How to Value Your Property Maintenance Business

"What's my business really worth?" It's the first question every business owner asks when considering a sale—and the answer isn't always straightforward.

Your HVAC, plumbing, electrical, or landscaping business represents years of hard work, satisfied customers, and built relationships. But how do buyers actually determine what to pay for all that effort?

Let's break down the valuation process in plain English so you can understand what your business might be worth and how to maximize that value.

The Three Main Valuation Methods

Business valuations typically use one or more of these approaches:

1. Multiple of Earnings (Most Common)

This is the most widely used method for property maintenance businesses. The formula is simple:

Business Value = EBITDA × Multiple

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Think of it as your "true" profit before accounting adjustments.

The Multiple varies based on your industry and business characteristics. For property maintenance businesses:

• HVAC companies: Typically 3-5x EBITDA
• Plumbing businesses: Typically 3-5x EBITDA
• Electrical contractors: Typically 3-5x EBITDA
• Landscaping companies: Typically 2.5-4x EBITDA

2. Seller's Discretionary Earnings (SDE)

For smaller businesses (under $2M in revenue), buyers often use SDE instead of EBITDA. SDE adds back the owner's salary and personal expenses run through the business.

SDE = Net Profit + Owner Salary + Owner Benefits + Interest + Depreciation

SDE multiples are typically 2-3x for property maintenance businesses.

3. Asset-Based Valuation

This method looks at the value of your physical assets (trucks, equipment, inventory) minus liabilities. It's rarely used as the primary method because it doesn't account for goodwill, customer relationships, or future earnings potential.

What Increases Your Business Value?

Not all businesses with the same revenue are worth the same. Here are the factors that command higher multiples:

✅ Strong Financial Performance

• Consistent revenue growth (3-5 consecutive years)
• Healthy profit margins (15-25%+ for service businesses)
• Clean, organized financial records
• Minimal owner-related expenses

✅ Recurring Revenue

• Maintenance contracts and service agreements
• Annual inspections or seasonal services
• Commercial accounts with multi-year contracts
• Subscription-based billing models

Why this matters: Recurring revenue is predictable, which reduces risk for buyers. A business with 40% recurring revenue will command a higher multiple than one with 10%.

✅ Diversified Customer Base

• No single customer represents more than 10-15% of revenue
• Mix of residential and commercial clients
• Customers across multiple geographic areas
• Strong customer retention rates

✅ Strong Management Team

• Business operates without owner's daily involvement
• Competent managers in place
• Documented processes and procedures
• Low employee turnover

✅ Licensed, Trained Team

• Certified technicians with proper credentials
• Low risk of mass departures
• Training programs in place
• Competitive compensation and benefits

Remember: In property maintenance, your skilled workforce IS your business. Buyers pay premium prices for established, happy teams.

✅ Brand and Reputation

• Strong online reviews (4.5+ stars)
• Recognized local brand
• Active digital presence
• Awards or industry certifications

What Decreases Your Business Value?

Just as important—factors that hurt your valuation:

❌ Owner Dependency

If you're the only one who can close sales, manage key relationships, or handle operations, buyers see major risk. This can reduce your multiple by 30-50%.

❌ Revenue Decline

Even one year of declining revenue raises red flags. Buyers will either walk away or demand a significant discount.

❌ Customer Concentration

If you lose your top 3 customers and it devastates your business, buyers will heavily discount your valuation—or require earnouts tied to customer retention.

❌ Aging Equipment

If buyers need to invest $200K in new trucks and tools immediately after purchase, they'll deduct that from your purchase price.

❌ Poor Financial Records

Missing documentation, commingled personal/business expenses, or inconsistent bookkeeping will either kill the deal or force you to accept a lower price.

How to Maximize Your Business Value

If you're thinking about selling in the next 1-3 years, focus on these value drivers:

1. Clean Up Your Financials (12-24 months before sale)

• Hire a professional bookkeeper or CFO
• Separate personal and business expenses completely
• Document all income and expenses meticulously
• Get annual financial statements audited or reviewed

2. Reduce Owner Dependency (18-36 months before sale)

• Hire or promote a general manager
• Document all processes and procedures
• Delegate customer relationships to team members
• Create systems for sales, operations, and administration

3. Increase Recurring Revenue (Ongoing)

• Convert one-time customers to maintenance contracts
• Offer annual service plans with discounts
• Focus on commercial accounts with multi-year agreements
• Track and improve customer retention rates

4. Strengthen Your Team (Ongoing)

• Invest in employee training and certifications
• Improve compensation to match or exceed market rates
• Create clear career paths for advancement
• Reduce turnover through better culture and benefits

Common Valuation Mistakes to Avoid

Mistake #1: Overvaluing Based on Emotion

Your business is worth what a buyer will pay—not what you feel it's worth based on years of sacrifice. Get an objective third-party valuation.

Mistake #2: Using Revenue Instead of Profit

A $5M business with $200K profit is worth less than a $3M business with $500K profit. Buyers care about profitability, not top-line revenue.

Mistake #3: Ignoring Add-Backs

Make sure your valuation includes legitimate add-backs (owner salary, personal expenses, one-time costs). These increase your EBITDA and therefore your valuation.

Mistake #4: Waiting Too Long

The best time to sell is when your business is thriving—not when you're burned out or revenues are declining. Plan ahead.

Getting a Professional Valuation

While you can estimate value using these methods, a professional business valuation provides:

• Credibility with serious buyers
• Detailed analysis of strengths and weaknesses
• Benchmark comparisons to similar businesses
• Identification of areas to improve value
• Supporting documentation for negotiations

Cost: Professional valuations typically range from $3,000 to $15,000 depending on business complexity.

What Happens Next?

Understanding your business value is just the first step. The next questions are:

• When is the right time to sell?
• What deal structure maximizes your after-tax proceeds?
• Do you want to sell 100% or retain partial ownership?
• Should you consider seller financing for tax advantages?
• How do you protect your employees and legacy?

These decisions are too important to figure out alone. The good news? You don't have to.

Your business represents years of hard work. Make sure you get the value you deserve when it's time to move forward.