The Revenue a Buyer Will Pay Up For
Put two electrical contractors from one city side by side, matched on size and both around $12 million in revenue. One draws an offer worth a couple million more than the other. The gap comes down to one thing: how much of next year's revenue a buyer can count on before the year starts.
That's the recurring-service premium, and in electrical it's one of the widest spreads in the whole valuation. A buyer sorts your book into two piles. One pile is project and break-fix work: real money, but it walks out the door with each finished job and has to be won all over again. The other pile is recurring: service agreements, preventative-maintenance contracts, monitoring, standing accounts that renew on their own. Advisors in the space are explicit that the second pile gets underwritten at a higher multiple than the first, especially once recurring revenue clears roughly 25 percent of the business.
What the gap is actually worth
The numbers are not small. One advisory firm writing on electrical valuations in 2026 put it plainly: a business with 20 percent of its top line in recurring service agreements will price three-quarters of a turn to 1.5 turns higher than an identical business with none. On an eight-figure company, that's serious money attached to revenue you may already be producing and simply not packaging as recurring.
Some buyers make the split explicit in diligence. A common approach in the lower middle market is to capitalize the recurring stream at one multiple and break-fix at a lower one, then blend the two by mix. Advisors describe running something like 8 times earnings on the recurring revenue and 5.5 on the break-fix, weighting by share, and arriving at a blended enterprise value. The lever is right there in the blend. Every point of revenue you move from the break-fix pile to the recurring pile gets repriced upward the moment it changes column.
Why the market is paying for it right now
This premium is not permanent, and at the moment the window is genuinely open. Deal commentary through 2025 and into 2026 describes electrical contractors entering a premium M&A market, with consolidators and larger platforms paying up for service-heavy, recurring-revenue businesses and paying noticeably less for project-heavy, owner-dependent ones. The buyers doing the most acquiring want durability, and recurring service is the cleanest durability an electrical contractor can put on paper.
The owners who benefit didn't build that revenue the month before they sold. Service agreements take years to seed and prove, and the renewal rate that makes a buyer comfortable is a track record, not a promise. So the work of turning one-time customers into contracted ones is worth starting long before you have any intention of selling. It improves the business you run every day, and separately, it resets the price of the business you'll eventually hand over.
Put a real number on it before anyone else does. Pull your revenue apart into recurring and non-recurring and calculate the percentage. If it's under 25 percent, that's your target, and every service call you convert into a renewing agreement moves you toward it. A dollar of recurring revenue and a dollar of break-fix revenue spend the same at your bank this year. They are not worth the same the day you sell, and the difference runs to full turns of EBITDA.