You built something real over years of early mornings and long weekends. Before you talk to a buyer, you need to understand the number that matters most, and what it means for your exit.
A guy walks into my office last year. 62 years old. Built an electrical contracting company in Fort Worth from a single truck in 1998 to a $6.2 million revenue operation. Twenty-six years of waking up before sunrise. Twenty-six years of answering the phone on Christmas morning when a commercial client's panel blew.
He sat down and asked me one question.
"What is my business worth?"
That question, those six words, is the reason most business owners either leave hundreds of thousands on the table or spend years stuck in a deal that never closes. Because the answer starts with a number most owners have never calculated correctly: their EBITDA.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. In plain language, it is the cash profit your business generates from operations before accounting tricks, tax strategies, and financing decisions muddy the picture. It is the number every buyer, every lender, and every private equity firm uses to decide what your company is worth.
But here is the part that matters. The EBITDA on your tax return is almost never the number a buyer uses. Buyers use normalized EBITDA, which means they add back owner-specific expenses that would disappear under new ownership. That is where the real money is, and most owners have no idea how much they are leaving hidden.
Understanding your EBITDA multiple is not an academic exercise. It is the single most important number in your business exit. A half-point difference in your multiple on $800,000 in EBITDA is $400,000. That is a lake house. That is your grandkids' college fund. That is generational wealth or generational regret.
Every industry trades at a different range. These multiples reflect the risk profile, growth trajectory, and cash flow predictability that buyers see when they evaluate a business. The table below covers the most common industries we work with at Kingdom Broker, based on closed transactions and current market data for businesses in the $1M to $20M revenue range.
| Industry | Revenue Range | EBITDA Multiple |
|---|---|---|
| HVAC Services | $1M–$20M | 3.5x – 6.0x |
| Plumbing Companies | $1M–$15M | 3.0x – 5.5x |
| Electrical Contracting | $1M–$20M | 3.0x – 5.0x |
| Roofing Companies | $1M–$15M | 2.5x – 4.5x |
| Waste Management / Hauling | $2M–$20M | 5.0x – 8.0x |
| Dental Practices | $1M–$10M | 4.0x – 7.0x |
| Medical Practices (non-dental) | $1M–$15M | 3.5x – 6.5x |
| Manufacturing (general) | $2M–$20M | 4.0x – 6.5x |
| Staffing / Recruiting | $2M–$20M | 3.0x – 5.0x |
| IT Services / MSPs | $1M–$15M | 4.0x – 7.0x |
| Landscaping / Lawn Care | $1M–$10M | 2.5x – 4.5x |
| Pest Control | $1M–$10M | 4.0x – 7.0x |
| Auto Repair / Body Shops | $1M–$10M | 2.5x – 4.0x |
| Restaurants / Food Service | $1M–$10M | 2.0x – 3.5x |
| Construction (general) | $2M–$20M | 2.5x – 4.5x |
| Insurance Agencies | $1M–$10M | 6.0x – 10.0x |
| Home Services (general) | $1M–$10M | 3.0x – 5.0x |
| E-commerce / DTC Brands | $1M–$15M | 3.0x – 5.5x |
| SaaS / Software | $1M–$20M | 6.0x – 12.0x |
| Distribution / Wholesale | $2M–$20M | 3.5x – 5.5x |
Important note: These are ranges, not guarantees. Where your business falls within the range depends on factors like recurring revenue, owner dependence, customer concentration, and growth trajectory. A well-prepared business with clean financials and a management team in place will trade at the top of the range. A business that runs through the owner's cell phone with handshake deals and messy books will trade at the bottom, or not at all.
"Your EBITDA multiple is not fixed by your industry. It is earned by how you built, documented, and positioned your business. Preparation is the highest-ROI activity an owner can do before going to market."
If you want to see where your business falls in these ranges right now, use our free AI valuation tool. It takes five minutes, no login required, and it gives you a real estimate based on your industry and financials.
A pest control company doing $800K in EBITDA might sell for $5.6 million. A restaurant doing the exact same EBITDA might sell for $2 million. Same profit. Wildly different value.
That is not random. Buyers are pricing risk. And the factors that drive risk are consistent across every deal.
Here is the Kingdom principle behind all of this. Stewardship is not just about building revenue. It is about building something transferable. Something that can survive and thrive beyond you. The owners who understand this, who build systems instead of just chasing sales, are the ones who walk away with generational wealth instead of a job they cannot leave.
We see this pattern at Kingdom Broker every week. Two HVAC businesses, same city, same revenue. One owner built a management team, locked in 400 service contracts, and documented every process. The other runs everything off his cell phone. The first business sells for 5.5x. The second struggles to find a buyer at 2.5x. Same industry. Same EBITDA. A million-dollar gap because of preparation.
This is where I see owners leave the most money on the table. They hand over their tax returns, a buyer calculates EBITDA from the bottom line, and the owner walks away thinking their business is worth 30% less than it actually is.
