Copp OakPublished with source review · 2026-11-07
The short answer
In BizBuySell closed sales from 2021 to 2025, the middle sale was 2.58 times seller’s discretionary earnings (SDE) for HVAC, 2.24 times for plumbing and 2.56 times for electrical and mechanical contracting. SDE is the owner’s take-home before the owner’s own pay, plus add-backs.Sources: BizBuySell, HVAC Business Valuation Benchmarks (retrieved 2026-11-07); BizBuySell, Plumbing Business Valuation Benchmarks (retrieved 2026-11-07); BizBuySell, Electrical & Mechanical Contractor Business Valuation Benchmarks (retrieved 2026-11-07)
The multiple climbs with size. IBBA’s Q2 2026 survey reports 2.0 times SDE under $500K of value, 2.8 times from $500K to $1M and 3.1 times from $1M to $2M. Above $2M the measure changes to EBITDA, and the multiple steps up to 4.0 times and then 5.8 times.Sources: IBBA and M&A Source, Market Pulse Q2 2026 Highlights (PDF) (retrieved 2026-11-07); IBBA and M&A Source (PR Newswire), Market Pulse Survey Q2 2026 press release, 25 August 2026 (retrieved 2026-11-07)
1. SDE multiples by trade
BizBuySell publishes closed-sale benchmarks for each trade. The lower quartile is the value under which the lowest 25% of sales fell; the upper quartile is the value above which the highest 25% fell. Half of all sales landed between the two.Sources: BizBuySell, HVAC Business Valuation Benchmarks (retrieved 2026-11-07)
| Trade | Lower quartile | Median | Upper quartile | Median revenue multiple | Source and date |
|---|---|---|---|---|---|
| HVAC | 1.99x | 2.58x | 3.33x | 0.56x | BizBuySellretrieved 2026-11-07 |
| Plumbing | 1.66x | 2.24x | 3.15x | 0.59x | BizBuySellretrieved 2026-11-07 |
| Electrical and mechanical contracting | 1.96x | 2.56x | 3.15x | 0.54x | BizBuySellretrieved 2026-11-07 |
The last column is a cross-check, not a method. A median near 0.55 times revenue means a typical sale is a little over half of one year of sales. Two shops with the same revenue can differ widely in earnings, which is why buyers price on earnings.Sources: BizBuySell, HVAC Business Valuation Benchmarks (retrieved 2026-11-07); BizBuySell, Plumbing Business Valuation Benchmarks (retrieved 2026-11-07); BizBuySell, Electrical & Mechanical Contractor Business Valuation Benchmarks (retrieved 2026-11-07)
2. The size staircase
Larger businesses sell at higher multiples. IBBA and M&A Source survey business brokers and M&A advisors each quarter on the deals they closed. The Q2 2026 results, for deals up to $50M:
| Business value | Earnings measure | Reported multiple, Q2 2026 | Source and date |
|---|---|---|---|
| Under $500K | SDE | 2.0x | IBBA and M&A Sourceretrieved 2026-11-07 |
| $500K to $1M | SDE | 2.8x | IBBA and M&A Sourceretrieved 2026-11-07 |
| $1M to $2M | SDE | 3.1x | IBBA and M&A Sourceretrieved 2026-11-07 |
| $2M to $5M | EBITDA | 4.0x | IBBA and M&A Sourceretrieved 2026-11-07 |
| $5M to $50M | EBITDA | 5.8x | IBBA and M&A Source (PR Newswire)retrieved 2026-11-07 |
For a sense of scale across all industries, BizBuySell’s Q3 2026 report puts average sale multiples at 2.30 times cash flow below $1M of sale price and 3.73 times above it. The report also quotes a broker saying SDE multiples held steady near 2.0 to 3.0 times for Main Street businesses.Sources: BizBuySell, Insight Report, Q3 2026 (retrieved 2026-11-07)
| Sale price | Average multiple of cash flow (SDE) | Average multiple of revenue | Source and date |
|---|---|---|---|
| Under $1M | 2.30x | 0.62x | BizBuySellretrieved 2026-11-07 |
| Over $1M | 3.73x | 0.97x | BizBuySellretrieved 2026-11-07 |
3. EBITDA multiples belong to larger businesses
EBITDA is earnings after paying for the management a business needs. Buyers of larger businesses, such as other companies and private equity firms, plan to keep or hire a management team, so they value on EBITDA. Buyers of small owner-run shops are usually individuals who plan to work in the business, so they value on SDE.Sources: SCORE, EBITDA vs. SDE: How Earnings Drive Business Value (retrieved 2026-11-07)
| Segment | Multiple of EBITDA | Who reports it | Source and date |
|---|---|---|---|
| Deals of $2M to $5M | 4.0x | IBBA and M&A Source, Q2 2026 | IBBA and M&A Sourceretrieved 2026-11-07 |
| Deals of $5M to $50M | 5.8x | IBBA and M&A Source, Q2 2026 | IBBA and M&A Source (PR Newswire)retrieved 2026-11-07 |
| Private-equity deals, $1M to $5M enterprise value | about 5.5x trailing-twelve-month EBITDA | GF Data, first half of 2025 | GF Dataretrieved 2026-11-07 |
| Private-equity deals, $5M to $10M enterprise value | about 5.6x trailing-twelve-month EBITDA | GF Data, first half of 2025 | GF Dataretrieved 2026-11-07 |
