Short answer: plumbing and roofing businesses are both usually priced on profit after the owner's pay is added back, times a multiple. Plumbing shops with steady service and repair work tend to draw more buyer interest, because that revenue repeats. Roofing companies are valued more on backlog, crew stability and how dependent sales are on storms. In both trades, the owners who keep the most start preparing two to three years ahead.
Private equity firms and larger regional companies have been buying home-service businesses for years. If you own a plumbing or roofing company, that interest gives you options, but the first offer is rarely the best one, and the headline price is not what lands in your bank account.
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How is a plumbing business valued?
Smaller shops are usually priced on seller's discretionary earnings (SDE): profit plus your salary, personal expenses run through the business, and one-time costs. Larger companies with managers in place are usually priced on EBITDA. What moves the multiple up:
- Service and repair revenue, especially from service agreements or repeat customers, rather than one-off new construction.
- Licensed plumbers other than you, so the business isn't tied to your license.
- Clean books with personal expenses separated out.
- A dispatcher or office manager who runs the schedule without you.
How is a roofing business valued?
Roofing buyers look harder at how predictable the work is. A company that lives on storm seasons is harder to price than one with steady retail replacement and commercial maintenance work. Buyers usually focus on:
- Revenue mix: storm and insurance work versus retail replacement and commercial service contracts.
- Backlog and signed contracts at the time of sale.
- Crew stability and whether crews are employees or subcontractors.
- Warranty exposure: open workmanship warranties are a liability the buyer will price in.
- Whether sales run through a team or through you personally.
Multiples vary widely by size, market and buyer. An independent valuation gives you a real starting point before you talk to anyone.
How are these deals usually structured?
- Cash at closing: the part you're sure to receive.
- Rollover equity: part of your price reinvested in the buyer's company, common with private equity.
- Earnouts: extra payments if the business hits targets after the sale. Common in roofing, where revenue swings more.
- Seller financing: you lend the buyer part of the price and get paid over time.
- An employment or consulting agreement that keeps you working for a set period.
Two offers with the same headline price can be worth very different amounts once you account for how much is guaranteed.
Asset sale or stock sale?
Most small-business buyers prefer an asset sale because they can write off what they buy. Sellers often prefer a stock sale because more of the gain may qualify for long-term capital gains rates. In an asset sale, the price is split among equipment, trucks, goodwill and other assets, and part of it can be taxed as ordinary income. How that split is negotiated can change your after-tax result significantly, so bring in your CPA before you sign a letter of intent.
What should you do with the money?
For most owners, the sale is the largest check they'll ever receive, and it has to replace the income the business paid them. Before closing, map out how much you need each year, how the proceeds will be invested, how taxes on the sale fit with Roth conversions or charitable giving, and what happens to health insurance. See our business owner planning page and our guide to selling an HVAC business for more.
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Frequently asked questions
- What is my plumbing business worth?
- Most small plumbing businesses are priced as a multiple of seller's discretionary earnings. The multiple depends on how much revenue is repeat service work, whether licensed plumbers other than you are on staff, and how clean the books are. A professional valuation is the best starting point.
- Why do roofing businesses often sell with earnouts?
- Roofing revenue can swing with storm seasons and insurance work, so buyers often tie part of the price to future results. Steady retail and commercial maintenance revenue can reduce how much of the price depends on an earnout.
- Is an asset sale or stock sale better for the seller?
- Sellers usually come out ahead with a stock sale because more of the gain may be taxed at capital gains rates, but most small-business buyers want an asset sale. The purchase price allocation matters a lot, so involve your CPA early.
- How long does it take to sell a trade business?
- Getting ready usually takes two to three years; the sale itself often takes six to twelve months once you go to market.
- Should I talk to a financial advisor before selling?
- Yes. The terms of the deal affect your taxes, your retirement income and your investments. It helps to plan those before you sign a letter of intent, not after.
