HVAC, plumbing, electrical, roofing, landscaping, cleaning and pest control companies are among the most actively traded small businesses in the country. Most sell for a multiple of seller's discretionary earnings or EBITDA, and buyers pay the most for recurring service revenue, a stable team of licensed technicians, and a company that runs without the owner on every job. The two issues that most often delay or derail trades deals are licensing, because licenses usually belong to a person rather than the company, and owner dependency.
Key points
- Owner-run trades companies are usually priced on SDE; larger ones with management on EBITDA. Recurring revenue and low owner dependency raise the multiple.
- Trade licenses are usually tied to a qualifying individual. Plan early for who will hold the license after closing.
- Technicians are the main asset buyers worry about losing. Retention plans and timing of the announcement matter.
- Maintenance agreements, service memberships and commercial contracts add value; one-time installation and storm work add less.
- Private equity-backed platforms are active buyers in most of these trades, alongside owner-operators using SBA loans.
- Buyers will look closely at warranty exposure, worker classification, vehicle and equipment condition, and safety records.
How trades businesses are valued
The general approach to pricing a business, including how SDE and EBITDA are calculated, is explained in our business sale guide. In the trades, a few factors carry extra weight.
Size and the type of buyer
Valuation depends heavily on size. A single-owner shop with a few trucks, where the owner sells, schedules and still works in the field, is usually bought by an individual using an SBA loan and priced on SDE. Broker and marketplace data commonly put owner-run HVAC and plumbing companies in a range of roughly 2 to 3.5 times SDE, with other trades in a similar band. These are broad ranges, not quotes, and individual companies can fall outside them.
Once a company has a general manager, a service manager, office staff and earnings large enough to support a market-rate salary for the owner's role, it is priced on EBITDA and attracts a wider set of buyers, including private equity-backed platforms and larger regional competitors. Those buyers often pay higher multiples for scale, management depth and growth.
What raises the multiple
- Recurring revenue: maintenance agreements, service memberships, recurring pest or lawn programs, and commercial cleaning contracts
- Residential service and replacement work rather than new construction bids
- A strong technician bench, with licensed people other than the owner
- Good online reviews, a recognizable local brand and a phone number that customers call directly
- Dispatch and field service software with clean customer and job history
- A fleet and equipment in good repair
What lowers it
- The owner is the only licensed person, the main salesperson or the face of the company
- Revenue is heavily tied to one general contractor, builder or property manager
- Large swings from storm, seasonal or one-off project work
- Paying workers as independent contractors when they function as employees
- Deferred vehicle and equipment replacement
- A history of injuries, high workers' compensation costs or open warranty claims
Trade by trade
HVAC
HVAC buyers focus on the share of revenue from service and replacement versus new construction, the number of active maintenance agreements, and how many technicians hold the needed licenses. Technicians who handle refrigerants must hold EPA Section 608 certification, which belongs to the individual. Seasonality matters, so buyers look at monthly revenue across at least two or three years.
Plumbing
Plumbing companies are valued much like HVAC. Drain cleaning, water heater replacement and repiping provide steady residential demand, and commercial service contracts add predictability. Plumbing licenses, often at a master level, are typically issued to individuals by state or local boards.
Electrical
Electrical contractors range from residential service companies to commercial contractors bidding large projects. Service work generally earns higher multiples than project work. Commercial contractors are judged on backlog, bonding capacity and the quality of their estimating. Master electrician licenses are usually personal to the license holder.
Roofing
Roofing companies tend to have lumpier revenue, especially when storm restoration and insurance claims work is a large share. Buyers look for a balance of retail replacement, commercial maintenance contracts and repeat customers. Licensing varies a great deal: some states license roofing contractors directly, while others rely on general contractor or local registration. Workmanship warranties are a significant diligence item.
Landscaping and lawn care
Recurring maintenance contracts, especially commercial contracts with property managers and associations, drive value. Design-build and installation work is valued lower because it must be resold every season. Companies that apply fertilizer and weed control products may need state pesticide applicator licensing, and those certifications are usually held by individuals.
