Ask a broker and you get a range, not a number: roughly 2 to 4 times yearly owner earnings.
That is the standard answer, and it is an honest one. Nobody quotes a single figure, because the figure depends on the business behind it.
The short answer
Two shops can have the same sales and the same crew, and still land at opposite ends of that range.
The difference is what a buyer believes will still be there a year after you hand over the keys. Everything below is a way of asking that one question.
What owner earnings means
Owner earnings is the money the business puts in the owner's pocket in a year.
You start with the profit on your books. Then you add back your own salary, because a new owner sets their own. Then you add back the costs the business carries for you personally, like the truck and the wage paid to someone who doesn't work there. Accountants call this recasting the books. It is normal, and buyers expect it.
The buyer and their accountant work this number out from your books whether you offer it or not. If you have never seen your own, you are the only person at the table guessing. Ask your accountant for it early.
What moves you up the range
Buyers pay the top of the range for a business that does not need its current owner. Four things push you that way:
- Service contracts that renew without anyone selling them again
- A crew that intends to stay after the sale
- Books an accountant can read without you sitting beside him
- New work arriving on its own, from people who found the business rather than you
The last one is the piece most owners cannot show, and it is the piece that settles the argument. If a buyer can see work arriving without your name on it, they count that profit as the business's and not yours.
What drags you down
It's the same list, turned over: revenue that lives in your cell phone, one or two customers who make up half the sales, books that need explaining, and no visible way new work arrives. That asks a buyer to bet your reputation stays with the sign on the building, and they know it doesn't.
Buyers don't pay full price for a bet, so they offer a lower multiple, ask you to stay on for a year or two, or hold back part of the money until the work proves itself. All three cost you, and the first one is the quietest, because nobody says the words and the number comes in low.
The term for it is key-man risk: the business depends on one person, and that person is leaving. It is the first thing a buyer looks for. Most of the checks they run online are about that.
The cheapest fix on the list
Look at the list again and notice what each item costs to fix.
You can't build a book of service contracts overnight, and you can't hire a crew that has been there ten years. Those are slow, and they depend on other people agreeing to things.
The online side is different, because showing up when someone nearby searches your trade is something you can build. It costs less than anything else on the list, and you can start this month. Give it two or three years of steady monthly work and it produces a record a buyer can trust.
That is the part I do, and it starts with a strategy built on what a buyer will find. The spending then goes where the report says it should. If the report says build, that is a website with a maintenance plan attached, and the plan transfers when you sell. The monthly work is what turns it into a record you can put on the table next to your financials.
Three years out is the comfortable place to start. Closer than that is still worth a conversation, because some of it is fast.
Common questions.
How do I work out my own owner earnings?
Start with the profit on your books. Add back your own salary, and add back anything the business pays for that a new owner would not need. Your accountant can do this in an afternoon. Ask for it before you talk to anyone about selling.
Does the range change from trade to trade?
Yes. Trades with contracts that renew every month tend to sit higher, because the income repeats without anyone selling it again. Trades that live on one-off jobs tend to sit lower. Size matters too. A bigger business with real management usually sells on a higher multiple than a two-truck outfit.
Can you tell me what my business is worth?
No. I do not broker sales and I am not involved in the handover. A valuation is work for your accountant or a broker who sells businesses in your trade. What I can tell you is what a buyer sees when they look you up online, and what that part is doing to your number.
Do my reviews belong to me or to the business?
To the business, as long as they sit on the Google Business Profile and not on your personal Google account. That is one reason reviews are worth more than they look. They stay when you go, and the buyer inherits them.
What proof of lead flow does a buyer accept?
Something written down that covers enough months to show a pattern, such as where you rank and how many jobs got booked each month. A folder of monthly reports does the job.
Find out which end of the range you are on.
Thirty minutes on the phone, and I'll tell you what a buyer sees when they look you up.