How are home service businesses valued?

It starts with adjusted earnings

Most buyers of home service companies start with one number: adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, cleaned up to show what the business really earns for an owner.

Cleaning up means making add-backs. If you pay yourself well above or below what a manager would cost, run personal expenses through the business, or had a one-time cost like a lawsuit or a move, those get adjusted. Done right, add-backs can meaningfully change your number. Done carelessly, they become the first thing a buyer challenges in diligence.

Then a multiple is applied

Buyers multiply adjusted earnings by a figure that reflects how risky and how attractive your company is. You'll hear owners trade multiples like baseball stats, but the honest answer is that the range across home services is wide, and two companies with identical profit can sell for very different prices.

• Size. Larger companies usually command higher multiples because they're less dependent on any one person or customer.
• Recurring revenue. Memberships, service plans and routes make future revenue more predictable.
• Growth. A company growing steadily is worth more than one that's flat, even at the same profit.
• Revenue mix. Residential service and replacement work is typically valued above new construction.
• Team and owner independence. If the business needs you every day, buyers price in that risk.

Price is not the same as value

The headline number in an offer can hide a lot. How much is paid in cash at closing? How much depends on an earnout tied to future results? Is part of the price paid in rollover equity? What working capital must you leave in the business? Two offers with the same price can leave you with very different amounts of money and risk.

That's why we compare every offer on what you actually take home, when, and with what conditions, not just the number at the top of the letter.

How to raise your value before you sell

The most valuable work usually happens 12 to 24 months before a sale: getting clean financials, growing recurring revenue, hiring or developing a strong second-in-command, and documenting how the business runs. None of it is glamorous, and all of it shows up in the price.