The asking price is not the number that matters
Every home services business for sale has an asking price and a multiple attached to it — "3.5x EBITDA," "4x SDE," whatever the broker's listing says. That number is a starting point for negotiation, not a measure of what the business is actually worth to you. What determines that is underneath it, and most buyers don't look closely enough before signing.
Start with adjusted EBITDA, not reported EBITDA
Every seller presents an adjusted EBITDA number — reported earnings plus add-backs for owner-specific expenses that a new owner wouldn't carry. Some of those add-backs are legitimate (an above-market owner salary added back to market rate, a one-time legal settlement). Some are not (personal vehicle leases run through the business, family members on payroll who don't actually work, "one-time" expenses that recur every year under a different label).
The gap between reported and adjusted EBITDA is often where a deal actually gets made or unravels. The Numbers Primer walks through gross profit versus margin, EBITDA, and adjusted EBITDA with worked examples — read it before you look at a single add-back schedule, not after.
Quality of earnings is a process, not a number
A quality of earnings review is what a buyer (or their accountant) runs to test whether the adjusted EBITDA a seller is presenting actually holds up. It typically checks whether revenue is recognized at the right time, how concentrated the customer base is, whether every add-back is real and documented rather than asserted, and whether the business needs unusual working capital to run day to day.
This is the step most individual buyers skip because it costs money and takes time. It's also the step that catches the seller's optimistic numbers before they become the buyer's problem.
The operational questions a purchase price doesn't answer
A clean set of financials tells you what the business earned. It doesn't tell you whether the business earned it despite its systems or because of them — and that gap is exactly what determines whether you can maintain the number you're paying for, let alone grow it.
Specific things worth checking before you sign, not after:
- Is the platform actually configured correctly, or is the reported performance happening despite a messy ServiceTitan (or other) instance the previous owner never fixed? A shop running well on a broken platform is often running on institutional knowledge that walks out the door with the seller.
- What does the membership and agreement book actually look like — real renewal rates and correctly configured terms, or a stack of agreements nobody's been tracking?
- How concentrated is the technician-level knowledge? A business where one or two people hold all the pricing, scheduling, and customer-relationship knowledge is a different risk than one with documented systems.
- What's the real booking rate and callback rate, measured the same way you'd measure your own business — not just what the CRM dashboard shows without checking the definition behind it.
After the deal closes
The diligence questions above are also, not coincidentally, the exact scope of the ServiceTitan Operating Audit — a fixed-scope pass across booking rate, callback attribution, pricebook integrity, membership configuration, reporting gaps, and the accounting seam. Running it as part of diligence, or in the first 90 days after close, gives you a written baseline of exactly what you bought instead of finding out slowly over the first year.
If ongoing 1:1 support makes more sense once you're operating it, see how the audit and the coaching retainer fit together.
This is IronMargin operational education, not legal, accounting, tax, or employment-law advice. See the disclaimer.
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