What an HVAC or Plumbing Business Is Actually Worth in Southern California

Most owners of trades businesses in Los Angeles and Orange County have heard a number from somebody — a competitor who sold, a private-equity roll-up that called out of the blue, a friend at the supply house. The number is almost always wrong, because it is a multiple applied to the wrong figure.

Here is the short version. Your business is valued on a multiple of SDE — seller's discretionary earnings — not on revenue, and not on the profit line your tax return shows. And the range is wide. Two companies with identical revenue can sit at opposite ends of it, and the gap has almost nothing to do with how good the technicians are.

Start with the right number: SDE, not revenue

SDE is your reported net profit, plus the owner's salary, plus the owner's personal benefits running through the business, plus interest, depreciation, amortization, and any one-time expense that will not repeat for the next owner. Your vehicle, your health insurance, the trip that got coded as a trade show, the son on payroll who works summers — those are add-backs, and they belong in the number a buyer pays a multiple on.

For scale: the median HVAC business that sold reported about $1.16 million in revenue and $256,000 in SDE. Plumbing ran about $1.04 million in revenue at a 26.7% margin in 2025. If your business throws off meaningfully more than that, you are above the median company in your category — which matters, because multiples rise with size.

Two things owners get wrong here, consistently. First, they add back things that are not add-backs. If a truck gets replaced every five years, that is not a one-time expense, it is a capital cycle. If your spouse actually runs dispatch, their salary is a real cost the next owner has to replace. A buyer's accountant strips those back out in diligence, and a valuation built on them collapses at exactly the wrong moment.

Second, they confuse reported EBITDA with adjusted EBITDA. Below roughly $2 million in earnings you are in an SDE market, priced for an owner-operator buyer. Above that you are usually in an EBITDA market priced for a buyer who will hire a manager — and that number has to carry a market-rate general manager's salary as a real expense. Owners who assume they will get an EBITDA multiple on an SDE number are pricing themselves out of every offer they will receive.

What the market actually paid

These are national sold comps — not asking prices. Los Angeles and Orange County generally price at or above national medians on labor-driven service businesses, but the only number that matters for your business is a local comp set.

Two things worth noticing. Trades multiples sit well above the all-service-business median of 2.38x — this is a category buyers want. And the direction of travel is up: HVAC median sale prices rose 23% from 2021 to 2025, plumbing 46% from 2022 to 2025, even as median revenue softened. Buyers are paying more for the earnings, not for the top line.

The wider market backs that up. The IBBA's Q2 2026 Market Pulse — a survey of 255 advisors reporting 181 closed transactions — found roughly three-quarters of advisors describing the $2M–$50M market as favoring sellers, with multiples in the $5M–$50M band climbing from 5.5x to 5.8x, the highest since early 2022. Construction and engineering businesses appeared frequently in the $500,000–$5 million range, which is where most established trades companies land. For the local picture, see what the IBBA data means for LA and OC sellers.

The five things that move the multiple

1. Whether the business runs without you. This is the whole ballgame. If you price the big jobs, handle the difficult customers, and hold the license, a buyer is not purchasing a business — they are purchasing a job that comes with your risk. A dispatcher, a service manager, and a lead tech who can quote are worth more to your valuation than another million in revenue.

2. Service agreements and recurring revenue. Maintenance plans are the single most valuable asset an HVAC company has, and they are routinely undercounted. A buyer treats a book of transferable annual agreements very differently from the same revenue earned one call at a time. If your plans are informal, undocumented, or do not survive a transfer, fix that now — it is a year of work that pays for itself at closing.

3. Customer concentration. If one builder, one property manager, or one commercial account is more than 15–20% of revenue, expect that to be priced in, and expect the buyer's lender to have an opinion too. Residential service businesses with thousands of small customers carry a concentration profile buyers like. Construction-dependent shops do not.

4. The licensing question. In California the business needs a qualifying individual for the CSLB license. If that is you, the buyer has to solve for it — either a licensed employee who stays, or a buyer who holds the license themselves, which narrows your buyer pool. Deals have been lost at the two-yard line over this. Settle who the qualifier will be before you go to market, not after an LOI.

5. Clean books. Not perfect books — clean ones. Financials that reconcile to tax returns, a P&L that separates service from installation from new construction, and job costing that can prove gross margin by division. If a buyer cannot verify your numbers quickly, they do not pay less; they walk. More on this in preparing your business for sale.

What the SBA lender checks, and why it matters before you list

Most trades businesses in this size range sell with SBA 7(a) financing, which makes the lender a second buyer you have to satisfy. Expect scrutiny of debt-service coverage on adjusted earnings after the loan payment and a market-rate owner's salary; transferability of licenses and service agreements; customer concentration; equipment and fleet condition; and any environmental or workers' comp exposure sitting in the file.

The practical consequence: an offer is only as real as the lender's willingness to fund it. Get a banker's read on your numbers before you go to market and you find out about the problem while you can still fix it. Find out during diligence and you are re-trading your own deal.

Plan for a longer runway than you think

Timelines stretched in 2026. Main Street transactions are averaging six to ten months from engagement to close, and deals in the $2M–$5M band rose from nine months to 11.5 months. Add preparation time on the front end and a realistic exit is 18 months out, not six.

That matters because of what the same survey found about preparation: across every size segment, 60% to 90% of sellers had done less than a year of exit planning, or none at all. Retirement drove roughly two-thirds or more of sales between $500,000 and $50 million, peaking at 72% in the $1M–$2M range. Most owners in this market are selling on a deadline they set late.

The good news for sellers who do prepare: buyers paid 83% to 92% of transaction value in cash at close in Q2 2026, and seller financing came in under 10% on most deals. A well-prepared business gets most of its money at the table.

The risks I would flag on a trades business today

Owner-held licensing with no successor qualifier. Shrinks the buyer pool immediately.
New-construction dependence. Cyclical revenue gets a lower multiple than service revenue, every time.
Deferred fleet maintenance. A buyer prices the replacement cycle they inherit.
Undocumented labor practices. California wage-and-hour exposure is a diligence killer and a real successor-liability question.
A single key tech who holds the customer relationships. That is concentration of a different kind.

What to do with this

If you are one to three years from an exit, the work is the same either way: build the management layer under you, formalize the service agreements, clean up the divisional P&L, and answer the licensing question. Those four things can move you up a full turn of SDE — worth more than any negotiating tactic at the table.

The tables above are national. If you want the number for your own business against local comps, start with the valuation questionnaire — a few minutes, and I will come back to you with what the Southern California market says, confidentially and with no obligation. If you are earlier in the process, how to sell a home services business and what your business is worth are the right next reads.

Sources

IBBA & M&A Source, Market Pulse Survey Q2 2026 (published August 25, 2026; fielded July 1–15, 2026; 255 advisors, 181 transactions). BizBuySell valuation benchmarks for HVAC, plumbing and service businesses (sold comps, 2021–2025). BizBuySell Insight Report, Q2 2026. Figures are national unless stated otherwise.