Question 1

What is a business valuation?

Accepted Answer

A business valuation is an estimate of what your business is worth in a market transaction — what a ready, willing, and able buyer would pay a ready, willing seller under normal market conditions. Valuations aren't exact; they're ranges. Your actual sale price depends on buyer interest, deal structure, and negotiation.

Question 2

What are the three main valuation methods?

Accepted Answer

Income approach: value based on earnings (SDE or EBITDA × multiple). This is the primary method for home service businesses. Asset approach: value based on the fair market value of business assets minus liabilities. Used for businesses with minimal earnings or heavy asset bases. Market approach: compare to recent sales of similar businesses. This informs the multiple used in the income approach.

Question 3

Which valuation method is used for home service businesses?

Accepted Answer

The income approach — specifically SDE × Multiple — is the primary valuation method for home service businesses under ~$5M in revenue. For larger businesses ($5M+ revenue), EBITDA × Multiple is used. Revenue multiples are occasionally used as a secondary sanity check but rarely drive the final price.

Question 4

What is a 'multiple' in business valuation?

Accepted Answer

A multiple is the number you multiply your earnings by to get business value. Home service businesses sell for 2.0x–6.0x SDE or 4.0x–10.0x EBITDA. The multiple reflects the quality and risk of the earnings — higher recurring revenue, lower owner dependence, and stronger growth command higher multiples.

Question 5

Is my business valuation the same as the sale price?

Accepted Answer

Not necessarily. A valuation is an estimate of fair market value. The actual sale price can be higher (competitive bidding process) or lower (motivated seller, distressed sale, single buyer). A professional valuation is a starting point for negotiation, not a guaranteed outcome.

Question 6

What is goodwill in a business valuation?

Accepted Answer

Goodwill is the value of your business above and beyond its tangible assets (equipment, vehicles, cash). For home service businesses, goodwill represents: brand reputation, customer relationships, trained employees, established operating systems, and recurring contract base. Most home service business value IS goodwill — the tangible assets are worth far less than the earnings power.

Question 7

How do I get a business valuation?

Accepted Answer

Option 1: Free broker estimate. Call an experienced M&A broker who specializes in home services. They'll provide a range based on current market transactions. Option 2: Formal appraisal. A Certified Business Appraiser (CBA) produces a defensible written valuation for $2K–$5K. Option 3: Self-estimate using our online calculator. Fastest, least precise — good for ballpark planning.

Question 8

How often should I get my business valued?

Accepted Answer

If you're actively preparing to sell, get a valuation annually (or when SDE changes significantly). If you're in growth mode and not planning to sell within 3 years, a valuation every 2–3 years is sufficient. Major business changes (new contract base, lost key customer, revenue spike) warrant a fresh valuation.

Question 9

What factors increase my business value?

Accepted Answer

Value-increasing factors: recurring revenue percentage, revenue growth trend, absentee or semi-absentee operations, management team depth, customer diversification (no single customer over 15%), documented processes and SOPs, proprietary competitive advantages (exclusive territories, brand partnerships), and financial statement quality.

Question 10

What factors decrease my business value?

Accepted Answer

Value-decreasing factors: high owner dependency (owner is the business), no recurring revenue, flat or declining revenue, customer concentration, pending or historical litigation, unlicensed work, aging equipment, undocumented financials, and personal/business financial commingling.

Question 11

What is 'enterprise value' vs. 'equity value'?

Accepted Answer

Enterprise value is the total value of the business (what a buyer pays for the whole thing, including assuming or paying off debt). Equity value is what the seller receives: Enterprise Value − Business Debt = Equity Value. In home service deals, the purchase price typically refers to enterprise value; the seller's net proceeds are after business debt is paid at closing.

Question 12

Can I value my business myself?

Accepted Answer

You can estimate it — and you should, before talking to anyone. The formula: calculate your SDE (add-back all owner benefits and non-recurring expenses to net income), research your vertical's typical SDE multiple range, multiply. Our online calculator does this calculation. It gives you a reasonable ballpark. For a binding valuation used in a transaction, use a broker or certified appraiser.

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