Commercial Plumbing Service Division, 35-Year Western US B2B Contractor

$3.4M

Revenue

$1.1M

SDE

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Full Editorial Writeup

This is the service division of a 35-year-old commercial plumbing contractor being carved out from a larger operation, with the new construction division retained by the sellers. The service side handles the boring, sticky work that commercial facilities cannot defer: day-to-day maintenance, drain cleaning, hydro jetting, sewer repairs, boiler repair and replacement, backflow work, plus 24/7 emergency response. It also takes on larger tenant improvement projects, which adds some lumpy project revenue on top of the steady service base.

The customer base is entirely B2B and skews toward property managers, restaurant chains, HOAs, and multi-business retail centers. Management makes a fair point that commercial buyers behave better than residential ones: longer relationships, fewer invoice disputes, and less race-to-the-bottom bidding. The company holds preferred contractor status with four of its top 10 clients, which functions as a soft moat by giving early access to work and streamlining dispatch.

The headline number is the margin. On roughly $3.35M revenue the business throws off $1.08M in EBITDA, a 32 percent margin, sitting on 81 percent gross margins and a 36 percent average adjusted EBITDA margin across 2023-2025. That is achieved with zero advertising spend, which is unusual and points to a demand pull rather than a demand push business. The obvious caveat: this is a division carve-out, not a standalone company, so the buyer inherits an entity that has been sharing overhead, facilities, and possibly personnel with the retained construction arm.

Why we like it

The earnings quality is genuinely rare for a plumbing contractor: 81 percent gross margins and a 32 to 36 percent EBITDA margin on $3.35M revenue, all with no marketing spend. That combination means the business is winning work on reputation and relationships rather than buying it, which is the healthiest form of demand you can inherit.
The moat is the boring kind that compounds: 35 years of operating history, a strong regional reputation, and preferred contractor status with four of its top 10 clients. Commercial facilities cannot skip plumbing maintenance, backflow compliance, or emergency sewer repairs, so this revenue is need-based rather than want-based.
Commercial B2B mix is a structural advantage over residential plumbing. Management flags fewer invoice disputes, longer relationships, and less competitive bidding, which shows up directly in the fat margins and consistent $3.2M average revenue from 2022 to 2025.
The revenue base has genuine recurrence embedded in it through repeat service accounts, emergency call agreements, and preferred client dispatch, even before the buyer formalizes preventive maintenance contracts. This is a returning customer panel, not a series of one-off jobs you have to re-win every quarter.

How to improve it

Bring backflow testing in-house immediately. The listing flags roughly 250 backflow jobs per year currently subcontracted out, so training and certifying existing technicians captures that margin internally and lifts already-strong profitability within the first year.
Convert repeat service accounts into signed preventive maintenance contracts for boilers and drainage systems. This turns implied recurrence into contracted recurrence, smooths revenue, and raises the multiple a future buyer will pay by making the earnings visibly predictable.
Turn on marketing for the first time in the company's history. A business generating $1.08M EBITDA with zero advertising has obvious untapped demand, so even a modest, targeted B2B outreach and trade show program should expand the pipeline without touching margins much.
Expand geographically into surrounding counties. The dense commercial relationships and preferred status can be leveraged to win the same property manager and restaurant chain accounts in neighboring regions where they already operate multiple locations.
Formalize the division as a truly standalone entity post-close. Because this is a carve-out sharing facilities and overhead with the retained construction arm, the buyer should build clean, independent operations, systems, and financials from day one to avoid dependency on the sellers.
Deepen wallet share within the existing top 10 clients. With preferred status already secured at four of them, the buyer should map every service line these clients buy elsewhere (backflow, boiler, TI work) and consolidate that spend under one contractor.

Diligence notes

This is a division carve-out, so the single most important task is verifying that the $1.08M EBITDA is clean and standalone. Confirm which overhead, personnel, equipment, and administrative costs were shared with the retained new construction division and re-underwrite margins on a fully burdened, independent basis.
The president oversees the services division and the two shareholders are inactive in it but active in construction. Pin down exactly who runs the day-to-day, what happens to key technicians and dispatch staff at close, and how long the president will realistically stay given only a negotiable transition period is offered.
Client concentration needs scrutiny given preferred status with four of the top 10 clients. Request a revenue-by-customer breakdown to understand how much of the $3.35M sits with a handful of accounts and what contractual protection exists if one property manager or restaurant chain leaves.
The facility is leased from an affiliated entity and is not included in the sale. Nail down the long-term lease terms, rate, and duration in writing before close, because an affiliated-party lease negotiated at closing can quietly transfer value away from the buyer.
Understand how much of revenue is recurring service versus lumpy tenant improvement and large project work. Separate the two revenue streams to see how durable the base truly is and whether the fat margins hold once you strip out any high-margin project spikes.

Source

Originally listed on BizBuySell. View original listing →