Why Your Roofing Company Isn’t Worth What You Think
It’s not uncommon for a roofing business owner to tell me, “I think my company is worth $10 million.”
Sometimes it is.
Most of the time, it isn’t.
That’s not because the business isn’t good. It’s usually because the owner is basing the value on top-line revenue, replacement cost, or what another company in a different market got paid.
Here’s what actually goes into determining value, and why it’s often different from what you expect.
1. Buyers Don’t Pay for Revenue
Revenue might get someone’s attention, but it doesn’t drive valuation. What buyers care about is EBITDA (earnings before interest, taxes, depreciation, and amortization).
EBITDA tells us how much cash your business throws off, and that’s what a buyer is purchasing.
If you’re doing $15 million in revenue and barely breaking even, the business isn’t worth much. If you’re doing $10 million in revenue with $1.5 million in EBITDA, now we’re talking.
2. Your Business Is Only Worth What Someone Will Pay
You might think your company is worth $10 million because that’s what it would cost to rebuild it from scratch. But buyers don’t pay for what you’ve put into it. They pay for what they’ll get out of it.
Valuation is based on:
Profitability
Growth potential
Risk
Industry comps
Structure of the deal (cash, earn-out, rollover equity, etc.)
And different buyers will see different value based on how your business fits into their strategy.
3. Multiples Aren’t Set in Stone
Everyone wants to talk about “multiples.” What’s the multiple on EBITDA? Five times? Eight times?
The truth is, it depends. A healthy, well-run business with strong margins and a leadership team in place might get a premium. A messy business with customer concentration or weak leadership might not.
Multiples are influenced by:
Market size and growth
Customer mix
Revenue visibility (backlog, contracts)
How well the business runs without you
The stronger the business, the stronger the multiple.
4. Risk Lowers Value
Buyers apply discounts for risk. If your books are messy, your business depends entirely on you, or your margins are all over the place, that increases risk, and lowers valuation.
The goal is to de-risk your business so a buyer feels confident stepping in.
Final Thoughts
Valuation is part math, part story. If your business is profitable, growing, and well-run, buyers will see the value. If it’s built around you with no systems or team, the value drops fast.
The good news? You can improve your valuation over time by focusing on the right things.
If you’re thinking about selling, I can help you understand your company’s value and see if now’s the right time to consider a partnership or exit. Take advantage of our free business valuation tool to get a better idea of what your business is worth and discuss your options.
