Take last year's net profit, add back everything the business paid for that a new owner would not inherit, and multiply by somewhere between 1.8 and 3.1. That is your range, and for most contracting businesses it lands lower than the owner expects.
The precise figure: across 3,142 construction businesses sold on BizBuySell between 2021 and 2025, the average sale price was 2.60 times owner earnings, the median sale price was $750,000, and the median business behind that price did $1,509,665 in revenue and $323,174 in owner earnings.
The multiple is the boring part. It sits in a narrow band and you have limited influence over it. The two things that actually decide your outcome are which earnings number you can prove, and whether you get to sell at all.
Step one: work out your SDE, because that is what gets multiplied
Seller's discretionary earnings is the total financial benefit one working owner takes out of the business in a year. It is not net profit, and it is not what your accountant optimised your tax return to show.
Start with pre-tax net profit, then add back:
- Your own salary, dividends and payroll taxes
- Personal expenses running through the company: the truck you also drive on weekends, your phone, your health plan, family members on payroll who do not work
- Interest and depreciation
- One-off costs that will not repeat: the lawsuit, the failed software rollout, the equipment write-off
That total is what a buyer is really purchasing. Peak Business Valuation, a business appraisal firm, uses exactly this construction: SDE adds back "the owner's compensation, the owner's personal expenses, and other expenses such as non-recurring or non-related business items."
Watch out
The add-backs a buyer accepts are the ones you can document. A personal expense you can point to on a general ledger line is an add-back. A personal expense you paid in cash and remember taking is a story. This is where most contractor valuations quietly lose $50,000 to $100,000 of price.
Here is the benchmark that matters. Among construction businesses that actually sold on BizBuySell over those five years, discretionary earnings broke down like this:
| Percentile | Discretionary earnings |
|---|---|
| Lower quartile | $185,453 |
| Median | $323,174 |
| Average | $473,321 |
| Upper quartile | $585,821 |
If your SDE is under roughly $185,000, you are in the bottom quarter of businesses that sold, and the harder question is not your multiple but whether a buyer can finance you at all.
Half of all deals land in a narrow band
Once you have SDE, the multiple is less dramatic than the internet suggests. The BizBuySell figures for sold construction businesses, as opposed to asking prices:
| Lower quartile | Median | Average | Top 25% | |
|---|---|---|---|---|
| Sold earnings multiple | 1.81 | 2.43 | 2.60 | 3.13 |
| Asking earnings multiple | 1.92 | 2.88 | 3.22 | 3.96 |
Two things to read out of that table. First, half of all construction businesses sold for between 1.81x and 3.13x earnings, so the realistic spread on a $300,000 SDE business is roughly $543,000 to $939,000. Second, asking multiples sit meaningfully above sold multiples at every point in the distribution, which BizBuySell attributes to "business owners' common tendency to overvalue their own businesses."
Independent sources converge on the same band. Peak Business Valuation reports an average SDE multiple range of 2.16x to 2.85x for construction companies. CT Acquisitions puts owner-operator general contractors at 2x to 3x SDE. DealStream's rules-of-thumb guide says 2x to 4x. Four datasets, one answer.
Trade specialisation moves it barely at all:
| Sub-sector | Median earnings | Avg earnings multiple | Median sale price |
|---|---|---|---|
| Electrical and mechanical | $385,902 | 2.66 | $950,000 |
| HVAC | $304,309 | 2.75 | $750,000 |
| Heavy construction | $402,438 | 2.71 | $945,541 |
| Concrete | $348,471 | 2.52 | $825,000 |
| Plumbing | $311,598 | 2.49 | $638,730 |
The spread from plumbing to HVAC is 0.26x. Size moves the multiple far more than trade does. BizBuySell's own reading: a construction business doing $3 million in revenue "would likely sell for an earnings multiple over 3, where a smaller business with construction volume below $1MM may trade closer to 1.8 times earnings."
Why the multiple you read online is probably the wrong one
This is the part that costs owners the most, and almost nobody explains it.
