn’t hard—if you’re still heavy on T&M, you’re leaving a ton of money on the table.
Why? Because there’s no contractual obligation for clients to stick around, and T&M is all about post-payments and admin headaches. Buyers want stability, predictability, and less drama. They don’t want to roll the dice on a company whose revenue could disappear faster than donuts in the break room.
Stop Being the Auto Mechanic of IT Services
Think of a T&M shop as an auto mechanic waiting for a tow truck to bring in the next broken-down car. You’re sitting around, hoping for that next emergency. Contrast that with a managed services model, where you’ve got recurring contracts, predictable income, and a client base that’s locked in. It’s the difference between scrambling for scraps and sitting down to a feast every month.
Bottom line? If your business is still stuck in the T&M era, it’s time to modernize. Transitioning to managed services isn’t just a smart move; it’s a necessary one if you want to maximize your company’s value and future-proof your business.