How Much Is a Painting Business Worth?

What decides the value of a painting business?

Who holds the customers, and whether the crews rather than the owner produce the work. Two painters can report the same profit and be worth very different amounts, because one earns it from strata schemes and property managers that come back and the other from a builder who may use another painter next year.

The profit in the tax return is only the starting point. A valuer rebuilds it into the earnings a new owner could reasonably expect to keep, then tests which parts of it would repeat. The factors are set out on our page on painting business valuations. Every figure in this guide is illustrative and none is a benchmark.

Is there anything to value if the business owns very little?

Yes, but the value sits in earnings and relationships rather than in assets. Most painting businesses own vans, ladders, airless sprayers and hand tools, and little else, so asset value is a small part of any price. The valuation rests on whether the profit would continue under a new owner.

If the owner measures, quotes, sells and checks quality on every job, a buyer is not buying a business until someone else can do those things, and the report says so. We deduct a market cost for the selling, estimating and supervision, and for any hours on the tools. Our guide to valuing a business with owner dependency covers the wider question.

How much of a painting business’s earnings will repeat?

Only part of it, which is why the question matters. Homeowner repaints are won one at a time. Strata schemes and commercial buildings repaint on planned cycles, which makes some of that work predictable, although each major job is usually still won in competition. This illustration tests how much of the earnings could be expected to come back from schemes the business has already painted.

About 16% of the earnings come from strata work the business can reasonably expect to see again. The other 84% depends on winning builder, homeowner and new strata work each year. That is not a criticism, because most trade businesses win work continuously. It does explain why a painter with maintenance contracts, repeat property manager work and a customer database that is followed up is read as lower risk than one that starts every year from nothing.

The 50% re-win rate is an assumption for the example. In a real engagement it would come from the scheme list: how each job was won, by tender or by relationship, and what happened at earlier cycles. Our guide to EBITDA multiples for trade businesses explains why the 2.5 times is chosen for illustration and is not a market figure.

How do builders and strata managers affect the value?

New-build painting is usually won from a few builders and priced per house or per stage. We look at how many builders supply the work, price pressure at each renewal, payment times and exposure to a builder’s failure. A strata management company can direct many schemes to a painter and redirect them just as easily, so we look at how much revenue flows through each manager and whether the relationship rests on the owner personally.

Peeling, blistering and preparation claims can arrive months after a job is paid. We read the workmanship warranty offered, the claims history and how disputes were settled, and we compare quoted and actual labour hours by job type, because preparation is the main variable in any painting quote.

Painters pay wages weekly, but progress claims on commercial and strata jobs are often paid later. We look at work in progress, debtor ageing and retentions, and at how jobs are scheduled across crews so that labour is not idle between them. Where the business does epoxy floors, protective coatings or high-rise work, we also check whether the access equipment is owned or hired and whether margins on that work justify the investment.

Do subcontract painters change the value?

They can. Painting businesses run on employed painters, subcontract painters or a mix. Subcontractors give flexibility, but a buyer will ask whether the arrangements are stable, whether the painters would stay and whether any of them would need to be employed. We look at the proportion, how each is paid, tenure and the insurance held, and we weigh the cost if arrangements changed. How each arrangement should be classified is a question for your accountant or lawyer.

Crew leaders matter more than either model. We check how many there are, how long they have stayed and whether any could leave and take customers or crews with them. Whether a painter needs a contractor licence, and above what contract value, differs between states, so we ask which licences the business holds, who holds them and whether the work done falls inside what they permit.

What reduces the value of a painting business, and what increases it?

What tends to reduce value

• An owner who quotes, sells and checks every job. The customers are tied to a person rather than the business.
• Two or three builders, or one strata manager, supplying most of the work. One decision elsewhere can remove it.
• Subcontract painters on terms that may not hold, or who could leave with customers.
• A quoting method that does not hold margin. If actual labour hours regularly exceed those quoted, profit is not as safe as it looks.

What tends to increase value

• Strata, commercial and maintenance customers that come back, with a scheme list and the dates of past works.
• Crew leaders who run jobs without the owner. They make earnings easier to transfer.
• A customer database that is followed up, with reviews and referral sources held in the business’s name.
• Records of quoted against actual labour hours and margin by job type.

What should you prepare before a painting business valuation?

Records that show where work comes from and who does it. The most useful items are:

• Revenue split by stream: residential repaint, new construction, commercial, strata, maintenance contracts and specialist coatings.
• Top customers, builders and strata managers by revenue for three years.
• Maintenance contracts, preferred supplier panel agreements and schedules of rates.
• A strata scheme list with the dates and values of past major works.
• Employee and subcontractor lists with pay basis, tenure and insurance certificates, and a list of crew leaders and the jobs each ran.
• A quote register showing quoted against actual labour hours and margin, and a warranty and defect register.

If you are a tradie weighing up a sale, a crew leader buying in or a succession plan, an independent valuation sets out the earnings and the reasoning in writing. Our pages on business sale and succession valuations explain what the report needs to address. An Independent Business Valuation is $1,995 + GST, and you can start online.