Why? Because their accountant did exactly what they were paid to do, minimize taxable income. That is great for taxes. It is terrible for valuations.
Normalized EBITDA is your raw EBITDA plus legitimate add-backs, expenses that are specific to you as the current owner and would not continue under new ownership. These add-backs increase your EBITDA, which increases your total valuation by that amount multiplied by your industry multiple.
Let me show you what this looks like in dollars. Say your tax return shows $420,000 in net income. After calculating raw EBITDA (adding back interest, taxes, depreciation, and amortization), you are at $530,000. But you also pay yourself $280,000 when a replacement manager would cost $120,000. Your wife handles light bookkeeping for $65,000 when the role would cost $25,000 at a bookkeeping firm. You run two trucks through the business for personal use at $18,000 a year.
Those add-backs total $218,000. Your normalized EBITDA jumps from $530,000 to $748,000. At a 4.0x multiple, that is the difference between a $2.12 million valuation and a $2.99 million valuation. $870,000 more, just from properly calculating your add-backs.
This is exactly what our free AI valuation tool helps you estimate. And for our advisory clients, we go deeper. We analyze three years of tax returns, P&Ls, and bank statements to find every legitimate add-back and present your business the way institutional buyers need to see it.
Let me walk you through how this works with a real example. The names and details are changed, but the numbers are based on an actual engagement.
A plumbing company in the Dallas-Fort Worth area. In business for 19 years. Twelve full-time technicians, two office staff, and the owner who still runs estimates and manages the big commercial jobs. Revenue for the trailing twelve months: $4.8 million. The owner wanted to retire within two years and had no idea what his company was worth.
Net income (from tax return): $485,000
+ Interest expense: $22,000
+ Taxes: $0 (S-Corp pass-through)
+ Depreciation: $68,000
+ Amortization: $12,000
= Raw EBITDA: $587,000
Owner salary above market: $310K paid, $140K replacement cost = $170,000 add-back
Owner's wife (light admin): $55K paid, $0 replacement needed = $55,000 add-back
Personal truck (F-250): $14,400/year = $14,400 add-back
One-time legal fee (lease dispute): $28,000 add-back
Family health insurance: $24,000 add-back
Total add-backs: $291,400
$587,000 + $291,400 = $878,400 normalized EBITDA
Plumbing companies in the $1M to $15M revenue range typically trade at 3.0x to 5.5x normalized EBITDA. This business had moderate recurring revenue from commercial maintenance contracts (about 25% of revenue), a small management team that could handle day-to-day without the owner for short periods, and a strong local reputation.
Without add-backs, using raw EBITDA of $587,000, the midpoint valuation would have been $2.49 million. With proper normalization, the midpoint jumped to $3.73 million. That is $1.24 million in additional value, just from presenting the financials correctly.
The owner didn't change a single thing about his business. He just showed it to buyers the way buyers need to see it. That is the power of understanding your EBITDA multiples and your add-backs before going to market.
If you are thinking about selling your business in Texas or anywhere else, the first step is always the same: know your number. And if you plan to use SBA 7(a) financing to attract more buyers, your normalized EBITDA needs to tell a clear story to the lender, too.
For businesses in the $1M to $20M revenue range, a good EBITDA multiple typically falls between 3.0x and 6.0x. Service businesses with recurring revenue and a management team in place tend to land at 4.0x to 6.0x. Owner-dependent businesses with project-based revenue may trade at 2.0x to 3.5x. Industries like insurance, SaaS, and pest control can push above 6.0x due to the recurring nature of their cash flow.
Start with your net income from the trailing twelve months. Add back interest, taxes, depreciation, and amortization to get raw EBITDA. Then add back owner-specific expenses, above-market salary, personal vehicles, family on payroll, and one-time costs, to get normalized EBITDA. Multiply that by the EBITDA multiple range for your industry. For a faster estimate, use our free valuation tool which does this calculation automatically based on your inputs.
Multiples reflect risk. Industries with recurring revenue, essential services, and high barriers to entry (waste management, dental, pest control) command higher multiples because cash flow is predictable and defensible. Industries with project-based revenue, low switching costs, and heavy competition (restaurants, general contracting) trade lower because the risk of revenue loss after acquisition is higher.
The biggest add-backs are above-market owner compensation, personal vehicle expenses, family members on payroll, personal insurance premiums, one-time legal or professional fees, discretionary travel, and non-recurring capital expenditures. Properly identifying add-backs can increase normalized EBITDA by 20% to 50%, which directly increases your business valuation by that amount times your industry multiple.
Yes. Larger businesses command higher multiples. A business doing $500K in EBITDA might trade at 3.0x to 4.0x, while a business doing $2M in EBITDA in the same industry could trade at 4.5x to 6.0x or higher. Larger businesses have more diversified revenue, stronger management teams, and attract more institutional buyers. Growing your EBITDA before selling is one of the highest-ROI moves you can make.
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