Whether you’re looking to sell in the future or would like to track the value of your hard work, you’ve come to the right place.

Whether you’re looking to sell in the future or would like to track the value of your hard work, you’ve come to the right place.

With significant M&A activity since 2019, companies like ATI Restoration, Fleet Response, and Blusky have realized potential in the massive, fragmented fire & water damage restoration space. This has created a market of comparables within the restoration space, and it’s now become a lot easier to find out the true value of your restoration company. 

How is a restoration business valued?

Typically, restoration companies trade on a multiple of EBITDA. We’ll dive into what EBITDA stands for below; however, think of EBITDA as returns that a company can expect each year. By paying multiple EBITDAs, the buyer is paying a number of years of the company’s future earnings in exchange for a well-oiled machine that can continue to grow. Let’s take the example of a company selling for 4x EBITDA. The buyer would buy the company, and after 4 years, the original investment would pay off, leaving the future years as pure profit.

What is EBITDA?

EBITDA is “Earnings before interest, taxes, depreciation, and amortization”. It’s essentially your net profit with any interest you’ve spent, depreciation you’ve taken, taxes you’ve paid, and amortization added back in. Buyers often add certain “owner perks” like a company vehicle or child care back to the total EBITDA.

What makes a valuable restoration company?

One of the qualifying criteria for a company to sell is $2MM of EBITDA, as there are few institutional investors interested in companies doing less than that in the restoration space. Investors seek scalable and repeatable systems, 3-4 years of consistent growth, and a strong leadership team executing the vision without much owner reliance. Check out this podcast with Jeff Moore, Chief Acquisitions Officer at ATI Restoration, where we dive into what he looks for.

What are the different options I have once I have a valuable restoration company?

If investors are willing to purchase your restoration company in the first place, you’ve built a solid business that others desire. You might want to consider what automating and keeping the company would look like. After all, the company’s profits would go straight to you indefinitely.

This is a less popular option within the restoration space. However, it is well suited for entrepreneurs with a big vision who have a strong company they want to take to the next level. Let’s say you’re doing $10MM with $2MM of EBITDA and have mastered one location within a specific market. You have dreams of going bigger and opening multiple locations; however, you don’t want to strap your business for cash. You’ve been working for a very low salary in the past 10 years and have pretty limited cash personally, which makes you more risk averse. Let’s also assume your company is worth $8MM at this point.

You could sell 33% of the company to an investor and take $2.6MM home to ensure you have a personal runway and can send your kids to college. Then, you would have the investor partner by injecting $1MM into the company for growth and expansion efforts. You’d then continue growing the company to $20MM – $30MM, and you and the investor would both have a grand exit.

The only difference between this and option #2 is that you sell a higher % of the company (80%) and, therefore, have less control of the trajectory. The investor would then become the majority owner and push the company forward. You’d still have stakes and execute the vision. However, you wouldn’t have as much risk.

Finally, you could always throw in the towel and sell the company entirely. You may need to commit to staying on during a 12-24-month transition period; however, once that’s over, you’re on to the next venture.