Service Business Valuation Calculator

How to Value Your Service Business

When trying to figure out how you determine what a business is worth, begin with:

• Company assets

• Net profit

• Business model, structure, and size

• Relevant competition

• Growth trends

• Years in business

• Existing sales network

• Industry forecast

A realistic service company valuation is contingent on this information and buyers will assess this data to inform their decision, so make sure you have clear answers for all of these important components. An accurate valuation will help determine whether your company is a viable purchase for prospective buyers.

What to Include in Business Valuation Calculator

Let’s start with what you’ll need to input into the ServiceTitan Business Valuation Calculator.

Hint: use your company’s data from the last fiscal year.

• 1. Revenue - includes all sales made

• 2. Cost of sales - includes all costs that are directly linked to a job

• 3. Overhead expenses - the ongoing expense of operating your business

• 4. Total assets - current value of everything you own

• 5. # of staff - how many office staff and technicians work for you

• 6. % of recurring revenue - how much of your revenue is recurring

• 7. Years in business - how long your business has been operating

• 8. How to Interpret Your Business Valuation

How to Interpret Your Business Valuation

Once you’ve inputted all of the data points above, the ServiceTitan Business Valuation Calculator will give you an estimated range of what your business could be worth. It’ll also give you key company metrics that you can leverage in the event of a potential sale. This includes:

• Gross Profit - This is your sales minus your cost of sale.

• EBITDA - This is the profitability number most commonly used in valuing businesses. It stands for earnings before interest, taxes, depreciation, and amortization. This should represent the profit brought in by the end of the year.

• EBITDA % - This is the percentage of your earnings before interest, taxes, depreciation, and amortization. The percentage is calculated by dividing your EBITDA by your revenue.

Why Companies are Valuated Based on EBITDA

A business is typically valued based on a multiplier of EBITDA. As the EBITDA gets higher, the multiplier increases because investors will see the business as less risky. Note: the multiplier may change depending on how much of your revenue is considered recurring versus non-recurring.

For instance—if you have ongoing, long-term contracts, this demonstrates that customers are committed to buying from you, so that would be considered recurring revenue. The more recurring revenue you have, the less risky an investor would consider your business and the more they’d probably be willing to pay.

What to Do If You Don’t Have Any EBITDA

If you don't have any EBITDA—or net profit—that doesn't necessarily mean your business isn’t sellable. It would just be valued differently. The business would be valued based on the cost of your assets. In that case, an investor would consider how much it would cost them to purchase the assets themselves.

For example—investors would determine how much your fleet of trucks is worth by considering how much it would cost to purchase trucks from a third party that are the exact same age and condition as yours. Keep in mind that if you have debt on any of your assets—such as credit card debt or truck loans—you’ll typically still be responsible for eliminating that debt, even after an investor has already bought those assets.

Bonus Tip for Sellers

Consider that most investors will want you to remain in the business for a year or two after the sale of your business to ensure a smooth transition. Also, some investors may only want to buy 70-90% of the business and have you keep the remaining amount to make sure you have a vested interest in keeping the business going.

Each deal will vary depending on the parties involved. Make sure the buyer or investor you get involved with is willing to agree to any non-negotiable terms you may have (just be realistic!).

Make Sure to Satisfy Your Bottom Line

Selling your service company can be an emotional process. It may have been in the family for generations or maybe you built it yourself from the ground up. Either way, you’ll want to be able to walk away from the sale knowing that you got a fair and reasonable price. With the ServiceTitan Business Valuation Calculator, you’ll have a great starting point to understanding what your business is worth, and even gain insight on how ServiceTitan can improve your valuation.

*Disclaimer: the ServiceTitan Business Valuation Calculator is solely meant to provide an estimated valuation of your business. This calculator does not guarantee any price or value for your company. Please note that external factors may negatively or positively influence the valuation of your business. If you are looking for a more definitive valuation, please consult a professional.