A trades business, such as plumbing, electrical or air conditioning, is worth what its ongoing profit supports, adjusted for risk. The big questions are whether the work keeps coming without the owner on the tools, who holds the licences, how much is repeat or maintenance work, and how reliable the team and records are.
What is the short answer?
Your trades business is worth what its ongoing profit can support, adjusted for the risk that the profit will not continue. In a trades business, the biggest risk is often the owner. If the phone rings for you, the value is tied to you.
A valuer starts with the profit in your accounts. They then ask how much of it would stay if you stepped away. The Australian Government's guide to valuing your business says that for buyers and investors, the biggest value of a business will be its future profits. It also lists customer loyalty and reputation as part of goodwill.
What pushes the value of a trades business up or down?
Anything that makes the work more likely to keep coming under a new owner tends to support value. Anything that ties the work to one person or one customer tends to reduce it.
| Factor | Tends to support value | Tends to reduce value |
|---|---|---|
| Owner's role | You quote and manage, and the team does the jobs | You are on the tools most days |
| Licences | Licences held by staff who will stay, or by the company where allowed | Only you hold the licence the work needs |
| Repeat work | Maintenance contracts, service agreements, regular clients | Every job is a new one-off |
| Customer spread | Many residential and commercial customers | A few builders or one big client |
| Team | Qualified staff and apprentices who are likely to stay | Key tradespeople likely to leave on a sale |
| Vehicles and tools | Fleet and gear in good order, with records | Old vans and gear a buyer must replace soon |
| Systems | Job management software, quotes and invoices on file | Jobs tracked in a diary or by memory |
Licences. This one is particular to trades. A licence often belongs to a person. A buyer needs to know who will hold it after the sale.
Repeat work. Service agreements and maintenance contracts give a buyer income they can count on. Their notice and transfer terms matter.
Project risk. Some trades businesses work on large builds. Payment delays and defect claims can cut into profit.
What add-backs and traps should I watch for?
Add-backs are costs added back to profit because a new owner would not have them. Each needs a reason and a record.
- Owner wages. If you work long hours for a modest wage, a valuer deducts what it would cost to replace you. This can be a large adjustment.
- Private use of vehicles. A ute or van used privately may be a genuine add-back, if records support it.
- Cash jobs. Income that is not in your accounts cannot be counted. A buyer can only rely on what the records show.
- Work in progress. Jobs started but not finished, and money owed by customers, need to be counted properly.
- Warranty and defect claims. Work that may need fixing later is a cost to the next owner.
- Vehicle and equipment finance. Usually deducted from the value of the business.
- Apprentice and staff entitlements. Leave owed to staff who stay on may be a cost to the buyer. Ask your accountant how this applies.
Which documents matter for a trades business?
Beyond your profit and loss, balance sheet and tax returns, a valuer will want records that show how secure the work is.
- Revenue by customer, and the split between repeat and one-off work.
- Maintenance and service agreements, with notice and transfer terms.
- Licence details, and who holds each licence the work needs.
- A staff list with trades, qualifications, pay and length of service.
- A vehicle and equipment list, with ages and finance owing.
- Job management or quoting reports, if you use software.
The government's checklist for buying an existing business asks whether the business has the licences and permits it needs, and whether they are up to date. It also asks about the condition of equipment and machinery. Expect a buyer to ask the same. See our full list of documents needed.
How can two similar trades businesses be worth different amounts?
This example is made up. Picture two electrical businesses with similar sales and similar reported profit.
In the first, the owner holds the only licence and does most of the jobs. Much of the work comes from two builders.
In the second, two licensed electricians and an apprentice do the jobs. The owner quotes and manages. A good part of the work comes from maintenance agreements with many customers.
The second business would likely be worth more. Its work does not depend on one person or two builders. The first also needs a deduction for the owner's labour, which lowers its maintainable profit.
Which Valuo report fits my trades business?
Choose by who will read the report. If it is for your own planning, the Business Value Report fits. If a buyer, lender, investor or partner will rely on it, choose the Professional Valuation Report.
| Business Value Report | Professional Valuation Report | |
|---|---|---|
| Suits | Your own planning and early sale preparation | A sale, purchase, loan or partner arrangement |
| Signed | No, but reviewed by a valuer before it is issued | Yes, by the valuer responsible |
| Fee, revenue under $1 million | $995 + GST | $1,495 + GST |
| Fee, revenue $1 million to under $2 million | $1,495 + GST | $1,995 + GST |
| Fee, revenue $2 million to under $5 million | $2,495 + GST | $2,995 + GST |
| Fee, revenue $5 million to under $10 million | $3,495 + GST | $3,995 + GST |
For revenue of $10 million or more, you receive a fixed fee quoted before any work starts. Your fee is set by revenue and report type, never by the value concluded.
Handing the business to family or a business partner, or moving it into a new structure? Talk to Oliver Group. For tax on a sale, speak to your accountant.
What should I do next?
- See your fee in two taps: Get your fixed fee.
- Compare both reports and every band: pricing.
- Read the general guide: how much is my business worth.
- Planning to step back? Read valuation for retirement and succession.
Questions
Is my trades business worth anything if I do most of the work myself?
It can be, but the value is harder to separate from you. A valuer deducts what it would cost to pay someone to do your work. If customers call you by name, a buyer will see a risk they stop calling after a sale.
Does my licence go with the business when I sell?
Often it does not. Many trade licences are held by a person, not a business. A buyer needs their own licence or a licensed person in the business. Check the rules with your state licensing body and your lawyer.
Are my vans and tools part of the value?
They are part of what a buyer gets, but they are usually checked separately at what they are really worth. Finance owing on vehicles or equipment is usually deducted. Old gear a buyer must soon replace can reduce value.
Do maintenance contracts make my business worth more?
They can. Regular service or maintenance work under a written agreement is more predictable than one-off jobs. A buyer will check how long the agreements run and whether they transfer to a new owner.
What if a few builders give me most of my work?
That concentration is a risk a valuer must allow for. If one builder stops calling, a large share of the work can disappear. A wider spread of customers makes the profit more reliable.
General educational information, not advice. Examples are hypothetical and do not value a real business. The right treatment depends on the purpose, the evidence and the agreed scope.