Most builders find out what their company is worth at the worst possible moment.
A health scare, a partner who wants out, or an offer that arrives from nowhere and needs an answer inside a month.
By then the number is already fixed.
Everything that decided it was settled years earlier, in a hundred decisions that had nothing to do with selling. Who signs off the variations, whether the estimating lives in one person's head, and whether the company could keep trading if that person stopped answering the phone.
And most building company owners have never seen the number at all. Our 2026 State of Residential Construction Industry research (SORCI) found that only 35.2% of large building companies had a documented exit strategy, falling to 21.1% among mid-sized firms and 12.5% among small ones.
The report's own conclusion is that most builders view their business as a job rather than a transferable asset.
A residential building company is valued at one of three levels.
Level one is equity. What the business is worth on its balance sheet, when the assets are worth more than the earnings. The profit multiple doesn't come into it at all, and plenty of builders who assume they're sitting on three times profit are actually here.
Level two is seller's discretionary earnings, which is profit plus what the owner draws out. The multiplier is capped at 2.8 times, because the business still depends on the owner, and a buyer prices that dependency in before they price anything else. This is the level most established building companies land at.
Level three is net profit alone, at a multiplier ceiling of 4.9 times. It requires revenue above US$10 million, or US$7 million for a business that is mainly remodeling. It requires a non-owner leader across sales and marketing, construction, and finance and HR. And it requires a 90-day continuity runway, meaning the company keeps trading for 90 days after the owner stops showing up.
Which one applies to you is decided by how the company is designed rather than by how good you are at building homes.
A buyer is purchasing the likelihood that your revenue continues after you have gone, not the revenue itself.
Think about what a building company actually is from the outside. A pipeline, a team, a set of relationships with trades and suppliers, and a way of pricing work that produces a margin. If all four of those run through one person, the buyer is acquiring a job that comes with liabilities rather than a business, and they will price it that way.
There is no public transaction database for residential construction outside the United States that we have been able to find, which is why so much of this gets discussed in guesswork.
The closest comparable data comes from BMI Mergers, which tracks completed transactions in US residential home construction for companies above $5 million in revenue. Between 2017 and November 2024, the 25th percentile sold at 2.6 times EBITDA, the median at 3.1 times, and the 90th percentile at 4.3 times. The median revenue of the companies transacting was $10.3 million.
Those multiples are struck on EBITDA rather than on equity, seller's discretionary earnings or net profit, so they are not a direct comparison. What they show is the spread. The difference between the 25th percentile and the 90th is roughly a 65% swing, on real completed sales in the same sector at a similar size. Two building companies doing comparable work sell for materially different money depending on how they are built.
Work through these in order, because each one raises the return on the next.
Close the gaps in what you already have. Every part of a building company that a buyer examines has a score attached, whether or not anyone has told you the score. Advertising spend relative to revenue. Whether there's a documented three-year plan. Whether appraisals actually happen. Fixing those lifts the multiple applied to earnings you're already producing, and most of it is the same work as boosting your construction profit margins, which is the fastest money available because it requires no growth at all.
Then fix net profit. A company that lifts its net profit margin from 5% to the 10% minimum doubles the earnings the multiple is applied to, and doubles the valuation with it, without signing a single extra contract. Profitability is also one of the things a buyer scores, so the same work tends to lift the multiple as well as the earnings.
Then grow revenue. Every additional $1 million of revenue at a 10% net margin adds roughly $100,000 to earnings, worth around $280,000 in company value at the top of the capped band. That turns a revenue target into a number you would recognise if someone handed it to you.
Then change the level. Level three lifts the ceiling from 2.8 times seller's discretionary earnings to 4.9 times net profit. Getting there means taking revenue above $10 million, a non-owner leader in each of sales and marketing, construction, and finance and HR, and a company that keeps trading for 90 days after you stop showing up. Miss any one of those and you stay at level two.
Most builders attempt these in reverse. They chase revenue first, which is the third-most valuable step, and they do it with a business that still routes every decision through one desk. So the revenue arrives, the complexity arrives with it, and the multiple stays exactly where it was.
No.
The same things that raise the sale price are the things that make the company liveable while you still own it. A business with a non-owner leader in each function is a business you can take a holiday from. A business with a documented plan is one where the team knows what they're working towards without asking. A business at 10% net profit pays you properly, and one with cash flow under control stops making decisions out of fear.
An exit strategy is the document that tells you whether the thing you've built works without you in it, whether or not there is a sale coming.
On one of three levels. Level one is equity, the balance sheet value, which applies when the assets are worth more than the earnings. Level two is seller's discretionary earnings, profit plus owner drawings, with the multiplier capped at 2.8 times because the business still depends on the owner. Level three is net profit alone at a ceiling of 4.9 times, which requires revenue above US$10 million (US$7 million for remodeling), non-owner leaders across sales and marketing, construction, and finance and HR, and a 90-day continuity runway.
US transaction data from 2017 to November 2024 shows a median of 3.1 times EBITDA, with the 25th percentile at 2.6 times and the 90th percentile at 4.3 times. Median revenue of transacting companies was $10.3 million.
Usually owner dependence. If the pricing, the client relationships and the final decisions run through you, a buyer is purchasing a job rather than a business, and the multiple is capped regardless of how strong the revenue looks.
Yes, and it's normally the fastest gain available. Lifting net profit margin and closing operational gaps both increase value without adding a single contract, because they improve both the earnings and the multiple applied to them.
It's the clearest test of whether the company can operate without you, which is the first thing a buyer assesses. Only 35.2% of large building companies have one documented, 21.1% of mid-sized and 12.5% of small.
You don't need to be selling to want the number. The 2026/27 round of SORCI by APB is open now, and taking part gets you a free custom analysis of your building company. The report includes a market valuation of the business as it stands today, normally valued at USD$1,500, alongside a score across 11 critical areas and a step by step list of what to fix first.
It takes about 15 minutes and the research window closes November 10, 2026. Get your free analysis.