The starting point is adjusted EBITDA, with the usual add-backs for owner compensation above market, family payroll, personal vehicles and one-time costs. In roofing there is a second step that matters more than the add-backs: buyers normalise earnings across the storm cycle. A year inflated by a major hail or wind event is not treated as your run rate, and a buyer will typically look at three to five years to find the underlying baseline. Owners who go to market immediately after a peak year, expecting the multiple to be applied to that peak, are usually the ones most disappointed by the offers that arrive.
A roofing company with contracted commercial work, service agreements and recurring maintenance is a fundamentally different asset from one that follows storms. The first has visible, repeatable earnings; the second has earnings that depend on weather and on a sales approach that may not survive a change of ownership. Re-roof and maintenance work also tends to carry better margins and far less collection risk than new-construction subcontracting, where you are exposed to a general contractor payment chain. The higher the share of your revenue that a buyer can forecast without guessing, the higher your multiple.
Roofing value is unusually dependent on people and obligations. Buyers pay more when foremen and crews are stable and will stay, when the company holds manufacturer certifications that transfer, and when the backlog is real and profitable rather than bid at thin margins to keep crews busy. They pay less where warranty exposure is poorly documented, where a significant share of revenue comes from one builder or one property manager, or where labour is sourced in a way that creates classification risk. These are the items that get tested in diligence, and unresolved ones tend to come out of the price rather than out of the multiple.
It does not disqualify a business, but buyers value it more conservatively than contracted or maintenance work. Storm revenue is treated as cyclical, so it is normalised over several years rather than taken at the most recent peak, and a company whose profit depends almost entirely on storm activity will price toward the lower end of the range. A roofing business that has used strong storm years to build a recurring commercial and maintenance base is valued far more highly than one that simply had a good year.
They are a diligence item that usually affects the structure of the deal rather than the multiple itself. Buyers want to see what workmanship warranties are outstanding, how they have been reserved for, and what your historical callback and remediation costs have actually been. Well-documented warranty history with a low claim rate is a mark of quality that supports your number. Undocumented exposure tends to be handled through an escrow or a price adjustment, which is why getting it organised before going to market is worth doing.