How much is my construction company worth?
A commercial subcontractor business is typically worth 2x to 3.5x trailing-twelve-month EBITDA. A $5M sub netting 7% nets a $350K EBITDA, so a $700K to $1.2M valuation. Clean WIP, documented job costing, and three years of stable net margin push to the 3x to 3.5x band. Disorganized books cap the multiple at 2x.
Most $1M–$12M commercial subcontractors land at a 2x to 3.5x EBITDA multiple on trailing-twelve-month earnings. The spread is wide because buyers do not pay for revenue, they pay for provable profit. A $5M sub running 7% net produces $350K of EBITDA, which sells somewhere between $700K and $1.2M depending on what the books show. Three things move the number: clean WIP that proves margin by job, documented job costing that proves the margin is repeatable, and a three-year track record at the same net margin. Without those, the buyer reads the financials as risk and lands at 2x.
What construction valuation actually means
Construction company valuation is the dollar amount a third-party buyer would pay for the business as a going concern, based on its trailing-twelve-month earnings, the quality of its financial records, and the durability of its margins. It is not the same as the book value of equipment, trucks, and inventory. A subcontractor with $1.8M in titled assets and disorganized books frequently sells for less than a subcontractor with $300K in titled assets and clean WIP, because the buyer is buying future earnings, not the fleet.
The math is straightforward: trailing-twelve-month EBITDA times a multiple. EBITDA is net profit before interest, taxes, depreciation, and amortization. The multiple is what the market pays for that earnings stream in your trade and at your size.
EBITDA multiples by trade and size
Commercial subcontractors at $1M–$12M see a fairly tight band of multiples. Most deals fall between 2x and 3.5x trailing-twelve-month EBITDA. Above that band requires either a strategic buyer paying for capabilities, recurring service revenue, or a multi-year contracted backlog that de-risks the next 18 months for the buyer.
A $5M sub running 7% net produces $350,000 of EBITDA. At a 2x multiple that is a $700,000 valuation. At a 3.5x multiple that is $1,225,000. Same business, same revenue, same crews. Only difference: the buyer can verify the earnings.
What moves the multiple
Margin proved at the job level
A WIP schedule that ties to the general ledger, refreshes monthly, and shows percent complete, cost to date, billings to date, and earned revenue by job is the single highest-impact valuation lever a subcontractor controls. Without it, the buyer cannot tell whether the $5M revenue and 7% net came from twelve jobs at 7% each or from one job at 30% and eleven jobs at break-even. The first business is durable. The second is a coin flip. Buyers price the coin flip at 2x.
Cost codes that map to estimating
Job cost codes that line up with how the estimator builds bids prove that margins are repeatable. A bid that estimates 30,000 hours of labor at $52 fully burdened against actual hours and actual burdened cost shows the buyer the estimator and the field are calibrated. That calibration is what a buyer pays for. A business where the bid said 30,000 hours and the field burned 41,000 with no documented reason might be profitable this year, but the buyer cannot underwrite next year.
Same number, three years running
A sub that nets 9% in year one, 11% in year two, and 10% in year three is worth more than a sub that nets 4%, 15%, and 7% on the same average. Stability prices at a premium. Volatility prices at a discount. Buyers underwrite the floor of the range, not the average. If your three-year range is 4% to 15%, the buyer assumes 4%. If your three-year range is 9% to 11%, the buyer assumes 9%. That changes the EBITDA before the multiple even gets applied.
What kills the sale
Owner add-backs the buyer will not accept
Most subcontractors run personal expenses through the business. A truck, a phone, a family member on payroll who is not in the field. At sale time these become add-backs you ask the buyer to credit you for. A clean buyer accepts none of these without documentation. An aggressive buyer accepts maybe half. The undocumented $80K of add-backs you assumed would lift EBITDA frequently does not survive due diligence.
Customer concentration above 30%
If one general contractor is more than 30% of revenue, the buyer treats your business as a captive vendor and discounts the multiple by 0.5x to 1.0x. The buyer does not buy a customer relationship that the GC controls; the buyer wants to inherit a portfolio. Diversifying ahead of a sale is a 12 to 24 month project, so this is decided years before the deal closes.
Working owner who cannot leave
If the business cannot produce a month of operations without the owner, the buyer sees the owner as the asset and prices the business at a discount. Building a project management layer, an estimating layer, and an office that runs without the owner is what converts your operating role into a coachable role. That conversion is what unlocks the 3x to 3.5x band.
How to actually move the number
Run a WIP schedule monthly with the books closed by the 10th. Reconcile estimated job cost to actual at every job close, in your own words, in writing. Track net margin on a thirteen-month rolling view so the trend is visible at a glance. Document the owner’s replaceable functions and assign them to named team members. None of this is fast. It is twelve to twenty-four months of consistent work. The payoff is a multiple that doubles before the buyer ever walks in.
Field detail: On a $5M sub running 7% net, the difference between selling at 2x and selling at 3x is $350,000. That is roughly equal to the difference between three years of monthly bookkeeping and three years of monthly bookkeeping plus a proper monthly WIP review with a CFO. The CFO line on your P&L is the cheapest valuation lift you will ever buy.
Construction valuation questions
A commercial subcontractor at $1M–$12M typically sells for 2x to 3.5x trailing-twelve-month EBITDA. Disorganized books cap the multiple at 2x. Clean WIP, documented job costing, and three years of stable net margin push to 3x to 3.5x. Above 3.5x requires strategic buyer interest, recurring service revenue, or multi-year contracted backlog.
Take trailing-twelve-month EBITDA (net profit plus interest, taxes, depreciation, and amortization) and multiply by the trade-and-size-appropriate multiple. A $5M sub netting 7% produces $350,000 EBITDA. At 2x that is $700,000. At 3.5x that is $1,225,000. Same business, different financial records, half a million dollars of valuation difference.
Three things destroy multiple: undocumented owner add-backs the buyer will not accept, customer concentration above 30% with a single GC, and a working owner who cannot leave the business for a month. Each one drops the multiple by 0.5x to 1.0x. All three together compress a $1.2M valuation to under $500,000.
Twelve to twenty-four months of consistent operational discipline. Monthly WIP closed by the 10th, job-cost-to-estimate reconciliation at every job close, three-year rolling net margin tracking, and a documented org chart that proves the business operates without the owner. The payoff is the multiple roughly doubling before the buyer walks in.
