It’s the first question most owners ask — and the honest answer is: it depends. Not because advisors are being evasive, but because value is a range, not a number. Here’s how to think about it.
THE MOST COMMON MISCONCEPTION
Most owners come into the first conversation expecting a number. Something definitive — “your business is worth $14 million.” That’s not how it works, and any advisor who tells you otherwise is oversimplifying.
What your business is worth depends on who’s buying, when they’re buying, what the market looks like, and — most importantly — what’s happening inside your business. Two HVAC companies with identical revenue can have very different valuations. That’s not a flaw in the system. It’s the system working correctly.
HOW BUYERS ACTUALLY VALUE TRADES BUSINESSES
The primary method buyers use is an EBITDA multiple. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization — think of it as a cleaner version of your profit that buyers use to compare businesses on an apples-to-apples basis.
The formula is simple: Value = EBITDA × Multiple.
If your business generates $2 million in EBITDA and a buyer applies a 6x multiple, the enterprise value is $12 million. The question is always: what multiple will a buyer apply to your business?
Multiples in the trades and contractor space generally range from the low single digits for smaller businesses to 9x or higher for larger, well-positioned ones. Where your business lands in that range is determined by the factors below.
WHAT MOVES THE MULTIPLE UP OR DOWN
Whether you run an HVAC company, a plumbing or mechanical operation, a roofing business, an electrical contractor, or a landscaping company, three factors matter more than anything else when it comes to how a buyer prices your business:
Revenue mix — Service and maintenance contracts are worth significantly more than new construction revenue. Recurring, predictable revenue reduces buyer risk — and lower risk means a higher multiple.
Management depth — If the business runs through you personally — if customers call your cell, if you’re on every job — that’s a risk to a buyer. Businesses with a strong team in place command better valuations.
Customer concentration — If a large share of your revenue comes from one or two customers, buyers discount for that risk. Clean, distributed revenue across a broad customer base is a meaningful value driver.
SIZE MATTERS TOO
The size of your business has a direct impact on the multiple a buyer will apply. Larger businesses attract more buyers — institutional buyers, family offices, PE-backed platforms — and more competition means better pricing. As EBITDA grows, so does the pool of qualified buyers willing to compete for your business.
That’s not to say smaller businesses don’t sell — they do, every day. But understanding where your business falls in the market helps set realistic expectations before you start any process.
WHAT THIS MEANS FOR YOU
If you want to get a rough sense of where your business stands, start with your EBITDA. But getting to a true, buyer-ready EBITDA number is more nuanced than it looks — there are add-backs, normalization adjustments, and ways to tell the story of your earnings that can move the number meaningfully. That’s worth talking through with someone who does this regularly, not figuring out alone.
The number you land on isn’t final — it’s a starting point. The right buyer, the right timing, and the right process can move that number significantly in your favor.
If you want to talk through what your business might be worth — no process, no commitment — I’m happy to have that conversation.