Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Plumbing Business Sold at 80x EBITDA with Recurring Service Data
Transcript
- Lucas: So a plumbing business in Phoenix just sold for 80 times EBITDA. That's real. And the buyer wasn't a competitor — it was a private equity platform doing a roll-up. Luna: Eighty times? That's more than a software company with recurring revenue. How does a trade service business command that kind of multiple? Lucas: It comes down to what the buyer sees in the data — not just the financial statements, but the operational history. This company had four years of detailed service records. Every truck roll, every repeat call, every seasonal dip, all logged and categorized. Luna: So the data told a story that the P&L alone couldn't. Lucas: Exactly. The buyer is building a national platform for residential services. They need evidence that a target has sticky customer relationships and predictable demand. This plumber had a sixty percent repeat rate — customers who called more than once a year. And the average ticket size was growing about eight percent annually. Luna: That repeat rate is critical. In a roll-up, you're basically buying the customer base and hoping to cross-sell other services. Lucas: Right. So the multiple reflects the confidence that those customers will stick around and buy more. The seller structured his data room like a pitch deck. He didn't just hand over tax returns. He showed month-by-month retention cohorts, truck efficiency ratios — how many jobs per truck per week — and even the breakdown of emergency versus scheduled calls. Luna: That level of detail is rare in a mom and pop trade business. Most owners don't track that stuff. Lucas: He was a former operations manager at a larger company before he started his own shop. So he treated the business as a system from day one. He used a CRM, tracked customer lifetime value, and even had a spreadsheet of every invoice going back to 2022. When the buyer's diligence team came in, they could validate the numbers in hours instead of weeks. Luna: That speed alone probably saved a few points on the multiple negotiation. Less risk for the buyer. Lucas: It did. The first offer was around 50 times. But as the buyer's team dug into the data, they realized the churn was lower than comparable businesses and the growth drivers were sustainable. The seller's broker used that to push the multiple up. The final price was about eight point two million dollars — on about one hundred thousand in EBITDA. Luna: Wait — a hundred thousand EBITDA? That's a small business. Eight point two million is a big number for something that size. Lucas: That's the magic of the multiple. But the buyer isn't buying the current cash flow alone. They're buying the platform potential. They'll add their own systems, marketing, and cross-selling. The plumber's existing customers become the base for a larger operation. Luna: So is this a one-off or the beginning of a trend? Are we going to see more trade service businesses fetching multiples like tech companies? Lucas: I think it's part of a bigger shift. Private equity has been moving into fragmented service industries — landscaping, pest control, janitorial, plumbing. The key is data. If you can demonstrate that your business has predictable unit economics, you can command a multiple that rivals software. But most small trade businesses don't have that data. Luna: Which means the ones that do are in a different league. They're essentially competing with companies that have a lot more revenue, just on a smaller scale. Lucas: Exactly. And the seller in this case was smart — he hired a broker who specializes in trade services, not just general business sales. The broker knew exactly which data points the roll-up buyers care about. That made all the difference. Luna: What data points specifically? If I'm a plumber listening, what should I be tracking? Lucas: First, repeat rate — what percentage of customers call you more than once a year. Second, average revenue per customer per year. Third, customer acquisition cost — how much you spend on marketing to get a new customer. Fourth, seasonal variance — show that summer and winter don't swing wildly. And fifth, truck utilization — how many revenue-producing hours per truck per week. Luna: That's a lot of data for a small operator. But I guess if you want an 80-times exit, you have to run it like a business from the start. Lucas: And that's the trade-off. This plumber didn't just work hard — he collected data. He spent maybe two hours a week on it. Over four years, that was an investment of about four hundred hours. It paid off to the tune of millions. Luna: It's interesting to think about the buyer's perspective too. They're paying 80 times for a business with a hundred thousand EBITDA. That means they need to grow it significantly to justify the price. Lucas: Right. The buyer's internal model probably assumes they can double revenue within three years through cross-selling and operational improvements. If they succeed, they'll have paid effectively 40 times on the future earnings. And then they'll bundle it with other acquisitions and sell the whole platform for a much larger multiple. Luna: So the plumber's data gave the buyer confidence that those growth assumptions are realistic. Without that data, it's just a hope. Lucas: Exactly. And that's the lesson for any service business owner thinking about an exit. The numbers on your tax return are the floor. The ceiling depends on the story your data tells. Luna: Speaking of stories that add value — you know, we spend a lot of time on this show talking about how sellers can optimize their businesses for sale. And one thing we always come back to is the importance of having clean, organized data. It's a theme that runs through almost every episode. Lucas: It does. And it's why we keep doing this show without ads. We're not trying to sell you something — we just want to share what we're seeing in the market. If these conversations have helped you think about your business differently, that's the goal. If you want to support that, the link is buy me a coffee dot com slash fexingo. It's a small way to keep the podcast ad-free and focused on the content. Luna: Yeah, and we appreciate everyone who listens. Now, back to that plumber — one thing I'm curious about is the competitive landscape. Are there other plumbers in Phoenix that could have done the same thing? Lucas: Probably not many. Most plumbers are focused on the work, not on building a data-rich business. That's exactly why the buyer paid a premium. They want to acquire the outliers — the ones who already have the infrastructure in place. Luna: So for listeners who are thinking, 'I should start tracking these metrics,' what's the first step? Lucas: I'd say start with a simple CRM. Even a spreadsheet works. Capture every customer interaction — date, service type, revenue, and whether it's a repeat or new customer. After a year, you'll have enough data to start calculating repeat rates and averages. That's the foundation. Luna: And once you have that foundation, you can start thinking about whether a roll-up buyer might be interested in your business. Lucas: Right. And the multiples we're seeing in trade services are only going to attract more capital. So if you're a service business owner, now is the time to start building that data moat. The buyers are out there, and they're looking for stories backed by numbers. Luna: I think that's a good note to end on. Thanks, Lucas. Lucas: Thanks, Luna. See you next time.