Valuation Multiples for HVAC Companies

Valuation Multiples for HVAC Companies

The HVAC industry is comprised of companies that primarily install and service heating, ventilation, and air-conditioning (HVAC) and refrigeration equipment. Here’s is a quick summary of what HVAC multiples look like. Be sure to also check out our post on Valuing your HVAC Company.

HVAC Valuation Multiples

**Disclaimer: These multiples have been provided for educational purposes only. As such, the information provided does not constitute valuation advice and should not be acted as such. These multiples do not represent the valuation opinion of Peak Business Valuation or any of its valuation professionals. Instead, you should seek the guidance and advice of a qualified business valuation professional with respect to any matter contained in this article.

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Revenue Multiple

According to our data, in 2019 HVAC companies transacted at an average revenue multiple of 0.46x.  In order to derive an implied value of a business, apply the multiple by the most recent 12-month period revenue. The calculation is as follows:

Revenue X Multiple = Value of the Business

For instance, if an HVAC company generates $650,000 in revenue and transacts at a 0.46x multiple, then the business value is worth approximately $299,000.

$650,000 X 0.46x = $299,000

This calculation is straightforward. However, most HVAC companies do not transact on a revenue multiple. The reason being, a revenue multiple does not take into consideration the operations of a business. As such, this multiple is not relied upon. Therefore, it is important to look at cash flow multiples. Cash flow multiples consider expenses that impact the cash flow. For instance; rent, COGS, and salaries.


Seller’s Discretionary Earnings (SDE) Multiple

In 2019, the average SDE multiple was 2.6x for HVAC companies. This multiple is applied to SDE for a business to derive an implied value of the business. The calculation is as follows:

SDE X Multiple = Value of the Business

For example, if an HVAC company has seller’s discretionary earnings of $350,000 and transacts at a 2.6x multiple, then the business is worth approximately $910,000.

$350,000 X 2.6x = $910,000

Seller’s discretionary is a common cash flow multiple used in small business transactions. SDE is derived by starting with your company’s EBITDA and adding back potential expenses that would not otherwise be incurred by a new owner. These expenses may include owner’s compensation, managers salary, other expenses such as auto, and nonrecurring items or events such as legal fees, consulting.

This approach is most frequently used as a valuation method for small businesses with sales less than $3M.


EBITDA Multiple

The average EBITDA multiple for HVAC companies in 2019 was 2.81x. This multiple is applied to EBITDA for a business to derive an implied value of the business. The calculation is as follows:

EBITDA X Multiple = Value of the Business

For example, a HVAC company has an EBITDA of $750,000 and transacts at an EBITDA multiple of 2.81x. Using the above metrics, the HVAC company is worth approximately $2.1M.

$750,000 X 2.81 = $2,107,500

The EBITDA multiple measures a company’s return on investment (ROI). This multiple is preferred as it is normalized for differences in capital structure, taxation and fixed assets. Normalized ratios allow for comparisons to similar businesses.


Average EBITDA Multiples

The following graphic shows how EBITDA multiples have trended over the last 4 years in the HVAC industry.

HVAC Multiples By Year

Impact of Size on the Valuation Multiple

The following graphic shows how business size impacted EBITDA multiples in the HVAC industry over the last 4 years.

HVAC Multiples By Size


Peak Business Valuation enjoys working with small business owners to help maximize their HVAC company’s value. We focus on providing valuable information to help you grow, sell, or buy an HVAC company. We have worked with over 15 HVAC business owners in the last year to provide HVAC company valuations. Questions are always welcome. Please reach out via email or phone call.

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