M&A Multiples in Q3: What Trade Business Owners Need to Know
- Tawni Nguyen
- Jul 12
- 3 min read
Updated: Jul 17
Q: Why does understanding your business's worth matter now more than ever?
A: Because buyers in Q3 2025 are still active—but they’re more selective than ever.
Multiples haven’t disappeared; they’ve just gotten smarter. If you’re not clear on what drives value, you could leave serious money on the table.
Q: What’s a "Multiple" anyway?
A: A multiple is how buyers calculate the value of your business.
It's a number (like 4x or 5x) applied to your profit.
Usually, it's based on:
Net Profit
SDE (Seller’s Discretionary Earnings)
EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization)
If your SDE is $600,000 and your multiple is 4.5x, the valuation is $2.7 million.
But here's the catch: not all profit is equal.
Clean financials and systems matter just as much as your top-line earnings.
Q: Should I use SDE or EBITDA?
A: Use SDE if you’re still hands-on in the business—bidding jobs, writing checks, talking to customers. Use EBITDA if you’ve built a leadership team and can step away without the company falling apart.
Most trades businesses under $3M in earnings use SDE. If you want a higher multiple and more buyers, work toward EBITDA.
Q: What matters more than net profit on paper?
A: Cash flow.
That’s why we look at your Cash Conversion Ratio:
Operating Cash Flow ÷ Net Profit
Above 1 = Efficient
Below 1 = Cash is tied up in receivables or inventory
This ties back to your Cash Conversion Cycle (CCC)—which we covered in our previous guide.
The shorter the cycle, the faster your business turns work into real money, the more attractive your business is.
Q: What do serious buyers really look at?
A: Margins and operations.
Our internal benchmark is the 30 / 20 / 10 Rule:
30% Gross Profit
20% SG&A (overhead) as % of revenue
10% Net Profit
If you’re under these marks, it’s a signal you need to tune your pricing, systems, or team.
Q: What are buyers paying in 2025?
A: According to TranzDigi and First Page Sage:
EBITDA Range | Average Multiple |
$1M–$3M | 5.1x |
$3M–$5M | 7.9x |
$5M–$10M | 9.8x |
If you're under $1M in profit, expect 3.2x–4.5x SDE—but only with clean books and real systems.
Q: What’s driving those multiples?
A: Clean, accurate financials. Foremen or ops leads in place. Documented systems that reduce integration risk.
Buyers are doubling down on essential trades with strong cash flow and second-tier leadership.
One advisory firm reported 40+ active rollup projects with 20+ deals in pipeline. The best-positioned companies are getting scooped up first.
Q: How do I increase my multiple before I sell?
A: Start here:
Normalize your P&L (remove personal expenses)
Track job-level profitability
Build a leadership bench
Improve your margins
Lock in recurring revenue (service agreements, maintenance plans)
Shorten your cash cycle
Document your systems
You don’t have to be perfect—but you do need to be consistent, transferable, and low-friction to operate.
Q: What’s exit readiness really about?
A: It’s not just about selling—it’s about having options. Exit readiness means:
Sleeping better
Taking real time off
Saying “yes” to what matters without the business falling apart
Q: Want to know what your business is worth?
We’re not brokers—we’re operators. We partner with trades businesses doing $1M+ in EBITDA to scale, sell, or simplify.
HVAC. Plumbing. Electrical. Janitorial.
Let’s build exits that don’t suck.
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