Selling Your Residential and Commercial Services Business For Millions More

What actually drives a higher valuation when you sell your residential and commercial services business?

In this episode of The Founder’s Journey to Exit, Evergreen M&A Managing Director Hannah Huke sits down with fellow Managing Director Roy Yewah to break down what HVAC, plumbing, pest control, roofing, and landscaping business owners can do months—or even years—before a sale to capture meaningfully more value at exit.

Residential and commercial services is one of the hottest sectors in private equity right now, but not all businesses attract the same buyers—or the same multiples. Hannah and Roy unpack what the best buyers are really looking for, how businesses in this space are valued, and the most common mistakes owners make that quietly cost them millions.

You’ll also hear a clear, founder-level view of:

• Why buyer demand in residential services remains so strong
• How to position your business to attract top-tier strategic and PE buyers
• What drives valuation (and what doesn’t) in HVAC, plumbing, pest control, and landscaping
• How to maximize dollars at close—not just headline multiples
• What the sale process actually looks like from start to finish
• What owners can expect their role to be after the transaction

Whether you’re actively considering a sale or simply want to be prepared when the timing is right, this episode gives you a practical roadmap to exit smarter—and for more. 

For more information, visit evergreenforfounders.com.

Real founders. Real exits. Real lessons from the journey. Brought to you by Evergreen M&A: Advisory for Founders.

Transcript

Hannah Huke  0:03  
Hello and welcome to the Founders Journey to Exit, an original podcast from Evergreen For Founders M&A Advisory. Today's episode is for owners in the residential services space. Particularly excited about this episode, because this marks the beginning of us diving into the specific industries that we represent at Evergreen. And today we're going to be talking all about HVAC, plumbing, electrical, roofing, landscaping, pest control and more. There's been a gold rush in residential services, and we're here today to understand what buyers are paying for in the space and how founders and business owners can reap the benefits of investments in this space. We're joined by Evergreen Managing Director, Roy Yewah, and he...

Roy Yewah  1:06  
Hello!

Hannah Huke  1:06  
...Hi, Roy!

Roy Yewah  1:07  
Hello, happy to be here!

Hannah Huke  1:08  
Thank you so much! He's very experienced in the M&A space, particularly in commercial and residential services. He has over 10 years of experience helping owners understand valuations and exits, and we're really happy to have him here today.

Roy Yewah  1:28  
Yeah, thanks for having me. I think that this is one of the most active and misunderstood spaces right now, and there's real opportunity here, especially if owners understand what buyers are actually looking for so, happy to get get going and discuss this topic!

Hannah Huke  1:45  
Yes. So, let's start with the big picture. Residential Services is incredibly hot right now for private equity buyers. Why is that? Why is it such an attractive sector for buyers today?

Roy Yewah  2:05  
Yeah, so when you think about residential services, right, it checks a lot of boxes for buyers. You got that non discretionary demand. So, no matter what the economy is doing, good or bad, people need heat, water, power and then safe home, right? And so when you have that recurring revenue business model through maintenance plans and repeat customers, right? I think that that is very attractive for not only private equity buyers, but also strategic players who might be looking to acquire smaller players within the same industry, right? And then another thing is that fragmentation is a huge driver. There a lot of great businesses who are still owner operated, which creates really good roll up potential, right? So you think about all the different HVAC businesses, not only even here in Tampa, but, where i, where i live in Chicago, in the Midwest in general, that creates a lot of opportunity for these buyers to, you know, buy one, buy two, buy three, buy four, buy five, roll them up, create a platform, and then sell that to another, bigger private equity firm or to another bigger corporation, or take that platform public, right, and so that strong cash flow and low capex compared to other industries is also something that these buyers are looking for, and that's very attractive right now.

Hannah Huke  3:37  
Great! So, what are the key stats and indicators buyers focus on when valuing these businesses?

