HVAC Business Valuation Benchmarks

HVAC business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating HVAC businesses relative to industry standards.

See also: Plumbing Business Valuation

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Highlights of HVAC Businesses Sold on BizBuySell

HVAC businesses listed and sold on BizBuySell are comprised primarily of locally owned small businesses engaging in service, maintenance, repair and installation of heating, ventilation and air conditioning systems. Most HVAC business listed and sold on BizBuySell service residential and commercial customers, with fewer focusing on industrial systems. Revenue streams include installation of new HVAC systems, repair of installed systems, and maintenance plans.

HVAC Business Transaction Trends

The median sale price of HVAC businesses sold on BizBuySell has grown consistently since 2020, through the pandemic years, until leveling off in 2024. In the five years from 2020 through 2024, the median sale price of HVAC businesses sold has increased 65% from under $500,000 to over $800,000. Drivers of these increases include growth in HVAC business revenues and earnings, as well as strong market valuation multiple trends.

HVAC Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth. For HVAC businesses reported sold on BizBuySell, valuation multiples had increased post-pandemic, until being tamped down by increasing interest rates in 2023 and 2024.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on a reasonable earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its overall sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of HVAC businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are almost always higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context. Local business sale comps by sales class suitable for pricing and negotiations are available in BizBuySell's Business Valuation Report.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high revenue, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Businesses with lower revenue, thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of HVAC businesses are worth between 1.9 and 3.3 times their annual seller discretionary earnings, with 25% of exceptional, large businesses trading above this range, and 25% of smaller, less desirable businesses trading below.

Financial Benchmarks

To determine how a business compares in terms of sales volume and financial performance relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated HVAC business financial ranges useful for comparing an individual business to the broader industry.

HVAC Business Revenue and Earnings Trends

Sales and earnings of HVAC businesses listed for sale fell during the 2020 pandemic related quarantine orders, but quickly rebounded in the years following. Median revenue has grown 45% from 2020 to 2024, while owner’s discretionary earnings rose 32% to well over $300k.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to similar businesses traded on the business for sale market. Below you will find discretionary earnings ranges for HVAC businesses sold over the past five years, as well as recent HVAC business for sale listings.

Revenue Ranges

Revenue volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue volume. The table below includes revenue ranges of HVAC businesses sold over the past five years and recent HVAC businesses listed for sale.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Larger HVAC businesses that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, an HVAC business generating over $2 million in annual sales may sell for an earnings multiple over 3, where a similar, smaller business with sales below $1MM may trade around 2 times its annual earnings.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Businesses with greater revenue and earnings give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader building and construction sector when benchmarking HVAC businesses. The chart and table below includes key metrics from sales of building and construction related businesses on BizBuySell between 2020 and 2024.

Most types of building and construction businesses trade around a similar range of valuation multiples, and the primary driver of higher or lower relative business valuations is size and sales volume. HVAC businesses tend to receive a valuation premium over other building and construction related companies, relative to their median revenues.

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