Search for HVAC valuation multiples and you will find First Page Sage's 2025 report showing residential all-purpose HVAC trading at 6.3x to 10.8x EBITDA, averaging around 8x. Search construction valuation and you find Peak Business Valuation reporting an average EBITDA range of 2.79x to 4.11x. Both are honest. They describe different businesses.
The difference is what the earnings figure assumes about you.
- SDE counts the owner's pay as part of earnings. It assumes the buyer steps into your job. It is used for owner-operated businesses and it carries low multiples, because the buyer is partly buying employment.
- EBITDA does not count the owner's pay as earnings, because a salaried manager is already in the cost base. It is used for businesses that run without the owner, and it carries higher multiples, because the buyer is purchasing a functioning asset.
Look at the bands in the First Page Sage tables and the point becomes obvious: they start at $500,000 of EBITDA and go to $10 million. A company throwing off $500,000 in EBITDA after paying someone else to run it is doing several million in revenue with a real management layer. That is not the shop where the owner still runs the estimates.
By the numbers
An owner-operator applying an 8x EBITDA headline to a business that will be valued at 2.5x SDE will price the business at roughly three times what the market pays. Peak Business Valuation names overpricing as one of the two reasons "most businesses don't sell." The other is owner dependence.
The practical version: if you disappeared for three months and revenue held, you are in the EBITDA conversation. If you disappeared for three weeks and quoting stopped, you are in the SDE conversation, and 2.5x is your world.
What contracting businesses actually sold for
Multiples are abstractions. Cheques are not. A business broker in Florida posting to r/sweatystartup as u/FL_Biz_Broker published a list of businesses they had personally closed, which is the kind of evidence no valuation calculator gives you:
| Business | Sale price |
|---|---|
| Contractor A/C and heating | $729,900 |
| Contractor A/C and heating | $2,700,000 |
| Contractor electric | $1,250,000 |
| Contractor electric | $3,200,000 |
| Contractor installer | $399,000 |
| Contractor gutters | $275,000 |
| Construction roll-off | $267,500 |
| Pressure and soft washing | $275,000 |
| Irrigation and sprinkler | $150,000 to $499,000 |
| Lawn, commercial | $86,000 to $1,900,000 |
| Pool service | $75,000 to $119,900 |
| Junk removal | $180,000 |
| Home inspection | $279,500 |
Two came with context worth more than the numbers. The $2.7 million A/C business "started in the Owner's garage with his son, and sold 10 years later." The $3.2 million electrical business sold "after only 5 years. Started in his garage with 1 employee after quitting his job."
Note also the range inside a single trade. Commercial lawn businesses in that list span $86,000 to $1,900,000, a factor of 22. The trade did not decide that. The structure did.
The revenue rule of thumb is wrong by about half
Ask on a contractor forum and you will get the folk answer. On r/Construction, an owner posting about a $1.2 million revenue business with $100,000 in EBITDA was told by one commenter: "I've heard 3-4x ebitda or 1x annual revenue."
The 1x revenue half of that is badly wrong. BizBuySell's sold construction deals:
| Lower quartile | Median | Average | Upper quartile | |
|---|---|---|---|---|
| Revenue multiple, sold | 0.35 | 0.52 | 0.58 | 0.74 |
The median sold construction business went for 0.52x revenue. Peak Business Valuation's independent range is 0.31x to 0.64x. An owner anchoring on 1x revenue is expecting roughly 90 percent more than the median outcome, which is exactly the mispricing that keeps a listing on the market until it expires.
That $1.2 million revenue, $100,000 EBITDA business is a good illustration of why revenue is the wrong anchor. At 1x revenue it is a $1.2 million company. At the actual arithmetic it is a business with an 8 percent margin, and a commenter did that maths in the thread: "100k profit on 1.2m sales implies it cost 1.1m to earn 100k. That's a 9% RoI." If your margins are thin, revenue is a measure of how much work you are doing, not how much you are worth. Same reason a busy calendar can produce a bad year.
Your buyer's lender sets your ceiling, not your industry
The most useful reframe available: you are not really negotiating with a buyer. You are negotiating with the bank behind them.
