Question 1

How much is my home service business worth?

Accepted Answer

Home service businesses typically sell for 2.0x–6.0x Seller Discretionary Earnings (SDE), depending on the industry vertical, revenue size, recurring contract percentage, and operational factors. HVAC, pest control, and pool service businesses command the highest multiples. Handyman and pressure washing businesses trade at the lower end. Your specific business value depends on factors beyond just revenue — a $1M revenue HVAC company with 60% recurring contracts and an absentee owner structure can easily command 4x–5x SDE.

Question 2

What is Seller Discretionary Earnings (SDE)?

Accepted Answer

SDE is the most commonly used profitability metric for valuing small and mid-sized home service businesses. It equals: Net Income + Owner's Salary + Owner's Benefits/Perks + Non-Cash Expenses (depreciation, amortization) + One-Time/Non-Recurring Expenses. SDE represents the total economic benefit a single full-time owner-operator would receive from the business. It's used instead of EBITDA for businesses under $2M EBITDA because it normalizes for the owner's compensation.

Question 3

What is EBITDA and when is it used instead of SDE?

Accepted Answer

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is used to value larger home service businesses — typically those with $1M+ EBITDA and a management team in place. Unlike SDE, EBITDA does not add back owner compensation because the assumption is the business runs without the current owner. Private equity buyers almost always use EBITDA multiples. For home service businesses, EBITDA multiples typically range from 3x–10x depending on size and quality.

Question 4

What valuation method is most accurate for my business?

Accepted Answer

For most owner-operated home service businesses under $5M revenue, the SDE multiple is most accurate because buyers are paying for the income stream they'll receive. For businesses above $2M EBITDA with professional management, EBITDA multiples better reflect market reality. A revenue multiple is used only as a sanity check — no serious buyer values primarily on revenue. The most reliable valuations triangulate all three methods and weight based on business size and buyer type.

Question 5

How do I calculate my business's SDE?

Accepted Answer

Start with your net income from your P&L or tax return. Then add back: (1) your total owner compensation including salary, distributions, and benefits; (2) any personal expenses run through the business (vehicle, phone, travel); (3) one-time expenses that won't repeat (legal settlements, major equipment repairs); (4) depreciation and amortization; (5) interest expense; (6) any above-market rent if you own the building and are charging it to the business. Use a 3-year weighted average (most recent year weighted highest) for the most accurate SDE.

Question 6

Does my business need to be profitable to sell?

Accepted Answer

Yes — buyers are acquiring an income stream. A business with minimal or negative profitability is extremely difficult to sell at any meaningful multiple. There are exceptions: a business with strong recurring revenue that's losing money due to temporary owner compensation issues, or a business with significant asset value. But generally, a business needs at least 2–3 years of consistent profitability and an SDE of $150,000+ to attract serious buyers.

Home Service Business Valuation — Frequently Asked Questions

Valuation Basics

Multiples by Industry

The Sale Process

Deal Structure

Value Maximization

Private Equity & Strategic Buyers

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