Trades business valuation
Electrical, plumbing, HVAC and maintenance businesses typically value at 2.0 to 3.5 times normalised EBITDA. The single question that decides the multiple is whether the business runs without the owner on the tools.
A trades business with recurring maintenance contracts, licensed staff and a foreman running crews is an asset. The same revenue earned by an owner working sixty hours a week with two apprentices is a job, and buyers price it accordingly — often close to the value of the vehicles and equipment.
Quick answer
What is a trades business worth?
Normalised EBITDA — after the owner’s own labour is costed at what a qualified tradesperson and a manager would be paid — multiplied by 2.0× to 3.5×. Recurring maintenance agreements, licences held by employed staff and a forward work book push toward the top. An owner-operated business with no contracted work is usually valued near the depreciated market value of its vehicles and equipment.
What moves the number
What lifts a trades business out of the bottom of the band
Every factor below is a variation on one theme: how much of the business exists independently of the owner.
| Factor | Pushes toward the top | Pulls toward the bottom |
|---|---|---|
| Owner role | A foreman or operations manager running jobs; owner in a genuine oversight role | Owner quoting, running crews and on the tools with nobody able to replace them |
| Revenue type | Recurring maintenance agreements, service contracts, body corporate panels | One-off job work won by quote, with no forward book |
| Licences | Held by employed, contracted staff as well as the owner; QBCC capacity in the entity | Held personally by the owner and not transferable with the business |
| Customer spread | A broad base of builders, facility managers and repeat domestic clients | One builder or one contract producing more than 30 per cent of revenue |
| Systems | Job management software, documented pricing, scheduled preventative work | Quotes on a phone, pricing in the owner’s head, no work-in-progress records |
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Owner role
↑ A foreman or operations manager running jobs; owner in a genuine oversight role
↓ Owner quoting, running crews and on the tools with nobody able to replace them
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Revenue type
↑ Recurring maintenance agreements, service contracts, body corporate panels
↓ One-off job work won by quote, with no forward book
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Licences
↑ Held by employed, contracted staff as well as the owner; QBCC capacity in the entity
↓ Held personally by the owner and not transferable with the business
-
Customer spread
↑ A broad base of builders, facility managers and repeat domestic clients
↓ One builder or one contract producing more than 30 per cent of revenue
-
Systems
↑ Job management software, documented pricing, scheduled preventative work
↓ Quotes on a phone, pricing in the owner’s head, no work-in-progress records
Normalising the earnings
Normalising a trades P&L
Owner-operated trades businesses run a great deal through the company. Each add-back has to be individually evidenced — a bundled "owner benefits" figure is the fastest way to have a valuation dismissed.
How the earnings method works →- Owner labour and management Costed at a market wage for both the trade work and the management work performed
- Family wages Bookkeeping and administration roles brought to a market rate
- Vehicles and fuel The genuinely private share separated from work use
- Tools and equipment in expenses Capital items coded to consumables, capitalised and depreciated properly
- Work in progress Jobs started and unbilled at period end, so earnings sit in the right year
- Warranty and defect provisions Assessed against actual rectification history rather than assumed at nil
Worked example
Worked example: a commercial electrical contractor
Revenue is $3.4m with reported profit of $420,000. The owner draws $110,000 and works as both estimator and site supervisor. Replacing those two roles costs $215,000 including on-costs, so $105,000 comes off reported profit. A private vehicle and a personal travel claim add back $18,000.
Normalised EBITDA is $333,000. Forty per cent of revenue comes from three body corporate maintenance panels on rolling terms, a foreman runs the field crews, and the electrical licence is held by an employed nominee — supporting 3.2×.
$1.07m enterprise value, before deducting $260,000 of vehicle finance
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What a buyer, a bank or an opposing expert will test first
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01
Whether the owner can leave
The test is simple: what happens to earnings if the owner takes eight weeks off. If the answer is that they fall, that is the discount.
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02
Licence and QBCC capacity
Licences held personally do not transfer. Where QBCC financial capacity sits with the owner, a buyer has to rebuild it.
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03
Work in progress and retentions
Unbilled work and held retentions move profit between years. Getting this wrong misstates maintainable earnings entirely.
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04
Vehicle finance
A fleet of utes looks like an asset until the chattel mortgages are netted off. Both sides go in the schedule.
Questions
Trades business valuations, answered
Broader questions are on the full FAQ page.
Ask a valuerLess than the profit figure suggests, because part of that profit is your wage rather than a return on the business. We cost your actual roles at market rates first; whatever remains is the earnings a buyer is purchasing. Many owner-operated trades businesses value close to the market value of their vehicles, plant and stock — which is genuinely useful to know before you go to market.
Materially. Contracted recurring revenue survives the change of ownership, so a business with 40 per cent of revenue under maintenance agreements can support a multiple a full turn above an identical business doing purely quoted job work. Written agreements with notice periods are worth considerably more than long-standing informal arrangements.
Yes, as a separate asset schedule, valued at market by a Certified Asset Valuer rather than taken from the depreciation register. That schedule sets the value floor and is netted against any finance secured over the assets.
It is a discount, because the buyer must either employ a licensed nominee or hold the licence themselves. Where a business is being prepared for sale, moving the licence to an employed nominee ahead of time is one of the cheapest value improvements available.
Now. A valuation twelve to twenty-four months before going to market tells you which of the factors above are costing you value while there is still time to change them. Getting off the tools and signing up recurring work are both worth more than any negotiating tactic at sale time.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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