What makes a business sellable, with the numbers

Take two commercial HVAC service companies. Both do $3.2M in revenue. Both show $480K in seller's discretionary earnings. On paper they look like the same business. In practice one is worth roughly twice the other.

Company A

Sixty percent of revenue sits under annual maintenance agreements that renew at about 90%. A service manager schedules the crews and quotes most jobs. The largest customer is 9% of revenue. The owner works about twenty hours a week and has not sold a job personally in two years.

Company B

Nearly all revenue is project work, bid job by job. The owner quotes everything, holds every key relationship, and is the reason the two largest accounts, together 41% of revenue, keep coming back. Remove the owner and a meaningful share of next year's revenue leaves with them.

Why the gap is so wide

A buyer is not buying last year's profit. They are buying the probability that the profit repeats without the seller in the building. Company A's earnings survive the transition, so it might be valued in the range of 4x to 4.5x. Company B's earnings are partly the owner's personal book of business, so the same $480K might support something closer to 2x to 2.5x, often with a large portion held back in an earnout.

On $480K of earnings that difference is well over a million dollars, created by decisions about delegation and contracts rather than by anything on the income statement.

What moves the needle first

In most owner-operated businesses the fastest gains come from getting the owner out of quoting and customer ownership, converting repeat work into written agreements, and reducing the top customer below roughly 15% of revenue. None of it is quick. All of it is worth more than a marginal revenue increase.

If you want a sense of where your own business currently falls, the valuation calculator on this site gives an indicative range in about a minute.