BDC publishes its own worked example of acquisition financing. A company generating $3 million EBITDA sells for 5x, or $15 million, structured as:
| Source | Amount |
|---|---|
| Senior debt | $9,000,000 |
| Vendor debt | $3,000,000 |
| Mezzanine financing | $2,000,000 |
| Equity investment | $1,000,000 |
| Total | $15,000,000 |
The line that matters is BDC's description of how the senior lender behaves: it "typically decides how many multiples of EBITDA it's willing to lend." In that example the senior lender funds 3x EBITDA and everything above it has to come from somewhere more expensive or more contingent.
That is the whole mechanism. Your multiple is capped by what a lender will advance against your earnings while leaving the buyer enough to service the debt and pay themselves a living. In the United States the same arithmetic runs through SBA 7(a) acquisition loans, where buyers put down roughly 10 percent and lenders require the business to cover its debt service with a margin on top.
Two consequences owners rarely price in:
- A number the bank will not finance is not a number. It is an asking price that sits on a listing site for 207 days, which is the median time on market for construction businesses sold on BizBuySell.
- You will probably finance part of your own exit. In BDC's example the vendor takeback is $3 million, 20 percent of the price, paid out over time. Sometimes it is structured as an earn-out that rises or falls with the EBITDA the business produces after you leave.
If 20 percent of your price depends on the business performing after you leave, you have a direct financial interest in it being operable by a stranger.
Buyers pay for what they can verify. If your customer history, job margins and recurring work live in your head, a notebook and a phone, we build the system that turns them into evidence, structured the way a buyer and their lender need to see it.
The bigger risk is not a low multiple, it is no sale at all
Owners spend their planning energy on the multiple and almost none on the base rate. The base rate is brutal.
First Page Sage's research team found that around 52 percent of HVAC companies that go to market do not sell. The reasons they name are specific: "typically a high level of owner dependence and customer attrition." Business brokers put the general figure in the same territory, with Morgan and Westfield estimating a success rate of 15 to 30 percent for small businesses and Worldwide Business Brokers putting main street sales at "a little less than 20%."
The lived version appeared in a r/sweatystartup thread from an owner selling a junk removal business doing $200,000 to $220,000 in revenue on about $100,000 of profit. The problem was not the profit. It was that "my commercial contracts are nothing more than a handshake and being on a vendor's list, no written contracts with any of my commercial clients." The verdict:
The business broker said I'm essentially selling a full time job to someone which makes it nearly impossible for a person to obtain a loan to purchase the company.
Another commenter in the same thread put the distinction between a contract and a relationship precisely: "contracts are worth something when they give you consistent recurring revenue." A vendor-list placement is not a contract. It is a habit, and habits do not transfer.
A broker replying in that thread, u/yourbizbroker, described the floor: a business that is genuinely just a job can still sell "for around 1X the income" if it pays at least six figures for under 30 hours a week, rising toward 3X as the hours fall and the income rises. That is the honest bottom end of the market.
What separates the two outcomes was described well by another commenter in a broker's deal thread, contrasting two lawn companies both doing $500,000 a year:
One owner has: organized CRM, automated follow ups, reviews, recurring contracts, clean branding, predictable lead gen. The other guy has: everything in his head, customers stored in notes app, no systems, random cash payments, work only comes from referrals. One is an asset. One is basically a job.
What Canadian owners are up against specifically
If you are running a trades business in Canada, the numbers are more urgent than the American discussion suggests.
CFIB's succession research found that 76 percent of Canadian small business owners plan to exit within the decade, putting over $2 trillion in business assets into play. Retirement was the reason for 75 percent, but 22 percent cited burnout.
Against that wave of supply, only 9 percent have a formal written succession plan. And the obstacles owners named are exactly the two failure modes above:
- 54 percent say the hardest part is finding a suitable buyer or successor
- 43 percent are struggling to measure the value of their business
- 39 percent say the business is too reliant on them for day-to-day operations
That 43 percent figure is worth sitting with. Nearly half of Canadian owners cannot answer this article's question about their own company, and that is almost never a maths problem. The formula is one line. It is a records problem: the numbers needed to compute SDE honestly are scattered across a bookkeeper's file, a truck folder and the owner's memory.
