Most service businesses sell for a multiple of adjusted EBITDA, and healthy companies in the trades commonly trade in the 3x to 6x range. Size, recurring revenue, customer diversification, and a team that runs without the owner decide where you land, and larger platforms trade meaningfully higher, which is exactly why buyers want to build them.
Every owner eventually hears a number thrown out at a trade show or from a friend who sold, and the numbers never match. One sold "for 4x," another swears companies like his go "for 8." Both can be telling the truth. They are just standing at different spots on the same staircase.
What is adjusted EBITDA?
EBITDA is your earnings before interest, taxes, depreciation, and amortization: a rough proxy for the cash the business throws off. "Adjusted" means normalized for how an owner actually runs a private company. Your above-market salary gets added back. The family truck, the season tickets, the one-time lawsuit settlement: added back or pulled out. What remains is the earning power a new owner can reasonably expect. That number, not revenue and not profit on your tax return, is what buyers multiply.
What moves the multiple up?
- Scale. A $6M EBITDA company trades at a higher multiple than a $1M one, all else equal. More buyers can reach it, and lenders like it more.
- Recurring revenue. Maintenance memberships and multi-year service agreements are worth more per dollar than one-time installs, because they show up next year without being resold.
- Customer diversification. If one customer is more than a quarter of revenue, expect a discount or a structure that shares the risk.
- Management depth. A business that runs when you take August off is worth more than one that needs you on every estimate.
- Clean books. Reviewed financials and a tidy job-costing system don't just speed diligence; they remove the fear discount.
Why do consolidators pay more for the same company?
Because of the staircase. A platform doing $10M of EBITDA trades several turns higher than a $2M shop, so every acquisition is instantly worth more inside the platform than outside it. That arbitrage is the engine of the roll-up economy, and it is why the offer that looks generous may still capture less of the value than a deal where you keep rollover equity and share in the climb.
How do I get a real number instead of a rumor?
Ask a real buyer to underwrite it. A serious one will tell you the range they'd pay and exactly why: which factors above helped you, which hurt, and what would move the number in two years if you're not ready to sell yet. That conversation costs you nothing and replaces every trade-show rumor with your own data point.