| Private-equity deals, $10M to $25M enterprise value | 6.2x to 6.7x trailing-twelve-month EBITDA | GF Data, first half of 2025 | GF Dataretrieved 2026-11-07 |
4. What moves a shop within its band
The quartiles in Table 1 are a wide band: the lower and upper quartile for HVAC differ by more than a full turn of earnings (1.99 times to 3.33 times). Four things buyers look at decide where a shop sits in that band.Sources: BizBuySell, HVAC Business Valuation Benchmarks (retrieved 2026-11-07)
Owner independence
BizBuySell's reading of its HVAC data: businesses with low owner involvement, unique competitive advantages and a seller willing to finance will command a multiple at or above the upper quartile, while those with lower revenue, thin profit margins, full-time owner involvement and many direct competitors will trade at or below the lower quartile.Sources: BizBuySell, HVAC Business Valuation Benchmarks (retrieved 2026-11-07)
Clean books
BizBuySell's Q3 2026 report says businesses with strong cash flow, clean financial records and limited owner dependence continue to attract significant attention. SCORE adds the working test: list each add-back by year with the amount, the reason and the supporting document, and make the totals tie back to the tax returns.Sources: BizBuySell, Insight Report, Q3 2026 (retrieved 2026-11-07); SCORE, EBITDA vs. SDE: How Earnings Drive Business Value (retrieved 2026-11-07)
Top customer under 10% of revenue
Windham Brannon, an advisory firm, says that when a single customer accounts for less than 10% of revenue there is typically no major discount and no special due-diligence trigger. At 20% to 30% it says valuation compression of 10% to 20% is common. This is a practitioner's rule of thumb, not closed-sale data.Sources: Windham Brannon, How Customer Concentration Drives Valuation Discounts (retrieved 2026-11-07)
Recurring revenue
Sunbelt Business Brokers Atlanta says recurring maintenance revenue, clean financials, technician retention, documented systems and reduced owner dependence all influence what HVAC buyers will pay. We found no published study that puts a number on the premium for maintenance agreements, so this page does not either.Sources: Sunbelt Business Brokers Atlanta, 7 Ways to Increase the Value of Your HVAC Business Before Selling (updated 11 August 2026) (retrieved 2026-11-07)
The manager-pay rule
SDE adds back one owner’s full salary. Adjusted EBITDA adds it back too, then subtracts a market-rate salary for the person who would run the business. SCORE’s worked example: a business with $200,000 of SDE has $150,000 of adjusted EBITDA once a $50,000 supervisor salary is deducted. The same $500,000 price is 2.5 times SDE but about 3.3 times adjusted EBITDA.Sources: SCORE, EBITDA vs. SDE: How Earnings Drive Business Value (retrieved 2026-11-07)
In practice this means a shop that wants the upper end of its band cannot just say the owner is optional. The earnings a buyer will price are the earnings left after a manager is paid. If a shop’s profit disappears once a manager is on the payroll, the multiple that buyers quote does not apply to the larger number.
Common questions
What is a home services business worth?
Most small HVAC, plumbing and electrical shops sell for a multiple of the owner's earnings (SDE), not revenue. In BizBuySell closed sales from 2021 to 2025 the middle sale was 2.58x SDE for HVAC, 2.24x for plumbing and 2.56x for electrical and mechanical contracting. The middle half of sales ran from about 1.66x to 3.33x.
Should a small trade shop be valued on SDE or EBITDA?
Small owner-run shops are valued on SDE. EBITDA multiples belong to larger, owner-independent businesses. IBBA's Q2 2026 survey reports SDE multiples below $2M of deal value (2.0x, 2.8x and 3.1x) and EBITDA multiples above it (4.0x for $2M to $5M, 5.8x for $5M to $50M).
Is a home services business worth a multiple of its revenue?
Revenue is a cross-check, not the method. In BizBuySell closed sales the median revenue multiple was 0.56x for HVAC, 0.59x for plumbing and 0.54x for electrical and mechanical contracting, so a typical sale is a little over half of one year of revenue.
How does paying a manager change the value?
A multiple is only real on earnings after paying a manager to replace the owner's working hours. SCORE's example: $200,000 of SDE becomes $150,000 of adjusted EBITDA once a $50,000 market-rate supervisor salary is deducted.
What moves a shop up or down within its range?
Low owner involvement, clean financial records, no single customer above about 10% of revenue and recurring revenue move a shop toward the upper quartile. Full-time owner involvement, thin margins and many direct competitors move it toward the lower quartile.