What your company is worth the day you are not in it

Two companies in the same town. Both doing $2M. Same trades, same crew size, both profitable.

One gets an offer at three times profit, if it gets an offer at all. The other gets eight, sometimes twelve.

The owners are equally good at the work. That has almost nothing to do with the spread.

What the buyer is actually pricing

Somebody buying a construction company is buying next year's jobs. Not your trucks, not your reputation in the abstract, not the twenty years. Next year's jobs, and the odds they show up without you.

So the questions in diligence are all versions of the same question. Where does the work come from? Whose name is on the accounts that produce it? What happens to the phone if you stop answering it?

Three answers move the multiple more than anything else on the P&L.

Answer one: whose demand is it

If the work comes from a vendor that sells appointments, the buyer is not buying demand. He is buying a contract he could sign himself on Monday, at whatever price that vendor charges next year. That is a cost line, not an asset, and it gets priced as one.

If the work comes from a brand homeowners search by name, a profile that ranks in the county, an ad account with two years of learning in it and a database of past customers, that is an asset the buyer cannot replicate by writing a check to a third party. It transfers with the company.

Same revenue. Completely different thing being sold.

Answer two: are you the salesman

Most owners at this size are the estimator. They are in the kitchen, they read the room, they know when to hold the price. The close rate belongs to them personally.

The buyer sees that and prices it accordingly, because on the day you leave, that number goes with you. If somebody else in the company closes at a rate you can show on paper, you have converted a personal skill into a company process, and processes are what get multiples.

This is the least fun sentence in the article: the better you personally are at selling, the less your company is worth without you, unless you have taught it.

Answer three: does anything run without a person

Are the follow-ups automatic or do they happen when somebody remembers? Is there a CRM with every inquiry in it since 2024, or is the record three phones and a notebook? Can you produce, in ten minutes, what you spent and what it returned, by channel, for last quarter?

Every yes there is money. Not because a buyer loves software, but because each yes is proof the machine runs without the founder standing next to it.

The number nobody tells you at your size

Here is the market as it stands. Companies under a couple million in profit trade around three to five times that profit. Platform companies, the ones with their own brand and their own acquisition, go for eight to twelve.

Private equity has been rolling up this trade for a few years now, and the owners feeling that pressure usually cannot name it. It shows up as the competitor across town who suddenly has twelve trucks and a marketing budget, and as the broker who called you in March.

On $500,000 of profit, the spread between a four and a nine is two and a quarter million dollars. That is the price of the decisions in the three answers above.

What this has to do with next month

You are not selling next month. Fine. The reason to care now is that every one of those three answers takes years to change, and all three get better on the way.

Demand you own is cheaper per job than demand you rent, which you feel in this quarter's margin. A second closer means you stop spending Saturdays in other people's kitchens. A CRM that holds every inquiry is how you find the eleven people from last spring who said "call me in the fall."

The valuation is the last thing you collect. It is not the reason to build it.

If you want to know which of the three answers is costing you most right now, book a call. Bring where the work came from last quarter and who closed it. That conversation tells you more than any appraisal will.