Two more Canadian specifics. CFIB found 49 percent expect to sell to a buyer with no personal connection to the company, against 24 percent to family and 23 percent to employees, so the arm's-length sale is now the default. And BDC notes the lifetime capital gains exemption for qualified small business corporation shares sits at $1.25 million for dispositions on or after 25 June 2024, which is an argument for a share sale over an asset sale and a conversation to have with an accountant well before you list.
Tip
BDC's guidance is that succession planning should start 18 to 24 months before the intended exit. Note that this is longer than the 207-day median time on market. The preparation is the long part, not the sale.
The 20-minute self-valuation
Run this before you pay anyone for an opinion.
- Compute SDE. Last full year's pre-tax net profit, plus your compensation and payroll taxes, plus personal expenses run through the business, plus interest and depreciation, plus genuine one-offs.
- Place yourself in the earnings table. Under $185,000 is the bottom quartile of sold deals. Around $323,000 is the median. Over $586,000 is the top quartile.
- Pick a starting multiple by revenue. Under $1 million in revenue, start at 1.8x. Around $1.5 million, start at 2.4x. Over $3 million, start at 3x.
- Subtract for owner dependence. If quoting, selling or the key customer relationships stop when you leave, you are at the bottom of your band, not the middle.
- Add for contracted recurring revenue. Maintenance agreements and service contracts that survive a change of ownership are the one thing that reliably pulls a trades business up its band.
- Sanity-check against revenue. If your answer exceeds 0.74x revenue you are above the upper quartile of every construction business that sold in five years. Justify it or lower it.
- Ask the transferability question. Could a competent stranger, handed your files and nothing else, run this next Monday? If the honest answer is no, you have a preparation project, not a listing.
What actually moves the number in 24 months
Three levers, in order of how much they move the price.
Remove yourself from the operating path. This is the one buyers and their lenders price most heavily, and it is what 39 percent of Canadian owners already admit is broken. It usually means promoting or hiring someone to own quoting and scheduling, then genuinely leaving them alone long enough to prove the business holds. First Page Sage lists owner dependence as the first named cause of failed HVAC sales.
Convert one-off work into contracted revenue. A maintenance agreement is an asset that transfers. A customer who likes you is not. This is the difference between a junk removal business a broker calls unfinanceable and a commercial lawn business that sold for $1.9 million.
Make the records legible to a stranger. The broker checklist for a financeable deal is unglamorous and specific: clean verifiable financial records, at least around $75,000 in discretionary earnings to support the debt, "a simple CRM (preferably) or customer list to show recurring work and retention," documented processes, and a revenue mix that is not dependent on one hero client.
That last item deserves emphasis because it is the cheapest of the three and the one owners defer longest. A buyer paying near the top of your band is paying for proof: what each job actually made, how customers behaved over time, which revenue repeats. If that evidence only exists as your recollection, the buyer discounts it to zero, because they cannot take your memory with them. It is the same reason job-level costing matters long before you sell, and the practical reason a purpose-built CRM is an exit asset rather than an admin expense.
Private equity has noticed the arithmetic even if owners have not. PitchBook data cited by the Wall Street Journal in October 2024 counted nearly 800 HVAC, plumbing and electrical companies bought by private equity firms since 2022, and one acquirer, Redwood Services, described buying smaller shops outright for an average of $1 million. Those buyers underwrite on documented earnings and will not pay for a story.
The good news in the BizBuySell trend data is that this is not a declining market. Median construction sale prices rose from $695,000 in 2021 to $825,000 in 2025, a 19 percent increase, and the average earnings multiple ticked up from 2.54 to 2.68 across the same period, while sellers accepted about 94 percent of asking price. Demand is there.
The question is only whether what you have built is transferable, or whether it is a very good job that ends when you stop showing up.