Commercial cleaning
Cleaning companies are valued largely on the quality and length of their contracts and customer concentration. Most licensing is light, but buyers examine labor costs, turnover, wage and hour compliance, and whether workers are properly classified. Contracts that allow customers to cancel on short notice reduce value.
Pest control
Pest control has long been a consolidating industry, and large national companies and private equity-backed platforms are regular buyers. Recurring residential and commercial service routes are the core asset, and route density raises value. Pest control businesses are licensed by state agriculture or pesticide agencies, and the business license usually depends on having a certified applicator assigned to each location. Some states require notice to the regulator when a pest control company is sold or when its certified applicator changes, and a buyer generally has to qualify for its own business license. Check your state's rules before signing.
Licensing and the qualifying individual
In most states, contractor and trade licenses work through a qualifying individual: a licensed person whose credentials allow the business to hold its license or registration. When that person is the seller, the license usually cannot simply be handed to the buyer. Common solutions include:
- The buyer or one of its managers already holds the needed license
- An existing licensed employee becomes the qualifier, often with a raise or retention bonus
- The seller stays on as qualifier for an agreed period, with clear terms on pay, duties and liability
- The deal is structured as a stock sale so the entity keeps its registrations, though the qualifier rules still apply
Licensing often runs at both state and local levels, and companies that work in several states or cities may need approvals from each. A new license can take weeks or months, so start early. For a closer look at how advisors handle licensing and buyer outreach in these deals, see this overview of selling a trades business.
Who buys trades businesses
- Individual buyers, often former managers or corporate employees, financed with SBA 7(a) loans
- Competitors expanding territory or adding a service line
- Private equity-backed platforms building regional or national brands, and their add-on acquisitions
- Managers or senior technicians, sometimes through a gradual buyout
Private equity buyers bring higher prices for the right companies but also more paperwork, quality of earnings reviews and terms such as rollover equity, where the seller keeps a minority stake in the combined company. Read rollover and earn-out terms carefully.
Deal terms to expect
- Asset purchase of vehicles, equipment, inventory, customer lists, phone numbers, websites and the trade name
- A seller note, especially in SBA-financed deals
- A transition period, commonly several months, in which the seller introduces customers and trains staff
- A noncompete and nonsolicitation covering a defined area and period
- Price adjustments for open jobs, customer deposits, prepaid maintenance agreements and inventory counts
- Allocation of warranty callback costs on past work
Prepaid maintenance agreements deserve attention. If customers have paid for a year of service, the buyer will expect a credit for the unperformed visits.
Diligence issues specific to the trades
Buyers will ask for:
- Licenses and certifications for the company and every technician
- Vehicle titles, fleet condition and maintenance records
- Workers' compensation claims history and experience modification rate
- OSHA logs and any citations
- Warranty claims and callback rates
- Customer reviews and any licensing board complaints
- Lead sources, marketing spend and call tracking
Safety records matter because injuries on job sites raise insurance costs and can lead to lawsuits. Our guide to construction accident claims explains how those claims work. Companies that generate leads by text message or outbound calls should also review their consent practices, because buyers increasingly ask about exposure under the robocall rules described in our consumer protection guide.
Preparing to sell
- Get at least one other licensed person in place so the business does not depend on your license.
- Move customers onto maintenance agreements or service plans.
- Put dispatch, pricing and job history in field service software.
- Reclassify workers if needed, with advice from an employment lawyer.
- Catch up on fleet replacement or document the plan.
- Have a CPA review your financials and talk through asset allocation and taxes.
Related industries
Some trades businesses overlap with other industries covered in our guides. Mechanical and fabrication shops share traits with manufacturing companies, and fleet-heavy service businesses face some of the same issues as auto repair shops. For the full step-by-step process, valuation methods and tax basics, return to our main guide on how to sell a small business.