What your business is actually worth

Every owner has a figure in their head. It's often from the guy at the supply house who heard what somebody else's shop sold for. That number doesn't account for your books, your customers or your trucks, so it doesn't tell you much.

The question that matters is what a buyer with financing will pay, and what decides it.

Smaller businesses are priced on seller's discretionary earnings, or SDE. That's what one owner-operator actually takes out of the business in a normal year. Under about $1M of SDE, owner-operated trades businesses have been trading at roughly 2.5x to 4x.

Once a business earns more than about $1M in real EBITDA, buyers switch to EBITDA multiples, typically 4x to 6x. Platform-scale businesses trade higher still, which is why private equity is in the trades at all.

Your business lands somewhere in there. The rest of this article is about where.

Recurring revenue is the first. Maintenance agreements, service contracts, anything that renews without a sales call. A buyer pays more for revenue they can see coming, because they don't have to go win it again.

The second is a business that runs without you. That means a dispatcher who books, a lead tech who runs the day, and customers who call the company instead of your cell. When a buyer can picture the week after you leave, they stop pricing in the risk that it all falls apart.

One customer, messy books and old trucks. If a single account makes up too much of the revenue, the buyer worries it walks out with you. If your add-backs don't have receipts, the buyer's lender takes them back out. If the fleet is due, the buyer counts what it'll cost to replace and subtracts it.

Each one takes a turn off the multiple before anyone says a price out loud. You'll rarely hear it said that way. It just shows up as a lower offer.

Owners spend a lot of time on the multiple. Buyers spend theirs on the earnings figure underneath it. They rebuild your profit the way their lender will read it, adding some costs back and taking others out. Get that figure wrong and the multiple doesn't matter.

We walk through the rebuild, line by line, in how a buyer reads your P&L. Do that first, and the range above starts to mean something for your business.

We tell owners where they sit in the range today, and the three things that would move it. For one owner that's a service agreement program. For another it's a stack of receipts nobody filed.