A friend has been approached about selling.

Anybody know what kind of multiple a small construction type business goes for?

Specialty type company but no real barriers to entry other than special equipment to buy but he does do repeat business with a bunch of different contractors.

In the mechanical service and contracting world, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiple would run from a low of 2-3x for a company doing plan and spec bid work, a little higher when the mix includes design build to 5-7x for a service company that does retrofit and has a lot service contracts.

Some might negotiate an adjusted EBITDA which would remove owner expenses not directly related to the operation of the business. Wife's car and maybe salary if she isn't really an integral employee, life insurance for the founder, heavy T&E that really isn't required, stuff like that.

JPK

If he can get 2x plus the value of the hard assets he is lucky. I can start that same company tomorrow for much less. If there is a downturn, that construction company dries up overnight and is worth zero.

I've bought 4 businesses and paid 1.5-1.9x plus asset value on all 3 of them. We are closing on the 4th in 3 weeks.

In my opinion, a small construction business is worth nothing beyond the assets.

It's not worth anything in my opinion, except for its equipment, and building, if any.

Small construction companies are a dime a dozen.

I agree. Worth nothing more than the assets it has. The value is in the contacts and business base but in a business like this the customers are used to dealing with the current owner. If sells and moves on they very likely will find someone else. It is not like a McDonald's that derives a lot of business from the brand recognition and location. It gets business based on the owners relationships with customers.

I worked for a contractor for 13 years and the last 7 I ran everything. All our customers knew no one but me at the company. When I left I did not try to steal any customers but they all followed me on their own. They said we like working with you not whatever company you happen to work for. I even felt bad and tried to get one of our large clients to stay with my old company and we had a meeting and the client straight up told them our business goes where he goes. We know what kind of work he does and we have no idea how your company will perform without him there.