Roy Yewah  3:48  
Yeah, so buyers start with adjusted EBITDA, or sellers discretionary earnings, depending on the size, and they focus heavily on revenue consistency, right? And so looking at whether or not there's recurring maintenance contracts, looking at gross margins, looking at labor efficiency, any customer concentration, right, could be like a yellow or red flag, average ticket size, and then also looking at technician utilization, right? So you want to see and make sure that a lot of these contractors, technicians are being utilized, right? Because that means that, you know, the company is busy, and that means that there's a lot of backlog and projects and contracts to get through. And so they also care about pricing power and whether rates have been increased consistently to keep up with inflation, right? So, they'll probably do like a, an analysis in the past five years to see how rates have fluctuated or changed in those past five years, and whether or not there's opportunity there to increase rates, or whether or not the company has been doing that on their own, right? And so these are some of the things that the buyer will look at in terms of key stats and indicators when assessing whether or not they want to put a bid on a business in the home services space.

Hannah Huke  5:13  
There's two things I want to also ask about that, recurring maintenance contracts are important, right? Because you do have that recurring revenue that shows stability also. And then, what about size? Because we get that, you know, we get some that are really small, kind of, you know, $250k EBITDA. We get some that are around a million of EBITDA. Where is the interest right now? And what do you, what advice do you give to kind of those smaller players?

Roy Yewah  5:44  
Yeah, I think for the smaller players, right, there are buyers who are looking for those smaller players as add on or bolt on acquisitions for a platform that they already have established. And so, for the smaller players, as long as you're consistently performing well, from like a revenue and gross margins and EBITDA standpoint, I think you're still on the radar for, to be an attractive investment opportunity, right? And so I would say, just keep doing what you're doing in terms of running the business efficiently. And then, you know, if there's opportunities to grow, whether it be acquiring a smaller player in a different geography, right, to grow inorganically, then take those opportunities, where they, where they, where they present themselves, right, in order to be even more attractive to prospective buyers. So, I would say, right now we're seeing a lot of players, and like the, you know, $500k to $5 million of EBITDA, right? Being, being heavily sought after from these private equity firms and bigger companies or corporations, right? But otherwise, another thing to think about is, terms of customer concentration, right? That buyers like to see, there's a spread in, not only residential customers, but also some commercial customers, right? And so right now we're seeing that a lot of the companies that have a good mix of both, and maybe even a little bit more commercial customers, are being bought at a premium, right, in comparison to some of the ones that only focus on residential customers.

Hannah Huke  7:36  
So I know we're talking about a variety of industry, you know, variety of industries in that, HVAC, plumbing, landscaping. Can you give us a sense of what the multiple ranges are for various sizes?

Roy Yewah  7:53  
Yeah, definitely! So I would say it really depends on the buyer and their appetite.

Hannah Huke  8:00  
Okay

Roy Yewah  8:01  
And so when you're looking at EBITDA under $1 million, they're probably looking at enterprise value to EBITDA multiple of three to five times, okay, and then EBITDA...

Roy Yewah  8:14  
And can you just...

Roy Yewah  8:14  
Go ahead

Hannah Huke  8:15  
Can you just explain what that means? And we've explained what EBITDA means and what valuations mean. But for our listeners today, can you just explain the EBITDA multiple and how they get to the enterprise value on that? 

Roy Yewah  8:30  
Gotcha, yeah. So the, the EBITDA multi-, EBITDA is pretty much your earnings after all your expenses, right? So your earnings before interest, the literal definition, is your earnings before interest, tax, Depreciation, or Amortization. And so once you, you have your revenue, you account for all your expenses, whether that's operating expenses as well, your fixed and variable expenses, right? Then you'll, you'll get to that EBITDA.

Hannah Huke  9:01  
Yep.

Roy Yewah  9:02  
And so once you have that EBITDA figure, and you're looking at your enterprise value to EBITDA multiple, if it's three to five times, you take that EBITDA number, multiply it by that multiple in order to get the value of your business, right, or your enterprise value.

Hannah Huke  9:19  
Okay, thank you for that!

Roy Yewah  9:22  
Yeah. No, no worries. And so...

Hannah Huke  9:24  
So yes, as you were saying, the...

Roy Yewah  9:25  
From there, right when you're looking at typical valuation ranges in the home services space, like I mentioned before, under $1 million, is anywhere from three three times to five times of enterprise value to EBITDA multiple. And between $1 million to $3 million is around four times to seven times of enterprise value to EBITDA multiple. And then between, I would say, anywhere $5 million and above, we're seeing around seven times to 12 times plus of EV to EBITDA multiple. And so it really, it really varies depending on the EBITDA and the size of the business,

Hannah Huke  10:09  
And there's a lot of other factors that go right too. Like we've said before, it's, it's a little bit of an art and a little bit of a science, and...

