Alternative Energy Systems Installer - Commercial Energy Efficiency

$3.4M

Revenue

$857K

SDE

3.7x

Multiple

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Full Editorial Writeup

This is a 30+ year old commercial energy efficiency contractor serving the New York metro area. The company sells, installs, and maintains energy-efficient systems for commercial and industrial buildings, delivering turnkey installations that typically cut client energy costs 30-40% per year. Founded in 1992, it has been profitable every single year of operation, which is a rare and meaningful track record for a contracting business.

What makes this deal more than a typical install shop is the revenue mix. Roughly 53% of revenue comes from ongoing maintenance contracts and 47% from sales and installation. That recurring maintenance base smooths out the lumpy project cycle that kills most contractors and gives a buyer predictable cash flow plus a built-in upsell channel for new installs and equipment replacements.

The client base is sticky and non-discretionary: nursing homes, assisted living facilities, condo complexes, hotels, and manufacturing plants. These are facilities that must run continuously and that face rising energy costs and tightening efficiency regulations, so the value proposition only strengthens over time. With 8 employees, EPA/DOE/Energy Star recognition, and a leased 4,000 sq ft warehouse and office, this is a clean, asset-light operation priced at 3.74x SDE.

Why we like it

Earnings quality is strong and unusually durable for a contractor. The business throws off $856,580 in SDE on $3.4M revenue, a 25% margin, and 53% of that revenue comes from recurring maintenance contracts rather than one-time installs. That recurring base is the part you underwrite to, and it makes the 3.74x multiple far more defensible than a pure project shop.
The moat is built on three decades of relationships and switching costs. Founded in 1992 and profitable every year since, the company holds maintenance contracts on critical building systems where ripping out an incumbent who knows your equipment is painful and risky. EPA, DOE, and Energy Star recognition add credibility that helps win institutional clients like nursing homes and hotels.
Market tailwinds are real and policy-driven. New York has aggressive building decarbonization and energy efficiency mandates, and clients are motivated by 30-40% energy cost reductions that pay for themselves. Rising electricity prices and tightening regulations make these systems a need rather than a nice-to-have, especially for commercial operators watching margins.
The customer base is recession-resistant and essential. Nursing homes, assisted living, condos, hotels, and manufacturers all need their HVAC and energy systems maintained regardless of the economy. Energy efficiency upgrades also get prioritized in downturns because they directly cut operating costs, which protects both the install and the maintenance lines.

How to improve it

Audit and tighten the maintenance contract book in the first 90 days. Map every contract by renewal date, pricing, and margin, then institute annual price escalators tied to CPI or labor cost. Many legacy contractors underprice long-tenured accounts, and even a 5-8% bump across a $1.8M recurring base flows almost entirely to the bottom line.
Systematize the install-to-maintenance conversion. With 47% of revenue from installs, every project should automatically roll into a multi-year maintenance agreement at close. Build this into the sales process and comp structure so the recurring base compounds instead of leaking after the warranty period.
Invest in lead generation beyond word of mouth. A 30-year-old firm with minimal competition almost certainly relies on referrals and repeat clients. A modest spend on a targeted outbound effort to property managers, facility directors, and condo boards across the NY metro could meaningfully accelerate the install pipeline.
Document and de-risk the owner's knowledge. With retirement-driven sellers and only 8 employees, key technical and relationship knowledge likely sits with the owners. Use the transition period to build SOPs, transfer client relationships to named team leads, and certify technicians so the business is not dependent on the founders.
Pursue available utility rebates and government incentives as a sales tool. New York and federal programs offer significant rebates for efficiency upgrades. Packaging and handling that paperwork for clients lowers their effective cost, shortens sales cycles, and creates a differentiated offering that competitors may not bother to provide.
Layer in equipment monitoring and remote diagnostics. Adding sensors and remote performance tracking to maintained systems creates a higher-margin premium tier and identifies replacement and upgrade opportunities before failures occur. This turns reactive maintenance into proactive revenue and deepens client lock-in.

Diligence notes

Verify the recurring revenue claim contract by contract. Pull the maintenance agreements, confirm they are written and assignable, and check terms, auto-renewal language, and historical churn. The entire investment thesis rests on that 53% being genuinely recurring rather than recurring-in-name-only one-year handshake deals.
Scrutinize customer concentration. With a client base of nursing homes, condos, and hotels, find out what percentage of revenue and cash flow comes from the top five accounts. Losing one anchor institutional client could materially dent the $856k SDE, and you need to know if any contracts are up for renewal soon.
Confirm the SDE add-backs and owner compensation. At a 25% margin, scrutinize what is included in the $856,580 figure, including the two owners' salaries, vehicles, and any personal expenses. Determine the true cost to replace the departing owners with a manager, since they appear to be hands-on operators.
Assess workforce and technician dependency. With only 6 full-time employees doing skilled energy and mechanical work, identify which techs hold critical certifications and relationships. Confirm wage rates, tenure, and retention risk, and whether any are family members who may leave alongside the retiring owners.
Review the lease and facility terms. The business operates from a leased 4,000 sq ft warehouse and office at $5,515 per month. Confirm remaining term, renewal options, and whether the landlord is related to the sellers, since an unfavorable or expiring lease could disrupt operations post-close.
Examine revenue consistency and the project pipeline. The listing claims consistent year-over-year performance but installs are inherently lumpy. Request 3-5 years of financials, current backlog, and signed install commitments to confirm the 47% install line is not propped up by a single large recent project.

Source

Originally listed on BizBuySell. View original listing →