Once you have a base multiple from comps, adjust for quality. The discipline of writing down each adjustment with a reason is what separates a defensible valuation from a gut-feel guess.
Premium adjustments (+0.5x to +1.5x or more, additive):
- >95% recurring, predictable cash flow, easier financing
- <3% annual churn, lower replacement cost, easier hold
- Premium accounts, high-ticket residential or commercial with stable budgets
- Tight geographic density (e.g., 2–4 zip codes for a 50-stop route), higher margin
- >90% auto-pay, lower collections risk
- Transferable software, contracts, brand, turnkey premium
- Trained, retained tech with non-compete, owner-removable operations
Neutral / flat:
- Average density, average billing mix, average documentation, no unusual strengths or weaknesses
Discount adjustments (−0.5x to −2x or more):
- High churn (>10%), replacement cost is real
- Scattered geography, drive time eats margin
- Owner-dependent operations, buyer has to stay in the truck or hire fast
- Weak documentation, buyer absorbs risk during transition
- Aging or unincluded equipment
- Heavy concentration in a single account or zip code
- Unresolved complaints, license issues, or pending litigation
- Off-platform / cash revenue, discount or exclude entirely
- Property tied to the home (truck garaged at owner's house with no separate insurance, etc.), administrative friction
Be specific about magnitude. "+1.0x for 96% recurring + auto-pay + zero churn over 24 months" is defensible. "+1.0x because it feels good" is not.
Worked example. Base comp multiple: 11.5x. Subject route attributes:
- 96% recurring auto-pay → +1.0x
- 3% trailing 24-month churn → +0.5x
- Tight density (3 zip codes) → +0.5x
- Owner-dependent (no SOPs, owner is the only tech) → −1.0x
- Aging truck included at $15k value, realistic value $9k → handle separately by reducing equipment allocation, not the multiple
Adjusted multiple: 12.5x trailing recurring revenue. Equipment: separately negotiated.
If trailing recurring is $14k/month → recurring portion: $14k × 12.5 = $175,000. Equipment: $9,000. Total deal value: ~$184,000.
Buyers and sellers both respect a number that's built from line items, not gut feel. This is also the format that holds up in negotiation, every line is a defensible position.