Seller Education
Considering a partial or full sale? Here’s what it really means.
Most owners have spent decades building their business without outside investment or having sold a business. This guide walks you through the fundamentals — plainly, honestly, and without the jargon.
Starting Point
If you’ve never sold a business before, you’re not alone — and you’re not behind.
Most owners of great trades businesses have never been through a sale. They built their companies over decades through hard work, not financial engineering — which means the concepts buyers use (EBITDA, multiples, LOIs, due diligence) can feel foreign and a little intimidating.
That discomfort is normal. And it’s fixable. Understanding how a sale works — the language, the process, the math — is one of the best things you can do to get a fair outcome. Informed sellers make better decisions, ask better questions, and close better deals.
This guide isn’t a sales pitch. It’s a primer. By the end, you’ll understand how your business is valued, what the process looks like, and what questions to ask any buyer you talk to.
Valuation Basics
What is EBITDA, and why does it matter?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. The short version: it’s how much cash your business actually makes each year, before accountants start making deductions.
It’s the number that buyers use as the foundation for valuing your company. Once they have your EBITDA, they apply a “multiple” to arrive at a purchase price.
EBITDA × Multiple = Your business’s value.
Everything else in a valuation conversation flows from this equation.
Example: A Hypothetical HVAC Company
Applied to common multiples
* This is a simplified illustration. Real valuations also account for add-backs, working capital, debt, and deal structure. But this is the core logic.
Valuation Drivers
What moves your multiple up — and down.
Your EBITDA tells buyers how much the business earns. Your multiple tells them how confident they are it will keep earning that. These factors drive that confidence — or erode it.
Increases your multiple
Recurring revenue
Maintenance contracts and service agreements are gold. They show predictable future cash flow, which buyers pay a premium for.
Runs without you
If your business can operate while you take a two-week vacation, it's worth more. Owner dependency is the single biggest discount factor.
Clean financials
Three years of organized, consistent books. No surprises in due diligence. Every dollar accounted for. This builds trust and speeds closing.
Diversified customers
No single customer makes up more than 10–15% of revenue. Concentration is a risk buyers price heavily.
Strong team in place
Long-tenured technicians, a solid ops lead, maybe a field supervisor. A team that stays = a business that survives the transition.
Growing revenue
Buyers pay for momentum. A business growing 15% year over year commands a meaningfully higher multiple than one that's flat.
Decreases your multiple
Heavy owner dependency
You hold all the customer relationships, do all the estimates, and handle every escalation. This is the most common reason multiples drop.
Customer concentration
One commercial client that represents 30% of revenue is a risk. If they leave post-close, the buyer's investment goes with them.
Messy books
Inconsistent records, missing invoices, or unclear owner expenses slow due diligence and give buyers reason to reduce their offer.
Aging equipment
Deferred maintenance on your fleet or tools shows up as risk. Buyers discount for capital they'll need to spend post-close.
High turnover
If you cycle through technicians, buyers see training costs, lower productivity, and cultural risk. Retention matters.
Verbal agreements
Customer contracts on a handshake, informal employee arrangements, undocumented vendor terms. Buyers want paper. Formalize what you can.
Glossary
Terms you’ll hear. What they actually mean.
Buyers and brokers use a lot of shorthand. Here’s a plain-language reference for the terms that come up most often.
The most common way buyers measure the profitability of a business. Think of it as the cash your business generates each year before accountants and bankers get involved. It's the number your valuation is built on.
Similar to EBITDA, but adds back the owner's salary and personal perks run through the business. More commonly used for smaller businesses (under $1M profit). As businesses grow, buyers shift to EBITDA.
The number you multiply by EBITDA to arrive at business value. A business with $500K EBITDA selling at a 4× multiple is worth $2M. Multiples for trades businesses typically range from 3× to 6×, depending on size, growth, and risk factors.
The written offer a buyer sends after initial discussions. It outlines the purchase price, deal structure, and key terms. LOIs are typically non-binding except for a few clauses (like exclusivity). It kicks off the due diligence process.
The buyer's formal review of your business — financials, customer contracts, employee records, equipment, legal history. Think of it as a buyer doing their homework before writing a check. The cleaner your records, the faster it goes.
Adjustments made to your financial statements to show true business profitability. Common add-backs include owner salary above market rate, personal vehicle, family members on payroll, and one-time expenses. This is legitimate and expected.
The cash needed to run the business day-to-day — receivables, inventory, minus what you owe suppliers. Most deals include a working capital target so the buyer gets a business that's ready to operate from day one.
A portion of the purchase price tied to future performance. Example: you get $2M at closing, plus up to $500K over two years if revenue hits certain targets. Earnouts can bridge valuation gaps but add complexity. Understand the terms carefully.
An agreement that prevents you from starting or working for a competing business for a defined period (typically 2–5 years) within a defined geography. Standard in virtually every deal. Make sure the scope and duration feel reasonable.
Two ways to structure the transaction. In an asset sale, the buyer purchases the business assets (equipment, contracts, brand). In a stock sale, they buy your company entity outright. Asset sales are more common for small businesses. The tax treatment differs — talk to a CPA.
