Construction Business Valuation Calculator
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This free Construction Business Valuation Calculator is designed to help residential home builders, remodelers, and general contractors calculate the current value of their construction business using both SDE (Seller’s Discretionary Earnings) and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multipliers.
Disclaimer: The valuations generated from this calculator are not guaranteed to be accurate, nor intended be used as a formal valuation process. The multipliers used are based on data from the 2015 Pepperdine Private Capital Markets Report.
Sample Construction Company Business Valuation
Business Type: Home remodeling company
Team Size: 1 Owner-operator and 3 W2 employees
Years in Operation: 3 years
Revenue (Last 12 Months): $800,000
Revenue (Prior 12 Months): $600,000
Expenses (Last 12 Months): $500,000
Owner Compensation (Last 12 Months): $100,000
Current value of Assets: $50,000
% of revenue from returning clients & referrals: 25%
Based on the scenario above, the valuations and multipliers would be as follows:
Seller’s Discretionary Earnings Valuation: $1,544,400 based on a 3.25X multiplier
EBITDA Valuation: $1,663,200 based on a 3.5X multiplier
Additional Valuation Considerations
In addition to the multipliers, the valuation in this scenario is impacted both positively and negatively by other variables:
- At 3 years, the business is more established making it less risky of an investment, which increases the value to a potential buyer.
- With a $200,000 increase in revenue in the last 12 months, it demonstrates a positive growth trajectory which also increases the price someone would be willing to pay.
- Potential buyers often see a business that is operated by an owner as a negative sign as the risk of dependency increases. As a result, a business with a full-time owner will decrease the valuation.
- A company that has a high percentage of returning clients and new business from client referrals is a strong signal of continued growth. Not only does it mean less money needs to be spent on marketing, but it speaks to the strength of the company’s past work and overall reputation.
