August 7, 2026
How much is my HVAC, roofing, construction, manufacturing, landscaping, medical device or trades industry business worth in Illinois? That is usually one of the first questions an owner asks before retirement, a family transition, or a possible sale. The answer is not a simple percentage of revenue. It is not based only on trucks, tools, equipment, or the money the owner has invested over the years.
For most privately held trade and service businesses, the first serious valuation discussion starts with Seller Discretionary Earnings, commonly called SDE. Then the broker, buyer, and lender look at the business behind those earnings: employees, customers, contracts, owner dependence, growth, risk, and transferability.
1. Start With What the Business Actually Earns for the Owner
Sales matter, but sales alone do not establish value. A heating and cooling company with strong earnings may be more attractive than a larger company with thin margins, heavy owner involvement, or inconsistent results. Buyers are not just asking, “How big is the company?” They are asking, “What does this company produce for the owner, and how much of that should continue after closing?”
A practical valuation review usually starts with the two most recent completed years and the current year-to-date. Tangent Brokerage often helps owners organize the information buyers and lenders will want to review before the business is exposed to the market.
- Annual sales
- Cost of goods sold
- Operating expenses
- Owner salary and compensation
- Depreciation and amortization
- Interest expense
- One-time or non-recurring expenses
- Personal or discretionary expenses paid through the company
These items help develop SDE, which is intended to show the total financial benefit available to one working owner. For a contractor, that may include salary, vehicle use, certain insurance costs, depreciation on equipment, interest expense, and legitimate add-backs that a buyer and lender can understand.
2. Why Seller Discretionary Earnings Matters
Consider a typical Illinois HVAC contractor. The owner may be paid through payroll, drive a company vehicle, have a phone and fuel paid by the company, and run certain discretionary expenses through the business. The company may also have depreciation from trucks, lifts, diagnostic tools, or shop equipment. A tax return by itself may not show the full earnings power of the company.
That does not mean every expense can be added back. Add-backs need to be explainable, documented, and reasonable. Buyers will question vague adjustments. Lenders may ignore add-backs that cannot be supported. A clean SDE analysis helps a seller avoid overstating value and helps a buyer understand what cash flow may be available after the acquisition.
3. Look at More Than One Year
Trade businesses can change from year to year. Weather can affect roofing, landscaping, asphalt, and exterior construction work. A large project may create an unusually strong year. Material costs, labor shortages, equipment purchases, or the loss of a commercial account can affect another year.
That is why a valuation range should consider multiple periods instead of relying on one year. Recent performance usually carries more weight because buyers are purchasing future earnings, not history from ten years ago. If sales are growing, the reason should be clear. If sales are declining, the seller should be prepared to explain whether the issue is temporary, customer-related, staffing-related, or tied to the owner pulling back.
4. Same Earnings, Different Risk
Two construction or trade companies can generate the same SDE (Sellers Discretionary Earnings-EBITDA plus officers salary) and still have different values. One may have experienced technicians, dispatchers, estimators, project managers, recurring service agreements, and documented procedures. Another may depend on the owner for estimating, customer calls, field supervision, purchasing, and employee decisions.
The buyer sees those companies differently. The first business may give a buyer a base to build from. The second may still be sellable, but the transition risk is higher. If the owner is the main salesperson, estimator, technician, and relationship manager, a buyer will want a stronger transition plan and may price the risk into the offer.
5. What Buyers Value in HVAC, roofing, construction, manufacturing, landscaping, medical device or trades industry business
A buyer is not only buying equipment. In an established Illinois trade business, the buyer may be acquiring customer relationships, phone numbers, crews, trained employees, vendor accounts, online reviews, operating procedures, and cash-flow history. Those assets are hard to build from zero.
- Recurring revenue: HVAC maintenance agreements, commercial service contracts, landscaping contracts, and repeat repair work can support buyer confidence.
- Employee depth: Technicians, installers, foremen, estimators, dispatchers, and managers who can remain after closing may increase transferability.
- Customer diversity: A company with many customers is usually less risky than one dependent on one or two large accounts.
- Documented systems: Estimating procedures, CRM data, dispatch records, job costing, safety records, and accounting processes make due diligence easier.
- Reputation: Reviews, referrals, long-term customers, and local name recognition can be meaningful assets if they are transferable.
6. What Can Reduce Value
Risk does not automatically prevent a sale. It does affect how buyers think. Common issues include heavy owner dependence, unclear books, customer concentration, limited management, declining revenue, aging equipment, weak job costing, no written contracts, or employees who may not stay after closing.
Some of these issues can be improved before going to market. An owner may document estimating procedures, clean up financial statements, separate personal expenses, renew service agreements, update equipment lists, or begin delegating customer communication to managers. These steps can support value because they help the buyer believe the business can continue without the seller running every detail.
7. Why the Valuation Should Be a Range
A business valuation calculator can provide a useful starting point by developing weighted SDE and applying a multiple that reflects company size, earnings, employees, growth, risk, and competitive advantages. But a privately held business is not a stock with an exact public price every minute.
The eventual selling price depends on the facts of the business, the buyer pool, financing, deal structure, due diligence, and negotiation. Seller financing, SBA lending, working capital, equipment condition, lease terms, licensing requirements, and transition support can all affect how a deal is structured.
8. The Practical Takeaway for Illinois Trade Business Owners
If an owner is thinking about selling an HVAC, roofing, construction, electrical, landscaping, plumbing, fabrication, or other trade business, the first step is not public marketing. The first step is understanding earnings, risks, and transferability. That usually means reviewing tax returns, financial statements, year-to-date results, payroll reports, bank statements, equipment schedules, customer data, contracts, licenses, and operating procedures.
Tangent Brokerage uses valuation discussions to help owners understand what buyers are likely to value, what they may question, and what can be prepared before the business is presented confidentially. A buyer wants a business that can operate after closing. A seller usually wants fair value, a capable successor, protection for employees, and the freedom to move into retirement or a different stage of life.
The calculator is a starting point. The better work is in confirming the SDE (our brokers can assist you in determining this), is understanding the business behind the numbers, and preparing the company so the valuation range fits the facts buyers will actually verify.