Valuing an elevator service company requires isolating recurring revenue (maintenance contracts), evaluating technician capacity and growth potential, and understanding modernization pipeline and market positioning. Start with EBITDA. Take 12 months of recurring maintenance revenue. This is the base: (Units Under Contract × Average Annual Contract Value). Example: 900 units × $3,000 average contract = $2.7M recurring revenue. Add non-recurring revenue (one-time modernizations, emergency service calls, sales of parts): assume 5-15% uplift = $2.84M-$3.1M total revenue. Now subtract direct costs: (1) Technician labor (salaries, benefits, payroll taxes: typically 50-60% of revenue), (2) Vehicle costs (lease, fuel, maintenance: 5-8% of revenue), (3) Parts and equipment (5-10% of revenue), (4) Training and certifications (2-3% of revenue), (5) Facility costs (office, warehouse: 3-5% of revenue), (6) Overhead and admin (8-12% of revenue). Total OpEx typically 73-80% of revenue, leaving 20-27% EBITDA. Example: Recurring revenue (contracts): $2,700K Non-recurring (modernization, other): $300K Total revenue: $3,000K Direct costs: Technician labor: $1,650K (55% of revenue) Vehicle costs: $210K (7% of revenue) Parts/equipment: $240K (8% of revenue) Training/certs: $60K (2% of revenue) Facility: $120K (4% of revenue) Overhead: $300K (10% of revenue) Total OpEx: $2,580K EBITDA: $3,000K - $2,580K = $420K (14% of revenue) That seems conservative. Many elevator services run 20-28% EBITDA. Let me recalculate with more efficient operations: Revenue: $3,000K Technician labor: $1,500K (50%) Vehicle/parts/facility/overhead: $750K (25%) EBITDA: $750K (25%) At 25% EBITDA margin, $3M revenue = $750K EBITDA. At 11x EBITDA: Enterprise Value = $750K × 11 = $8.25M. Now apply adjustments based on quality factors: Unit count and growth: A business with 900 units growing 8% annually has more growth visibility than one with 900 units declining or flat. Add 0.5x-1x to multiple if growth is 6%+; deduct 0.5x-1x if growth is <2% or negative. Technician capacity: 900 units ÷ 9 technicians = 100 units per tech (optimal). 900 units ÷ 6 technicians = 150 units per tech (stretched, growth risk). 900 units ÷ 12 technicians = 75 units per tech (conservative, optimization upside). Optimal ratio earns base multiple; stretched earns 0.5x-1x discount; conservative earns 0.5x-1x uplift potential. Technician retention: Turnover rate matters. <10% annual turnover = low risk. 10-15% = moderate risk. 15%+ = high risk (loss of institutional knowledge, customer relationships, service quality). High turnover triggers 0.5x-1x multiple discount. Recurring revenue %. Maintenance contracts should be 85-95% of revenue. If one-time work (modernization, emergency calls) is >20% of revenue, recurring revenue % is below 80%. Lower recurring % = lower multiple (less predictable). Show 3-year revenue mix trend. Unit diversification. A business with 60% residential, 30% commercial, 10% industrial is balanced. One with 80% residential is cyclical (residential market cycles). One with 80% commercial is stable but vulnerable to commercial real estate downturns. Diversification = lower cycle risk = higher multiple. Manufacturer mix. A business with 40% Otis, 35% Schindler, 25% other is diversified. One with 70% Otis is concentrated. Concentration adds risk (if Otis relationship deteriorates or if customer replaces Otis equipment, you lose them). Diversification = +0.3x-0.5x multiple. Modernization pipeline. A business with $500K+ modernization backlog (18+ months out) shows growth visibility and margin expansion opportunity. One with <$100K shows weak pipeline. Strong pipeline = +0.5x-1x. Weak pipeline = 0.25x-0.5x discount. Example valuation: Base: $750K EBITDA × 11x = $8.25M Adjustments: + Growth 8% annually: +0.5x + Technician bench (12 techs, 75 units/tech, room to grow): +0.5x + Diversified unit mix (residential/commercial/industrial): +0.25x + Strong modernization backlog ($600K 18-month pipeline): +0.5x - Technician turnover 12% (moderate): -0.25x Net: +1.5x adjustment Final multiple: 11x + 1.5x = 12.5x Final valuation: $750K × 12.5 = $9.375M If business had weaker metrics: Base: $750K × 11x = $8.25M Adjustments: - Growth stagnant (1% annually): -0.75x - Technician stretched (6 techs, 150 units/tech, at capacity): -0.75x - Concentrated manufacturer mix (70% Otis): -0.3x - Weak modernization pipeline (<$100K): -0.5x - High technician turnover (18%): -0.5x Net: -2.8x adjustment Final multiple: 11x - 2.8x = 8.2x Final valuation: $750K × 8.2 = $6.15M The same EBITDA size yields $9.375M (strong) vs. $6.15M (weak)—a $3.225M valuation gap driven by operational quality and growth capacity. Final considerations: Customer concentration: If top 10 customers (buildings under contract) represent >40% of units, that's concentration risk. A major customer (hotel, office building) being sold or demolishing could mean loss of 50-100 units. Show top 20 customer list and % of total units. Regulatory and compliance: Elevator service is regulated (state inspections, safety certifications). A company with clean inspection record and all certifications current is lower-risk. Any safety violations or missed certifications trigger due diligence and potential multiple haircut. Owner transition: Is the owner involved in daily operations (critical to relationships)? If so, buyer needs retention period post-acquisition. Owner willingness to stay 12-24 months for transition is worth premium multiple; day-one exit is risky. Benchmarking: If elevator service companies in your region sold recently, what multiples achieved? Industry data suggests 10x-14x for solid operators, 8x-10x for weak operators, 14x-15x for top-tier. Your multiple should fall within this range based on quality factors. To increase valuation in 12-18 months: 1. Grow unit base by 6-8% annually (add 50-75 net new units; add 0.5x