Roy Yewah  10:18  
And how you tell the story right?

Hannah Huke  10:19  
Exactly.

Roy Yewah  10:20  
And the growth opportunities and all that.

Hannah Huke  10:22  
Yep, and you know, the owner involvement, how the owner wants to be involved going forward, what are the opportunities with the buyers platform? And we like to stress a lot that, you know, the purpose of our services is we create competition for you, so you're always getting the high end of the valuation range where we can so...

Roy Yewah  10:46  
Or if you don't know where you fall in the valuation range, right? We help you understand what your valuation is, and also help you just prepare for that, for that point to where you're ready to sell and ready to, you know, go through the whole process of figuring out your valuation, putting together confidential information memorandum or investor presentation deck, and selling your business, right, for maximum value.

Hannah Huke  11:14  
Yep. And I think the timing is really good for residential services right now...

Roy Yewah  11:21  
Great, yeah.

Hannah Huke  11:21  
... and there's a lot of trends that are positively impacting the multiples, and we've talked a little bit about this before we sat down to record. But can you talk about the trends that are impacting the multiples? And...

Roy Yewah  11:36  
Yeah...

Hannah Huke  11:37  
... you know what's...

Roy Yewah  11:38  
Happy too...

Hannah Huke  11:38  
... what's driving them up or down, or what can owners in the space be prepared for?

Roy Yewah  11:44  
Mhm! I would start with the, you know, just infrastructure in general, in the US, I'm sure most of you have noticed there's a lot of construction and just improving the infrastructure overall, happening right throughout a lot of different states. If you travel a lot, you're, every airport you go to, there's construction going on, right?

Hannah Huke  12:08  
Yeah.

Roy Yewah  12:08  
The aging housing stock across the US is a massive tailwind. They're labor shortages, which are driving professionalization, right? And buyers reward companies with strong recruiting and training systems. Private Equity continues to pour capital into the space, especially platform and add on acquisitions, like I mentioned for add on acquisitions, right, the smaller players, like if you're a smaller player, under $1 million of, of enterprise value that's still a potential, attractive investment opportunity for these private equity players, because they already have a platform, and there's looking for add on acquisitions, right, for that platform. And then another factor is technology adoption, like, you know, CRMs or dispatching software. And then dynamic pricing is separating premium operators from your average ones. And then energy efficiency, electrification, and regulatory incentives are creating new revenue streams, right? And so that's a lot of the positive trends that we're seeing impact the residential services space.

Hannah Huke  13:23  
Yes. And how important is reputation and reviews and things like that?

Roy Yewah  13:32  
Yeah, I would say that's very important, because a lot of this, a lot of the players in this space, the way they've grown to where they are is through their reputation, right? It's through word of mouth, you will, you'll look at a lot of these companies, they don't spend that much on marketing, right? And so your reputation is key in this space, and so being able to keep that positive reputation and also being able to highlight that reputation in any, like marketing material to prospective buyers is important as well.

Hannah Huke  14:08  
Yes, that's great. And then, if you know, for our roofers and our plumbers and HVAC owners and the like, owners that are listening today. If they want to prepare for a sale in the next few years, or even in the next few months. Where should they start?

Roy Yewah  14:28  
Well, first up is to call Evergreen.

Hannah Huke  14:32  
There you go!

Roy Yewah  14:32  
Right! Talk to, talk to...

Hannah Huke  14:34  
Call us up!

Roy Yewah  15:20  
... Hannah or I! And the we'll...

Hannah Huke  15:30  
Happy to talk as well!