A third-party analysis of your financial statements, typically ordered by the buyer. It validates your revenue and EBITDA claims and identifies any concerns. Common in deals above $2M. It's not an audit — it's a focused review of business earnings.
Once you sign an LOI, you typically agree to stop talking to other buyers for 30–60 days while the buyer completes due diligence. This protects the buyer's investment of time. If the deal falls apart, exclusivity ends and you can re-engage others.
Step by Step
What actually happens when you sell.
Every deal is different, but the sequence is predictable. Here’s what to expect from the first conversation to the day funds hit your account.
Decide you're ready — or at least curious
You don't need to have made a final decision to start learning. Most owners begin by quietly exploring what their business might be worth. There's no obligation in a first conversation, and nothing gets set in motion until you say so.
Get your financials in order
Pull three years of tax returns and profit & loss statements. If your bookkeeping has been inconsistent, a few months with a good accountant goes a long way. Clean books don't just speed the process — they protect your valuation.
Understand what your business is worth
Calculate your EBITDA, identify your add-backs, and apply a reasonable multiple for your trade and market. A buyer like Chisel will give you a free, no-obligation indication of value early in the process — before any paperwork.
Find the right buyer
Not all buyers are the same. PE firms, strategic acquirers, individual buyers, and holding companies like Chisel all have different intentions, timelines, and cultural fits. Interview them as much as they're interviewing you.
Receive and negotiate a Letter of Intent
The LOI is the buyer's written offer — price, structure, timeline, and key terms. Don't sign the first one you see. Negotiate. Ask questions. Have an attorney review it. This document shapes everything that follows.
Due diligence
The buyer goes deep on your business — financials, operations, customers, employees, equipment, legal. This is the most intensive part of the process. Expect 30–60 days of information requests. Stay organized and responsive.
Close
Final purchase agreement is signed, funds are wired, and the business changes hands. You'll typically spend 30–90 days in transition, introducing the buyer to key relationships and making sure the handoff is clean. Then — you're done.
Common Questions
Questions most owners ask.
Compiled from real conversations with trades owners who were exactly where you are now.
Not necessarily. Brokers typically charge 8–12% of the sale price as their commission. If you're selling to a direct buyer like Chisel, there's no broker involved — which means you keep more of the proceeds. If you prefer to run a broader process and have multiple buyers competing, a broker can help with that. Either way, make sure whoever you engage has specific experience selling trades businesses, not just 'small businesses' in general.
In almost every deal, no. Confidentiality is standard practice. Most buyers sign an NDA before you share any financial information, and the transaction is kept private until closing. A good buyer will want your employees to hear the news from you, in your words, at the right moment — typically right at or after close. Leaks almost always come from the seller side, so keep the circle small.
Plan for 3–6 months from first conversation to closing day. The LOI process is typically 2–4 weeks. Due diligence is usually 30–60 days. Then 2–4 weeks for final legal docs and funding. The biggest variable is how clean and organized your financials are — messy books slow everything down.
This is extremely common and nothing to be embarrassed about. Part of preparing your financials for sale is 'recasting' them — identifying and adding back owner-specific expenses like a personal vehicle, cell phone, family members on payroll, above-market owner salary, or one-time expenses that won't continue post-close. A good buyer has seen this before and handles it professionally. Just be honest about what's there.
For most home services businesses, 3× to 6× EBITDA is the typical range. Smaller businesses (under $500K EBITDA) tend to trade at the lower end. Larger, more systematized businesses with recurring revenue and low owner dependency can reach the higher end or beyond. Geography, growth rate, and trade category also matter. Don't trust anyone who gives you a number without first understanding your specific business.
Usually for a transition period, yes — but it's negotiable. Most buyers want 30–90 days of your time post-close to ensure a smooth handoff to customers, employees, and vendors. Beyond that, it varies by deal. Some sellers choose to stay on in an advisory or operational role for a year or more. Others walk away on closing day. Be honest with yourself about what you want, and make sure it's written clearly into the agreement.
In a well-run sale, your customers may not notice anything changed. The phone number stays the same. The brand often stays the same. The technicians they know stay. What changes is who owns the business behind the scenes. Good buyers understand that the customer relationship is the most valuable thing they're acquiring — and they protect it carefully.
Talk to a CPA before you sign anything. Generally, proceeds from selling a business held for more than a year are taxed as long-term capital gains — significantly lower than ordinary income rates. How the deal is structured (asset sale vs. stock sale) affects your tax bill meaningfully. Some sellers also use tools like installment sales or Opportunity Zone investments to defer or reduce taxes. A good M&A accountant pays for themselves many times over.
It happens. Buyers typically look at 2–3 years of financials and weight recent performance most heavily, but context matters. If the bad year was due to a one-time event (a key employee leaving, a major equipment failure, COVID), explain it clearly and document it. A single down year won't kill a deal if the underlying business is sound. What hurts more is a business that's been declining for three years with no clear reason why.
Ready for the next step?
Knowledge is the best preparation.
Now that you understand the fundamentals, the best thing you can do is have a real conversation. No obligation, no pressure — just an honest discussion about what your business might be worth and what a sale could look like.
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