Home service businesses typically sell for 2-4x annual net profit (seller's discretionary earnings), with well-run operations at the higher end. A contractor business netting $300K/year could sell for $600K-1.2M depending on how it's structured.

What Increases Your Multiple

Recurring Revenue

Maintenance agreements increase business value by 25-50%. Buyers pay more for predictable revenue streams. 500 agreements at $29/month ($174K/year in recurring revenue) significantly increases your multiple.

Owner Independence

Businesses that run without the owner command significantly higher multiples. If you're still on the tools, answering every call, and making every decision, the buyer is essentially buying a job - not a business.

Documented Systems

Written SOPs, trained staff, and working CRM/FSM systems make the business transferable. A buyer can step in and operate without your knowledge.

Diversified Revenue

Revenue spread across multiple service types, customer segments, and marketing channels is more valuable than revenue dependent on one source.

Types of Buyers

1. Private equity groups focused on home services (most common for $1M+ revenue)

2. Strategic buyers (competitors or complementary trades acquiring customers)

3. Individual buyers (someone looking to own/operate a trades business)

4. Key employees (internal succession)

Preparation Timeline

Start preparing 2-3 years before you plan to sell.

Year 1: Build systems, document processes, train staff to operate independently

Year 2: Grow recurring revenue, clean up financials, optimize profitability

Year 3: Engage a business broker, prepare financials, market the business

Valuation Basics

SDE (Seller's Discretionary Earnings) = Net profit + owner's salary + owner perks + one-time expenses

Typical multiples:

  • Under $500K revenue: 1.5-2.5x SDE
  • $500K-$2M revenue: 2-3x SDE
  • Over $2M revenue: 2.5-4x SDE
  • With strong recurring revenue: Add 0.5-1x

Plan your exit strategy

Get Started

The Key Insight

Every system you build, every maintenance agreement you sell, and every process you document increases your exit value. Building a sellable business and building a great business are the same thing.

Worked Example: Exit Valuation Comparison

Business A: $400K net profit (SDE), owner-dependent, no maintenance agreements, no documented SOPs. Valuation: 2x SDE = $800K. Business B: $400K net profit, runs without owner, 500 maintenance agreements ($174K recurring), documented systems, trained management team. Valuation: 3.5x SDE + recurring revenue premium = $1.4M-1.6M. Difference: $600K-800K in exit value from systems, agreements, and owner independence. Start building these 2-3 years before you want to sell.

What Not to Do

  • Don't wait until you want to sell to start preparing. Building a sellable business takes 2-3 years. If you decide to sell at 60 and start preparing at 59, you'll leave hundreds of thousands on the table.
  • Don't be the business. If every customer relationship, every decision, and every estimate requires you personally, you're not selling a business - you're selling a job. Buyers won't pay a premium for a job.
  • Don't skip professional valuation. A business broker who specializes in home services ($5,000-10,000 for valuation) identifies exactly what to improve to maximize your multiple. Worth every penny.
  • Don't neglect financial records. Clean books for 3+ years with clear P&L, job costing, and customer metrics are essential. Buyers (especially PE firms) want data, not stories.

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