How to value a Painting Company

Painting companies typically sell for 1.10x to 3.70x Seller’s Discretionary Earnings (SDE), but where your business falls within that range depends on efficiency, profitability, and market positioning. With shifting trends in residential construction, growing demand for eco-friendly coatings, and an industry dominated by small independent operators, understanding how to value your painting company ensures you stay ahead in an evolving market.

George Wellmer
George Wellmer

Painting Companies

Industry: Painting

Naics: 238320


Introduction: Understanding Your Painting Company's Worth


Valuing a painting company isn’t just about selling—it’s a key tool for measuring growth, securing financing, and making strategic decisions. Whether you're an owner tracking progress, a buyer assessing an opportunity, or a broker facilitating deals, understanding valuation ensures you make informed choices. This guide breaks down the essential factors that drive a painting company's worth, helping you navigate the industry with confidence.


Two Primary Valuation Approaches

Like many profitable small and medium-sized businesses, painting companies are valued using two main methods:


Income Approach: Projecting Future Earnings

  • This method forecasts your company's future cash flow and converts it into today's value. It's about predicting future profits and understanding their current worth.
  • Why it Matters: Ideal for businesses with stable, predictable revenue, it offers a forward-looking perspective.


Market Approach: Comparing to Similar Sales

  • This method compares your company to recently sold painting businesses, using key metrics like revenue, EBITDA, adjusted EBITDA, or SDE.
  • Why it Matters: It provides a real-world view of what similar companies are selling for.


Mastering the Market Approach: A Step-by-Step Guide

The market approach is often the most practical for painting companies. Here's how to use it:


Step 1: Calculating Seller's Discretionary Earnings (SDE)

  • SDE is your baseline. Start with EBITDA and add back personal or one-time expenses.
  • Common Add-Backs:
    • Family member salaries (if not directly contributing)
    • Personal vehicle use
    • Non-business meals and entertainment
    • Above-market rent
    • Personal health insurance and memberships
    • Personal phone bills
    • Non-recurring legal fees
  • Why it Matters: SDE provides a clearer picture of the company's true earning potential.


Step 2: Selecting the Right Valuation Multiple

  • The multiple you choose significantly impacts your valuation. Key factors include:
    • Business Size: Larger, higher-margin businesses command higher multiples.
    • Recurring Revenue: Consistent contracts are highly valued.
    • Revenue Concentration: Diversified revenue is less risky.
    • Customer Type: Commercial clients offer more stability.
  • Why it Matters: The multiple reflects the perceived risk and growth potential.


Multiples for Painting Companies

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Industry Overview


The painting industry has navigated a dynamic landscape, influenced by economic fluctuations and evolving consumer trends.

  • Market Size (2024): $42.7 billion
  • Projected Growth (2029): $45.1 billion (1.1% CAGR)
  • Key Trends:
    • Recovery in residential construction.
    • Increased renovation projects.
    • Demand for eco-friendly coatings.
    • High proportion of nonemployers - significant number of businesses operate without any paid employees.
    • Potential labor shortages.


Key Players and Market Concentration


The painting industry is highly fragmented, dominated by small businesses and independent contractors, ensuring a competitive landscape.


Factors Influencing Higher Valuation


To maximize your valuation:

  • Build a strong local reputation.
  • Specialize in high-demand niches.
  • Improve operational efficiency.
  • Diversify services.
  • Adopt technology.
  • Develop strong supplier relationships.


If you want to increase the valuation of your painting company, efficiency is key. The more profit you generate per dollar spent, the more valuable your business becomes. Buyers zone in on profitability and how well you convert revenue into profit. A painting company with strong margins and smart cost management will always command a higher valuation.


One way to assess your efficiency is by comparing your financials to industry benchmarks. Below is a common size key metrics and income statement for the painting industry, which breaks down expenses as a percentage of revenue. This helps you see where you stand and identify areas to improve.


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Strategies for Growth Before Selling


  • Focus on customer relationships.
  • Provide excellent after-sales service.
  • Specialize in eco-friendly services.
  • Invest in employee training.
  • Leverage technology.
  • Build strategic partnerships.
  • Focus on operational efficiency.


Final Thoughts: Beyond the Numbers


Valuing a painting company is about understanding the business's quality, retention, and growth potential. Painting companies with steady contracts, diversified revenue streams, and streamlined operations consistently achieve higher valuations.


Ready to understand your painting company’s true value? Tupelo offers free business valuations. Contact us today to schedule your consultation.