Resources
Insights for Skilled Trade Business Owners
Practical perspectives on M&A, exit planning, valuation, and what private equity is really looking for — from advisors who have been doing this for 30 years.
PE uses debt to amplify their buying power. Understanding how that debt works — and how it affects your rollover equity — is one of the most important things a seller can do before agreeing to retain any stake in a PE-backed platform.
Rollover Equity is one of the most important and most misunderstood elements of any PE transaction.
When a Private Equity firm acquires your HVAC, plumbing, or electrical business, the transaction is often quite straight forward: they make an offer, you receive all cash at closing, and they take over. However, in many PE roll-ups that consist of an equity rollover, the reality is more layered — and understanding it is the first step toward negotiating a deal that actually works for you.
Most trades owners leave significant money on the table when they sell — not because their business isn’t valuable, but because they didn’t know what buyers were looking for until it was too late to do anything about it. Here we list 5 things an operator can do to make themselves a desirable target and increase the value of the company.
Private equity is paying real multiples for HVAC, plumbing, and electrical companies right now. Here’s exactly how the valuation works, what the numbers look like by trade and tier, and what determines whether you land at the top or the bottom of the range.
The financial mechanics get most of the attention. What rarely gets discussed openly is the emotional reality — the anxiety, the grief, the identity crisis, and the unexpected difficulty of letting go.
The question of timing is one of the most consequential decisions a business owner will make — and in the skilled trades, most owners wait too long.
For most business owners, selling their company is not just a transaction — it is the culmination of years, sometimes decades, of sacrifice, risk, and relentless effort.
The Decision to Sell
For most business owners, selling their company is the culmination of years of sacrifice, risk, and relentless effort. What separates successful exits from disappointing ones?
When Is the Right Time to Sell?
Most owners wait too long. Understanding when the business, market, and you personally are aligned is the key to maximizing your outcome.
The Emotional Side of Exiting
The financial mechanics get most of the attention. What rarely gets discussed is the psychological reality of selling — and why it matters to your deal.
M&A Glossary for Trades Business Owners
Plain-language definitions of the terms you’ll encounter when selling your HVAC, plumbing, electrical, or other trades company.
A
Add-Backs
Expenses run through your business that a new owner wouldn’t incur — think your personal truck, cell phone, or above-market salary. Add-backs are added back to your reported net income to show buyers the true earning power of the business. Getting these right can add hundreds of thousands of dollars to your asking price.
Allocation Of Purchase Price
How the total sale price is divided among asset categories (equipment, goodwill, non-compete, etc.) for tax purposes. The split matters: goodwill is taxed at capital gains rates, while a non-compete is ordinary income. Negotiate this carefully with your accountant before signing anything.
Asset Sale
The most common structure for trades business sales. The buyer purchases specific assets — vehicles, equipment, customer lists, goodwill — rather than the company itself. Most small business buyers prefer this because it limits their exposure to your past liabilities. Most sellers prefer a stock sale for tax reasons, so the structure is often a negotiating point.
B
Basket
The minimum dollar amount in losses a buyer must hit before they can make a claim against the seller under the indemnification provisions. Works like an insurance deductible — below the basket, the buyer absorbs losses on their own. Sellers want a higher basket to reduce exposure to minor post-closing claims.
C
Cash Flow
The money a business generates after paying its bills. In the trades, this is usually expressed as SDE (for smaller owner-operated businesses) or EBITDA (for larger operations with professional management). Always ask which definition a buyer or advisor is using — the number can vary significantly depending on the calculation.
Confidential Information Memorandum (CIM)
The money a business generates after paying its bills. In the trades, this is usually expressed as SDE (for smaller owner-operated businesses) or EBITDA (for larger operations with professional management). Always ask which definition a buyer or advisor is using — the number can vary significantly depending on the calculation.
D
Due Diligence
The buyer’s thorough investigation of your business after you accept their offer. Expect them to dig into your financials, tax returns, customer contracts, equipment records, licenses, employee agreements, and more. Typically runs 30 to 60 days. The better organized your records, the faster and smoother this goes — and the lower the risk of the buyer renegotiating the price.
E
E
Earnout
A portion of the sale price paid to you after closing, contingent on the business hitting certain performance targets. Common when buyers and sellers disagree on value. Approach these cautiously — once you hand over the keys, you no longer control the outcomes that determine your payment.
EBITDA (Earning Berfore Interest, Taxes Depreciation, and Amortization)
The standard cash flow measure for larger trades businesses — typically those with revenues above $3M to $5M and a management team in place. EBITDA treats owner compensation as a real cost (at market rate) rather than adding it all back like SDE does. Buyers multiply EBITDA by an industry multiple to arrive at a price.
Escrow (Holdback)
A portion of the sale price — typically 5% to 10% — withheld at closing and held by a neutral third party for 12 to 18 months. Released to the seller if the buyer makes no indemnification claims. Standard in most transactions; negotiate the amount, duration, and claim threshold carefully.
