Almost every owner who thinks about selling asks the same question first: what is my business worth? There is no single formula, but the way buyers approach trade businesses is fairly consistent. Understanding it helps you set realistic expectations and spot ways to increase value before you sell.
Start with earnings, not revenue
Revenue tells a buyer how big you are. Earnings tell them what the business produces for its owner. Two plumbing companies with the same revenue can be worth very different amounts if one keeps far more of each dollar.
For owner-operated businesses, buyers usually start with seller's discretionary earnings (SDE): net profit plus the owner's salary and benefits, interest, depreciation and amortization, and documented one-time or personal expenses. For larger companies with a management team in place, buyers more often use EBITDA, which treats a market-rate manager salary as a real expense. See our guide to SDE and multiples for more.
Apply a multiple
Buyers then apply a multiple to those earnings. The multiple reflects risk and growth: the more predictable and transferable the earnings, the higher the multiple. Published ranges exist from business brokers and industry reports, but they vary widely by size, industry and timing, and your business may land anywhere in or outside a range. A real valuation looks at your specific numbers.
What raises value
- Recurring revenue. Maintenance agreements, inspection contracts, monitoring and service plans.
- A business that runs without you. Managers, dispatchers and lead techs who handle the day to day.
- Customer diversity. No single builder, GC or property manager that makes up a large share of revenue.
- Clean books. Financials that match tax returns, with documented add-backs.
- A stable, licensed team likely to stay through a sale.
- A strong local brand. Name recognition, reviews and inbound calls.
- Good equipment. A well-maintained fleet and tools that won't need immediate replacement.
What lowers value
- The owner is the only person who sells, estimates and holds the license, with no transition plan.
- Revenue depends heavily on one customer or on storm years.
- Unresolved claims, warranty problems or licensing issues.
- Cash revenue that is not reported, which buyers and lenders cannot count.
Real estate is separate
If you own the building or yard your business uses, it is usually valued separately from the business. You can sell it alongside the business, or keep it and lease it to the buyer. See selling a business with real estate.
Getting a number
An online calculator gives a rough idea at best. A useful valuation starts with your actual financials and a conversation about your customers, team and equipment. You can request a free, confidential valuation from us below. There is no obligation.
This guide is general information, not legal, tax or financial advice. Consult your own attorney and CPA.