By Oliver Bogner, Managing Partner at The Advisory Investment Bank
In the world of essential services — HVAC, plumbing, pest control, landscaping, and beyond — many founders assume that growing their top line and bottom line is the key to building enterprise value.
But here’s the truth: revenue and profit alone don’t tell the whole story.
As an investment banker focused exclusively on essential service businesses, I’ve seen hundreds of transactions across the country. The businesses that achieve the highest multiples aren’t always the biggest — they’re the ones that understand what truly drives value in the eyes of private equity buyers and strategic acquirers.
So here are the five key levers you can pull to grow the value of your business — beyond just your income statement.
1. Recurring Revenue Percentage
If there’s one thing that moves enterprise value faster than anything else, it’s recurring revenue.
Buyers love predictability. They’ll pay a premium for revenue that renews monthly, quarterly, or annually — because it’s dependable, under writable, and repeatable.
Think about it this way: if you’re running an HVAC company, a plumbing service, or a pest control business, your value skyrockets when you can prove that a strong percentage of your revenue comes from ongoing maintenance plans or memberships.
In landscaping, that might mean recurring contracts for mowing, fertilization, and plant health. In pest control, it’s monthly treatments. In HVAC, it’s quarterly tune-ups and maintenance agreements.
Pro tip: If more than 10–20% of your revenue comes from one-time projects or new construction, buyers will penalize you. Recurring revenue builds valuation; project revenue drags it down.
2. Customer Concentration
One of the biggest red flags in M&A is customer concentration.
If one or two customers represent more than 15% of your total revenue, buyers will see risk — because if that customer walks away, a huge portion of earnings disappears.
For residential businesses with hundreds or thousands of small clients, this isn’t a major issue. But for commercial operators — landscapers, HVAC, or pest control companies with property management accounts — it’s critical to diversify.
Rule of thumb: No single customer should represent more than 10% of your total revenue.
If that’s unavoidable, expect a portion of your deal to include an earn-out to ensure client retention post-acquisition.
3. Technician Utilization
Buyers don’t just look at how many technicians you have — they look at how efficient those technicians are.
Metrics like revenue per tech, jobs completed per day, or average upsell per visit are indicators of operational excellence.
If your techs are maximizing their routes, working efficiently, and consistently upselling maintenance plans or add-on services, you’ll see that reflected in valuation.
As one client of ours calls it: “optimizing windshield time.”
In other words — the less time your trucks spend driving and the more time they spend generating revenue, the higher your multiple.
4. Gross Margin Expansion Potential
Private equity buyers aren’t just buying what your business is — they’re buying what it can become.
They call this “one plus one equals four.”
If your company joins a larger platform, it may benefit from better vendor pricing, shared overhead, improved technology, and enhanced benefits — all of which expand gross margins.
That’s why it’s crucial to showcase where those expansion opportunities exist before you sell:
- Are there services you can cross-sell to your customer base? (e.g., an HVAC company adding plumbing or electrical)
- Can technology improve efficiency? (e.g., migrating to ServiceTitan or Aspire)
- Do you have buying power or economies of scale that could be unlocked post-acquisition?
When buyers can see margin expansion potential, they’re willing to pay for it today — even before it’s realized.
5. Retention and Lifetime Value
Finally, no buyer wants to purchase a leaky bucket.
Your churn rate — how many customers you lose each year — is a major driver of enterprise value.
If you’re losing 10–20% of your customer base annually, it means you have to spend constantly to replace them. But if your retention is above 80–85%, that’s proof of customer loyalty, brand trust, and predictable cash flow.
Track your retention. Track your reactivation. Track your lifetime customer value.
Buyers do — and so should you.
Putting It All Together
At the end of the day, every M&A valuation starts with one number: EBITDA — earnings before interest, taxes, depreciation, and amortization.
But the multiple you achieve on that EBITDA depends on the story behind it.
- Recurring revenue builds confidence.
- Diversified customers reduce risk.
- Strong tech utilization shows scalability.
- Margin expansion potential drives upside.
- High retention proves resilience.
These are the signals that make buyers compete — and when buyers compete, multiples expand.
Final Thoughts
At The Advisory Investment Bank, we exist for one mission:
to help Main Street compete with Wall Street.
We’re a sell-side-only investment bank dedicated to essential service founders — guiding over 500+ business owners to successful, life-changing exits.
Because your business isn’t just a company.
It’s your legacy.
If you’re ready to understand what your business might truly be worth — or how to position it for the best possible outcome — reach out. Let’s talk about how we can turn your transaction into a transformation.
Contact us: info@theadvisoryib.com