Exclusivity
A clause in the Letter of Intent (LOI) requiring you to stop talking to other buyers for a set period — typically 30 to 60 days — while the buyer completes due diligence. Protects the buyer’s investment of time and money. Keep this window as short as possible; once you’re in exclusivity, your negotiating leverage drops significantly.
G
Goodwill
The portion of the sale price that exceeds the value of your tangible assets. For most trades businesses, goodwill is the largest piece of the price — it represents your customer relationships, reputation, trained crew, recurring revenue, and the value of a running operation. Taxed at the favorable long-term capital gains rate in an asset sale.
I
Indemnification
Your post-closing obligation to compensate the buyer for losses caused by inaccurate representations you made about the business. The escrow holdback is the fund used to cover valid claims. Negotiate caps (maximum liability), baskets (minimum claim thresholds), and survival periods (how long you remain liable) before signing the purchase agreement.
L
Letter Of Intent (LOI)
A preliminary offer document that outlines the key deal terms — price, structure, exclusivity period, and timeline. Usually non-binding on price and terms, but the exclusivity clause is binding. Treat LOI negotiations as seriously as the purchase agreement; the framework established here is very hard to change later.
N
Normalize Recasting Financial Statements
The process of adjusting your reported financials to reflect what the business truly earns — removing personal expenses, above-market owner salary, and one-time items. This is one of the most important pre-sale steps. A properly normalized earnings figure can add a multiple of its value to your sale price.
Non-Compete Agreement
A contract preventing you from starting or working in a competing business for a defined period (typically 2 to 5 years) and within a defined geography after closing. Standard in virtually every business sale. Payments allocated to the non-compete are taxed as ordinary income — not capital gains — so negotiate the allocation carefully.
Non-Disclosure Agreement
A confidentiality agreement signed by the buyer before you share any financial information or business details. One of the first documents in any deal. Don’t share financials, customer lists, employee information, or pricing with any prospective buyer before an NDA is signed.
R
Promissory Notes (Seller Financing)
A written promise by the buyer to pay you a portion of the purchase price over time, with interest. Common in trades business sales when buyers can’t fund the full price from equity and bank financing alone. Typically carries a personal guarantee from the buyer. Treat it like the loan it is: require proper documentation and security.
R
Representations and Warranties
Formal statements you make in the purchase agreement about the condition of your business — that the financials are accurate, there’s no undisclosed litigation, licenses are current, etc. If these turn out to be wrong after closing, the buyer can make an indemnification claim. Negotiate these carefully with experienced M&A counsel; broad reps without qualifications create real post-closing risk.
S
Seller's Discretionary Earnings (SDE)
The primary valuation metric for owner-operated trades businesses. Starts with net income and adds back the owner’s full compensation, interest, taxes, depreciation, amortization, and personal or non-recurring expenses. SDE represents the total financial benefit available to a single owner-operator. Buyers multiply SDE by an industry multiple to set the price.
Seller Financing
When the seller accepts a portion of the purchase price as a deferred loan from the buyer rather than cash at closing. Very common in the trades — often 10% to 25% of the total price. It enables deals that cash-only structures cannot, but it comes with default risk. Always require a personal guarantee, a security interest in the business assets, and regular financial reporting from the buyer.
SBA Loan
Small Business Administration guaranteed financing — the most common way buyers fund trades business acquisitions under $5M. The SBA backs the loan through a participating bank, not the buyer’s personal assets. Requires the business to qualify (not just the buyer), adds 6 to 8 weeks to the closing timeline, and may require a seller note on standby during the loan period.
Stock Sale
A transaction where the buyer purchases the ownership entity itself (the LLC or corporation) rather than individual assets. Sellers generally prefer this for tax reasons — gains are taxed at capital gains rates across the board. Buyers generally prefer asset sales. The structure is negotiated; sellers may accept a lower price to get stock sale treatment.
Strategic Buyer
A company — often a competitor, regional operator, or PE-backed platform — that acquires your business to expand their geographic footprint, add service lines, or grow their customer base. Strategic buyers often pay more than individual buyers because they see synergies beyond the standalone financials. In the trades, PE-backed consolidators are among the most active strategic buyers.
Stay (Retention) Bonus
A payment offered to key employees — field supervisors, dispatch leads, service managers — to incentivize them to remain through and after the ownership transition. Typically funded from the sale proceeds and paid in stages (e.g., one-third at closing, one-third at 6 months, one-third at 12 months). Buyers increasingly require these for critical staff as a condition of closing.
T
Teaser Profile
A brief, anonymous one or two-page summary of your business shared with potential buyers before they sign an NDA. Describes the business type, geography, and financial highlights without identifying the company. Its job is to generate enough interest to get the buyer to sign the NDA and request the CIM.
W
Working Capital
Current assets (receivables, prepaid expenses) minus current liabilities (payables, short-term debt). In most trades business deals, working capital stays with the business at closing and is factored into the purchase price. The purchase agreement will define a target level; if the business delivers more, the seller keeps the excess. If less, the seller owes the difference.