The gross margin on this VA agency acquisition looks too good

Looking at a small VA agency serving real estate investors, 62 seats billed, asking around 2.4x seller discretionary earnings. Not a property, but it's the kind of service business this room covers and the numbers are bothering me.

Revenue is about $1.05M annual. Direct labor cost is roughly $390k. That's a 63% gross margin on a staffing business, which is high enough that I want to know what's holding it up. Staffing shops I've looked at elsewhere run 30 to 40.

What I can see: average bill rate is $1,410 per seat per month, average fully loaded pay is around $525. The delta is the whole business. Client count is 34, so average client holds 1.8 seats. Top client is 9 seats and 14% of revenue. Stated seat churn is 21% annual, client churn 26%.

What bothers me. The margin is entirely a function of the pay side staying where it is, and the owner's own notes say wage expectations in his recruiting market went up about 8% year over year while he raised bill rates once in three years. Run that forward four years with no bill rate movement and the gross margin goes from 63 to about 52. Still fine. But he's also told clients the price is stable, which is how he keeps the 26% churn from being worse.

The other thing. Roughly 40% of billed hours by his own task categorization are data entry, list scrubbing, and first touch lead follow up. Those are the tasks I'd expect to face the most automation pressure, and I can't tell from the outside whether a client who cuts three seats because a tool absorbed the work shows up as churn or as a shrinking seat count inside a retained client. His churn figure only counts logo loss.

So the decision. I can price this on trailing earnings and accept the wage drift, or I can build a downside where seat count per client compresses 15% over three years and bill rates can't move because the market is competing on price. Those two cases are about $700k apart in what I'd pay.

I don't have a good way to test which one is real without talking to his clients, and he won't let me until we're under contract with a deposit up. What would you want to see instead?