By Priya Raman · Updated September 11, 2026 · 6 min read
Short answer
Small HVAC and refrigeration companies are usually valued as a multiple of earnings: seller's discretionary earnings (SDE) for owner-operated firms and EBITDA for larger ones. The multiple depends on recurring service-agreement revenue, technician bench, equipment, customer concentration and, in Texas, whether the TDLR license holder stays. This article explains the method and does not predict a price.
Most small HVAC and refrigeration companies are valued as a multiple of their earnings. For owner-operated firms the usual measure is seller’s discretionary earnings (SDE): profit plus the owner’s pay and one-time or personal expenses. Larger firms with a management team are usually valued on EBITDA. The multiple depends on how stable and transferable the earnings are. In Texas one factor stands out: the company works under the TDLR license of a qualified person, so a buyer asks first whether that person will stay. This is general information, not financial or legal advice, and it does not predict a price.
What are SDE and EBITDA?
| Measure | What it includes | Typical use |
|---|---|---|
| SDE | Net profit plus owner salary and benefits, interest, depreciation, taxes and one-time or personal costs | One owner who works in the business |
| EBITDA | Earnings before interest, taxes, depreciation and amortization, after paying a market salary to management | Companies with a manager other than the owner |
Published ranges for small service businesses vary widely, and sources disagree. Treat any multiple from a blog as a rough starting point and ask a business broker or accountant for current market data.
What are add-backs?
Add-backs adjust reported profit to show what a buyer will really earn. Common ones include:
- the owner’s salary, minus what it costs to hire a manager;
- personal vehicles, phones, insurance and travel run through the company;
- one-time costs such as a lawsuit, a move or an unusual repair;
- family members paid above or below market rates.
Every add-back needs paperwork. Buyers and lenders discount ones they cannot verify.
What affects the multiple?
- Recurring revenue. Maintenance agreements and service contracts that renew each year are valued more than one-off repair work. For commercial chillers and refrigeration, a plan of preventive visits is a sign of stable demand; see chiller maintenance basics.
- Customer concentration. If one customer is 30% of revenue, buyers worry.
- Technician bench. A team that stays and can run jobs without the owner raises value.
- License holder dependence. In Texas the license is issued to a person. If the owner is the only license holder and leaves at closing, the company cannot keep offering ACR work. Buyers look for an agreement to keep the holder for a transition period or a second qualified person.
- Equipment and vehicles. Trucks, tools, test equipment and any shop machinery count, either in price or as separate items.
- Records. Clean books, job histories and customer lists support a higher price.
- Market and mix. Commercial and industrial work, such as compressors and process cooling, is valued differently from residential replacement work.
How does the license affect a sale in Texas?
TDLR licenses a person, not a company. A buyer cannot buy the license with the business. Typical solutions include:
- the current holder staying for a defined period under an employment or consulting agreement;
- a qualified employee already on staff;
- the buyer bringing its own license holder, with TDLR notified of the change.
Name changes need an assumed name filing and a notice to TDLR. Because rules and forms change, check TDLR and ask a Texas attorney. See Texas ACR license types for how the license works.
What do buyers ask for?
- Three years of tax returns and profit and loss statements.
- A list of customers, agreements and renewal dates.
- Technician list with tenure, certifications and wages.
- Equipment, vehicle and inventory lists.
- License and insurance certificates, claims history and any TDLR complaints.
- Vendor and manufacturer relationships.
How can an owner prepare?
- Separate personal and business expenses at least 12 months before a sale.
- Convert one-off work into agreements where possible.
- Document processes so jobs do not depend on the owner.
- Keep the license holder’s plans clear.
- Talk to an accountant and a Texas attorney early.
How do recurring contracts and equipment change the picture?
Two items often move a buyer’s view more than the headline revenue number.
Recurring maintenance revenue. Buyers usually prefer income that repeats. A book of well-run maintenance agreements is easier to forecast than one-off projects, so owners should be able to show contract terms, renewal history and how the work is scheduled; preventive maintenance plans for commercial buildings explains what a durable program typically includes.
Equipment and vehicles. Trucks, tools and test equipment have value, but so does their condition. Deferred replacement shows up as a negotiating point.
People and pay. If technician pay is well below market, a buyer may expect to raise it and adjust their offer; compare against Austin technician salary data. Retaining the team is covered in how license holders fit in an acquisition.
Process. For the buyer’s side of the sequence from letter of intent to closing, see buying an HVAC company in Texas. An owner thinking about timing may also find selling before retirement useful.
This is general information; valuation methods vary, so work with an accountant or broker and a Texas attorney.
Frequently asked questions
Is an HVAC business worth a multiple of revenue?
Usually earnings drive value, not revenue. Some sources quote revenue multiples as a rough check, but SDE or EBITDA multiples are more common.
Do I need a broker?
Not always. Brokers bring buyers and process; direct sales to a strategic buyer can be simpler. Weigh costs and confidentiality.
What if I am the only license holder?
Plan a transition. Buyers often ask the holder to stay for a period, or require a second qualified person before closing.
We are planning to enter Central Texas and are interested in buying a small HVAC or refrigeration company, with your team and name staying. See how we approach it.
