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.

Private equity firms are not buying trades businesses out of affection for the trades. They’re buying them because the math is compelling — a fragmented industry, essential services that can’t be outsourced or automated, recurring demand, and a long runway for consolidators to build meaningful platforms. If you own an HVAC, plumbing, or electrical business with solid earnings, someone is either already looking at you or will be soon.

The question isn’t whether PE will come knocking. The question is what they’ll offer when they do — and whether that number reflects what your business is actually worth.

The Formula — and Why Your Earnings Number Matters More Than You Think

Business valuation in the trades starts with one formula: Price equals earnings times a multiple. Simple in concept, consequential in practice.

The earnings figure is either SDE — Seller’s Discretionary Earnings — or EBITDA, depending on the size of your business. SDE is the metric for owner-operated businesses: it captures everything the business puts in the owner’s pocket — salary, benefits, personal vehicle, profit — reflecting the total economic benefit of owning and running the company. EBITDA applies once the business has professional management in place and the owner is running the company rather than working in it daily. EBITDA treats management as a real cost and asks what the business earns after paying someone market wages to run it.

Most HVAC, plumbing, and electrical businesses under $3 to $5 million in revenue are valued on SDE. PE buyers use EBITDA for mid-sized and larger businesses — it’s their native language.

Here’s why getting the earnings number right before you go to market is so important: every dollar of earnings gets multiplied. If your financials are understating your true earnings by $100,000 — because expenses that should be added back aren’t documented, or owner compensation isn’t properly normalized — and the buyer is paying 5 times earnings, that’s $500,000 that doesn’t show up in your sale price. The multiple amplifies both accuracy and error in equal measure.

Buyers pay based on what the numbers show, not what you tell them. Preparing your financials to accurately reflect your true earnings — before you ever sit across from a buyer — is one of the highest-return activities available to any seller.

The Multiple Ranges — By Trade and By Tier

Here’s where trades businesses are actually trading right now:

 HVAC

 Small  SDE under $2M  3.0x – 3.5x SDE  |  Individual buyers, search funds

 Mid-Market  $2M – $8M SDE  4.0x – 6.0x SDE  |  PE platforms actively competing

 Platform  $8M+ EBITDA  8.0x – 12.0x EBITDA  |  National strategics, growth equity

 PLUMBING & ELECTRICAL

 Small  SDE under $1.5M  2.0x – 4.0x SDE  |  Individual buyers, search funds

 Mid-Market  $1.5M – $8M SDE  4.0x – 6.0x SDE  |  Regional platforms, selective PE

 Platform  $8M+ EBITDA  8.0x – 12.0x EBITDA  |  PE platforms, national strategics

Two things stand out when you look at this honestly.

First, the range within each tier is wide. A mid-market HVAC business can sell for anywhere from 4 to 6 times SDE. On $3 million in earnings, that’s a $6 million spread — between $12 million and $18 million — on the same business with the same financials. That gap is not random. It’s driven by preparation, presentation, and how many buyers are competing for the deal.

Second, the multiple tends to move upward as a business crosses from one tier into the next — because the buyer pool changes, not just the business size. A company that reaches the platform tier attracts a different class of acquirer with more capital, more strategic rationale, and more competitive urgency to win the deal. If you’re approaching $8 million in EBITDA, the timing of your sale is worth thinking about carefully.

The multiple goes up with scale for one fundamental reason: more sophisticated buyers competing more aggressively always produces better pricing and better terms.

What Puts You at the Top of Your Range

Within any tier, businesses don’t all sell at the same multiple. The ones that consistently land at the top share a few specific characteristics.

Recurring revenue is the most universally rewarded. Even a modest service agreement program — 10 to 15 percent of revenue under annual contract — signals to a buyer that customers are sticky, that revenue doesn’t start from zero every month, and that the business has earned relationships rather than just transactions. That signal moves the multiple.

Management depth matters almost as much. A business that can operate without the owner — real service manager, real office manager, real field leadership — is a transferable asset. One where all roads lead to the owner is a risk the buyer has to price. Management independence is a direct multiple driver, and it also determines your exit flexibility. If you’re operationally essential, plan to stay on for two to three years after closing. That transition period is part of the deal and needs to be negotiated explicitly in the purchase agreement.

Revenue mix clarity also affects where you land. PE platforms come in with a specific thesis — residential service and replacement, or commercial and industrial. A business that’s 75 to 80 percent one direction fits a thesis cleanly. A 50/50 split doesn’t fit either cleanly, and the revenue from whichever side doesn’t match the buyer’s model tends to get discounted. Knowing your buyer’s thesis before you go to market is part of positioning well.

Two Things Most Sellers Don’t Think About Until It’s Too Late

Tuck-In Deals — A Path for Smaller Operators

If you’re a smaller trades business, there’s a specific deal structure worth understanding: the tuck-in. This happens when a PE firm has already made their platform investment in your market and is now looking for smaller businesses to bolt on to that platform. The buyer in a tuck-in isn’t the PE firm directly — it’s the platform company the PE firm controls, which already has infrastructure, management, and technology in place to absorb you quickly. These deals often move faster and with less complexity than a traditional PE acquisition, and they represent a real exit path for business owners who might assume they’re too small for PE to care about.

Terms Are Often More Important Than the Multiple

For smaller trades deals, the headline multiple frequently isn’t the most important number. The deal structure underneath it is. Smaller buyers often don’t pay all cash at closing — they’ll ask you to carry a seller note, financing 20 to 30 percent of the purchase price yourself, paid back over time with interest. That deferred portion carries real risk: if the business struggles after you leave, those payments are at risk.

Larger PE deals — from well-capitalized buyers who’ve competed for your business through a proper process — are typically all cash at closing. A 4.5 times all-cash offer can be a better outcome than a 5 times offer with a 30 percent seller note. Understand the terms before you evaluate the multiple.

Where to Start

The free valuation calculator at rainmakertrade.com works through the same factors a PE buyer would use — your earnings tier, recurring revenue, management structure, revenue mix, and scale. It takes about three minutes and gives you a grounded starting point for understanding where your business sits today.

Whether a sale is on your horizon or years away, understanding your number is where the conversation begins.

→ rainmakertrade.com/valuation

Rainmaker Trade Advisors  ·  Investment Banking Services for the Skilled Trade Industries

HVAC  ·  Electrical  ·  Plumbing  ·  rainmakertrade.com