Valuation

Updated April 17, 2026

What is a small trades business actually worth

Trades-business valuation typically combines tangible assets, the customer book, and goodwill. Brokerage data shows most small home-services businesses trade in a multiple of seller's discretionary earnings (SDE).

The 3 components

A trades business is usually valued in 3 parts. Tangible assets cover trucks, tools, inventory, and any owned real estate. The customer book covers active service contracts, recurring maintenance accounts, and the call-volume history. Goodwill covers the reputation, the brand, and the relationships that drive repeat business.

Each component has a different valuation method. Tangible assets are valued at fair market or depreciated book. The customer book is valued by recurring-revenue contracts and historical conversion rates. Goodwill is harder and is typically derived from the multiple-of-earnings method described below.

Multiple of seller's discretionary earnings

The most common valuation method for owner-operated small businesses is multiple of seller's discretionary earnings (SDE). SDE is approximately net income plus owner compensation, owner benefits, depreciation, and one-time non-recurring expenses.

BizBuySell's quarterly Insight Report and the IBBA's Market Pulse Survey both publish SDE multiple ranges by sector. For home-services trades businesses, multiples commonly fall in a 2x to 4x SDE range, with higher multiples for businesses with strong recurring-revenue contracts, lower multiples for businesses where the owner does most of the work and the customer book would walk with them.

Multiples are not promises. They are reference points based on completed transactions. A business with stable revenue and an experienced second-in-command typically trades higher than the median. A business where the owner is the brand typically trades lower.

What raises and lowers the multiple

Raises the multiple. Recurring service contracts. A licensed second-in-command who plans to stay. Documented systems and standard operating procedures. Diversified customer base with no single customer over 10% of revenue. Clean books reviewed by a CPA. Real estate that conveys with the business.

Lowers the multiple. Owner is the only licensed master plumber, electrician, or HVAC technician. Customer relationships are personal to the owner. Books kept in a spreadsheet with no third-party review. Single large commercial customer. Active litigation, lien, or licensing complaint. Equipment past its useful life.

Real-world examples to anchor against

BizBuySell's Insight Report publishes median sale price, median revenue, median cash flow, and median sale-to-cash-flow multiple for home-services businesses each quarter. The quarterly report is free.

The IBBA Market Pulse Survey publishes median multiples by deal size. Businesses under $500,000 in transaction value typically trade at lower multiples than businesses between $1M and $5M.

These are aggregated medians. Your business is not the median. The right number is what an actual qualified buyer pays after due diligence.

What this site does and does not do

This page lays out the framework so the conversation with a business broker or CPA starts with shared vocabulary. It is not a valuation. A defensible valuation comes from a credentialed professional who reviews 3 to 5 years of tax returns, the asset list, the customer book, and the local market.

Two helpful designations to look for in a valuator: Accredited in Business Valuation (ABV) from the AICPA, or Certified Valuation Analyst (CVA) from the National Association of Certified Valuators and Analysts.

Sources

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