Roy Yewah  14:32  
... and then we'll, you know, help you understand the valuation of your business, right? And understand and talk to you and determine whether or not the timing to sell your business is good for right now or to wait later on, and then based off that, you know, I think clean up your financials, right? Monthly reporting, proper add backs, and then separation of personal expenses, is key in order to get ready for that sale. Next, I would say, just try to reduce any owner dependency by empowering managers and the documenting processes, right, and just make sure that you have all your ducks in a row. Third, just focus on recurring revenue through maintenance plans. And also, you know, don't try to make any big moves or big hires, right, when you're thinking about going through this sell side process, right? And then I would say, try to, next, I would say, try to invest in talent, whether that's retention, incentive programs, and clear career paths, and so the talent that you currently have in house, you want to keep them happy, because you know, you never know how people will react when they find out that their company is going to be sold, right? And the last thing a buyer wants to do is buy a company, and then the next day, half the staff is gone, right, or has quit. And then finally, I would say, just understand your numbers early, so you're not reacting under pressure. And so that's where, you know, Evergreen M&A, we can help you be able to understand your numbers, clean up your financials if you need to, and be able to tell your story in the best way possible for it to be attractive to prospective buyers that you deem a good fit with, right, especially culturally speaking.

Hannah Huke  15:40  
Yes, calm and clarity, is what you need to bring to the process, and we certainly help with that as well, so you can focus on the business.

Roy Yewah  15:40  
Exactly.

Hannah Huke  15:40  
Couple last questions, I just, you know, you talk about owner dependency and empowering managers, and in, a question we get a lot also from founders, is, what can I expect my role to be after a sale? Is it, am I walking away immediately? Am I transitioning? Am I, you know, am I on the hook for the next five years? Can you speak to that from your experience?

Roy Yewah  15:40  
Yeah, I would say it really depends on the founder, right? And so, we have some founders...

Hannah Huke  15:40  
And the buyer, right?

Roy Yewah  15:40  
And the buyer too, true. We have some founders who are older, right, who want to just walk away, and so the, I'm sure the buyer would like them to stay on for, you know, six months, and then potentially have some type of consulting relationship with them, right, as, as they continue to grow. But that, that founder, you can still keep equity and roll over, right, in the, in the business, so that you, you win and gain for the next sale of your business, right? Because usually companies are not only sold once, right, they're maybe sold twice, three times, right? And so...

Hannah Huke  15:53  
And that's called your second bite of the apple.

Roy Yewah  15:53  
Your second bite of the apple, right. And you want to be, you want to be part of that. And then for the younger founders who want to stay on, there's opportunities to roll over a lot of equity and stay on in a managerial role, or even as a board, right, board member. And so, it really depends on a couple different factors, right, what the founder wants, why they're selling, right? And then also the buyers and their expertise and how they see the best relationship moving forward after they acquire the business.

Hannah Huke  18:30  
Great. Lots of opportunity, is basically what you're saying.

Roy Yewah  18:35  
Yeah, yup, so...

Hannah Huke  18:36  
And lots of opportunity...

Roy Yewah  18:38  
... A menu of options!

Hannah Huke  18:39  
... to build real wealth. Not only from that initial sale, that first bite, but the subsequent sales of the platforms to bigger buyers and you have, when you have equity in the, in that that can be very powerful for building wealth.

Roy Yewah  18:56  
Mhm, exactly.

Hannah Huke  18:57  
So Roy, give us your final takeaway for residential services owners.

Roy Yewah  19:04  
Yeah, I would say now the industry is hot. It's incredibly attractive right now, and the premium goes to prepared businesses, right, and so, don't wait until burnout or a market shift forces your hand, if your company is performing well now, you might want to think about selling, right? Don't wait until it's not performing as well to think about selling, because right now you're happy making the money that you're making, and if you want to understand your value or explore options, please feel free to reach out to Evergreen. We're here, education is the first step to a strong exit, and I would say that's why we're here! To educate, and to get you prepared for the sale of your business. 

Hannah Huke  19:53  
Great! Thank you, Roy! And if you want more information or advice or anything, you can reach out to us. You can find our contact information on our website. We have a number of blogs as well, and other podcast episodes. You just need to visit evergreenforfounders.com and like I said, get in touch with us anytime. We are happy to help. We're happy to give you some advice on where you're at. Talk about timing, talk about what you can expect for valuations and really the best way that we can help you, because for us, the founders journey is the most important thing. So, thank you Roy!

Roy Yewah  20:39  
Thank you for having me!

Hannah Huke  20:39  
We will see you guys soon! Thank you!