HVAC & Plumbing Valuation Guide: What’s Your Business Worth?
Your HVAC, plumbing, or electrical business is probably worth more than you think, especially if you have maintenance contracts and a solid team. Here’s how buyers figure out the price, and what you can do to push it higher.
How to Calculate Your SDE
SDE (Seller’s Discretionary Earnings) is the number that determines your sale price. It’s your true owner benefit, what a new owner would take home if they ran your business. Here’s how to calculate it:
Start With Net Income, Then Add Back:
- Your salary and any bonuses you pay yourself
- Health insurance, retirement, and other owner benefits
- Owner’s truck, payment, fuel, insurance, and maintenance (personal-use portion)
- Personal tools and equipment bought through the business
- Family members on payroll who aren’t working full-time
- One-time expenses (new truck purchase, office renovation, lawsuit settlement)
- Depreciation and amortization (non-cash expenses)
- Personal cell phone, meals, travel, and entertainment
- Interest on business loans (debt that won’t transfer to the buyer)
Quick Example
Net income: $180,000 + Owner salary: $120,000 + Owner truck: $18,000 + Tools: $8,000 + Wife on payroll (bookkeeping 5 hrs/wk): $35,000 + Depreciation: $25,000 = SDE of $386,000
Our free valuation calculator walks you through this step by step and calculates your SDE automatically.
What Drives the Multiple
What Pushes Your Multiple Up
- Maintenance contracts (30%+ recurring revenue), This is the single biggest factor. A business with 30% or more of revenue from service agreements gets a 1x or higher premium on the multiple. Contracts mean the buyer is buying guaranteed cash flow, not just a customer list.
- Technician count and retention, More technicians means more capacity and less owner dependence. Low turnover means the team will stay after the sale. Both push the multiple up significantly.
- Fleet age and condition, Newer, well-maintained trucks and equipment mean the buyer doesn’t need a big capital outlay right after closing. Keep service records for everything.
- Owner involvement level, If you’re managing the business and not doing service calls, the multiple goes up. If you’re on the truck every day, it goes down. Buyers want a business, not a job.
- Geographic coverage, Businesses that serve a wider area have more room to grow. Multiple locations or a large service territory is attractive to PE roll-ups.
- Brand reputation and Google reviews, A 4.5+ star Google rating with hundreds of reviews is a real competitive advantage. Strong word-of-mouth referral networks matter too.
What Brings It Down
- Owner is the primary technician handling most service calls
- No service agreements, all revenue is project-based or one-time
- Fleet needs replacing within 1-2 years ($150K-$300K+ capital needed)
- Poor online reviews (below 4.0 stars) or thin review count
- License issues, owner holds the only qualifying license with no backup
- High technician turnover or open positions you can’t fill
- Revenue concentrated in one or two large accounts
Real-World Valuation Examples
These are typical scenarios we see. Your business is unique, but these give you a ballpark:
Solo HVAC Technician
Owner does all the work. No contracts. One truck. Good reviews but fully owner-dependent.
SDE: $120,000
Multiple: 3.5x
$420,000
Mid-Size Plumbing Company
4 technicians, 200+ maintenance contracts, owner manages but rarely does service calls.
SDE: $350,000
Multiple: 5.0x
$1,750,000
Multi-Truck HVAC Company
8 trucks, 500+ contracts, office manager, dispatch team, owner fully removed from day-to-day.
SDE: $600,000
Multiple: 5.5x
$3,300,000
Want to see where your business falls?
Our calculator handles HVAC, plumbing, electrical, and other trade businesses.
Common Valuation Mistakes
These mistakes cost sellers real money. Avoid them:
Using Revenue Instead of SDE
Your business isn’t worth a multiple of revenue. It’s worth a multiple of profit (SDE). A $2M revenue business with $200K SDE is worth less than a $1M revenue business with $400K SDE.
Forgetting Add-Backs
Most trade business owners leave $50K-$150K in add-backs on the table. Your truck, tools, family payroll, and personal expenses all count. Document everything.
Overvaluing Equipment
Your trucks and tools have value, but they’re already factored into the SDE calculation. Don’t add equipment value on top of the multiple, that’s double-counting.
Ignoring Market Conditions
Multiples change based on buyer demand, interest rates, and industry trends. A 2023 multiple isn’t a 2026 multiple. Get a current valuation.
Comparing to the Wrong Businesses
A solo HVAC tech and a multi-truck operation with contracts are completely different businesses. Compare yourself to businesses that match your size and structure.
Not Getting Professional Help
DIY valuations almost always miss something. A professional valuation costs a fraction of what you’d lose from pricing your business wrong.
Frequently Asked Questions
What multiple do HVAC businesses sell for?
Most HVAC businesses sell for 4.0 to 6.0 times SDE. Businesses with strong maintenance contract bases, multiple technicians, and an owner not on the truck regularly can reach 5.5x or higher. Solo operators without contracts typically sell at 3-4x.
What is SDE and how do I calculate it for a trade business?
SDE stands for Seller’s Discretionary Earnings. Start with your net income, then add back your salary, personal expenses running through the business (truck, tools, family payroll, cell phone), one-time costs, and non-cash expenses like depreciation. The result is your true owner benefit, and it’s what buyers use to price your business.
Do maintenance contracts really affect the sale price?
Yes, maintenance contracts are the single biggest value driver for service trade businesses. A business with 30% or more of revenue coming from recurring service agreements can command a 1x or higher premium on their multiple compared to a business with no contracts.
How does fleet condition affect my valuation?
Fleet condition directly affects what a buyer will pay. A fleet of newer, well-maintained trucks signals a healthy business. If a buyer needs to spend $150K-$300K replacing vehicles right after closing, they’ll reduce their offer by that amount or more. Service your fleet and keep records.
Can I get a higher multiple if I stay on after the sale?
Sometimes. If you agree to stay on for 6-12 months to help with the transition (especially for licensing and customer relationships), some buyers will offer a slightly higher price or better terms. But the biggest multiple boost comes from building a business that doesn’t need you at all.
What’s Your Service Business Worth?
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