The Service Base Is the Asset
Two HVAC companies each do $8 million in revenue. One sells for 3.5 times EBITDA. The other clears 8. They run comparable trucks and crews out of the same city. The gap has almost nothing to do with the work they do in July and everything to do with the revenue that shows up in the mail whether the phone rings or not.
That revenue is the service agreement base, and it's the single most valuable thing most contractors own without treating it that way. A maintenance plan is a small annuity. The customer pays a flat sum, usually monthly or twice a year, and you owe them 2 visits and first call on repairs. On its own each contract is unremarkable. Stacked a few thousand deep, they become a book of contracted cash that arrives on a schedule you set instead of one the weather sets.
Why buyers pay for the boring revenue
Buyers aren't sentimental. They pay for certainty, and recurring revenue is the closest thing a contractor sells to it.
Industry trackers put recurring service agreements at roughly 55 percent of sector revenue in 2024, a share growing north of 8 percent a year. The premium those agreements command isn't subtle. Brokers who value these businesses report that a demand-only shop, the kind that lives and dies on inbound calls, trades at something like 2 to 4 times EBITDA. Push recurring revenue past 40 percent of the mix and the same broker starts quoting 6 to 10. A common rule of thumb adds 5 to 15 percent to the valuation for every year of contracted revenue already on the books.
Read that as a wage for work you already did. Every plan you sold and kept is worth its annual fee several times over on the day you sell the company. The contract that brings in $200 a year isn't a $200 asset. At an 8 multiple it's closer to $1,600, sitting on your balance sheet whether you've ever counted it or not.
The base does 2 jobs before it ever sells
The multiple is the payoff at the end. The base earns its keep long before that, and this is the part owners underrate.
The first job is smoothing the year. HVAC demand is brutally seasonal. In most of the country the stretch from September into March is the shoulder, the quiet months when air conditioners have powered down and furnaces haven't yet failed. A demand-only shop feels every week of that. A shop with a deep maintenance book doesn't, because those 2 contracted visits per customer are yours to schedule. You move them into the soft months on purpose. The tune-ups that feel like filler in October are the reason the crew has billable work in February.
Which is the second job. You can't flush skilled technicians every fall and expect to hire them back every spring. The trade doesn't have the bodies. Industry estimates put unfilled skilled-trade openings in the hundreds of thousands, with more than half the current workforce over 45 and heading toward retirement. A tech you lay off in November is a tech your competitor hires in December, and you'll pay a premium to replace him when the heat comes back. The maintenance base is what lets you hold the crew through the slow months without paying them to sweep the shop. It turns your worst staffing problem into scheduled, billable, margin-positive work.
So the same asset that doubles your multiple also carries your payroll through winter and keeps your best people off the market. Three problems, one solution, and most owners are underbuilding it because the individual contracts look too small to matter.
They aren't small. They compound. A contractor who adds even a few hundred net agreements a year, and renews the ones already signed, is building the exact asset a buyer will pay the highest multiple for, funding the off-season while he does it.
If you want one number to manage this year, make it net agreements. Not gross sold, net. Signed minus cancelled, tracked every month, with a renewal rate you can defend. That figure predicts your winter cash, your ability to hold your crew, and the multiple you'll be quoted the day you decide to sell, better than any other line on your statement. Grow it on purpose.