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When a Texas electrical contractor asks, “How do I sell my electrical business?” they almost always start with last year’s tax return and a rough multiple they heard at a supply-house counter. Maybe the shop ran $4.5 million in revenue and cleared $850,000 in adjusted profit. On paper, at 4.0x to 4.5x earnings, the owner pictures a $3.6 million check.
Then due diligence starts, and the buyer asks three questions that cut the day-one wire in half:
- Whose name is on the TDLR Master Electrician license tied to the company’s Electrical Contractor (
TECL) registration? - What percentage of revenue comes from recurring service agreements and facility maintenance versus one-off general contractor (GC) bid work?
- How much cash have you already collected on uncompleted commercial rough-in jobs (over-billings on the WIP schedule)?
Why Texas Occupations Code §1305.153 turns an owner retirement into a 50% holdback
Under Texas Occupations Code Chapter 1305 (§1305.153) and Texas Department of Licensing and Regulation (TDLR) rules, an Electrical Contractor license belongs to the business entity, but it is legally lifeless without an individual Master Electrician of Record assigned exclusively to that business. A Master Electrician can only assign their license to one electrical contracting company at a time unless they own more than 50% of the additional entity.
If you are the founder, you hold the Master license, and every other electrician on your payroll is a Journeyman or Wireman, look at what happens at the closing table:
- An SBA 7(a) search buyer who does not hold a Texas Master Electrician license cannot close the loan unless TDLR licensing is continuous. Moreover, SBA SOP 50 10 8 caps the selling owner’s post-close employment/consulting transition at 12 months.
- A private equity MEP platform or regional competitor will not pay 85% cash at close if losing you in month four shuts down municipal permitting in Houston, DFW, Austin, or San Antonio. Instead, they shift 35%–50% of the purchase price into a multi-year earnout, escrow holdback, or subordinated seller note conditioned on license continuity and GC backlog retention.
What the license, revenue mix, and WIP schedule do to a $850K EBITDA Texas electrical sale
Compare two Texas electrical contractors with the exact same $850,000 in trailing 12-month earnings:
| Diligence Factor | Shop A: Owner-Qualified GC Bid Shop | Shop B: Qualifier-Ready Service & Commercial Shop |
|---|---|---|
| TDLR Master Electrician of Record (Tex. Occ. Code §1305.153) | Founder is the sole Master Electrician; no Journeyman has sat for the Master exam. | W-2 Operations Manager or Lead Estimator holds a Texas Master Electrician license and is registered as qualifier with a retention bonus. |
| Revenue & Backlog Mix | 80% competitive GC bid-spec rough-in; top 2 GCs represent 48% of revenue. | 45% recurring commercial facility maintenance & residential service agreements; 55% diversified commercial retrofit/tenant finish. |
| WIP Over/Under-Billing Schedule | Cash-basis QuickBooks; $240,000 in mobilization deposits spent before wire pulling starts (treated as debt at close). | Monthly ASC 606 percentage-of-completion WIP schedule reconciled to the balance sheet; zero unbacked over-billing deficit. |
| Valuation Multiple Applied | 2.4x–3.3x SDE (~$2.2M–$2.8M headline value) | 3.5x–6.0x Adjusted EBITDA (~$3.4M–$4.8M enterprise value) |
| Typical Cash Wired at Closing | 50%–65% cash at close (~$1.35M after WIP deduction); rest locked in earnout/seller note. | 80%–90% cash at close (~$3.2M–$4.1M wired Day One) with clean 90-day transition. |
The 90-day sequence to fix the trap before you talk to a buyer
You do not need a business broker charging an 8%–12% commission to tell you that your Master license is in your wallet. You need an operational sequence that removes the buyer’s excuse to discount your company:
- Identify and elevate a W-2 Master Electrician qualifier now: Check which senior Journeyman Electricians on your crew have 12,000 hours of on-the-job training and two years as a licensed Journeyman under
Texas Occupations Code §1305.153. Sponsor their exam prep, pay the testing fee, and put a written qualifier bonus and stay-agreement in place at least 6–12 months before going to market. - Separate service/facility maintenance margin from GC construction bids: Create separate QuickBooks classes for recurring commercial service calls, panel/lighting retrofits, generator maintenance agreements, and new-construction rough-in. Buyers pay
4.5x–6.0xfor recurring electrical service revenue that they can see clearly on the P&L. - Build a monthly job-by-job WIP schedule before diligence: Stop letting mobilization billings inflate your checking account right before a sale. A buyer’s Quality of Earnings team will deduct net over-billings (billings in excess of costs) dollar-for-dollar from your closing check. Read our full Contractor WIP & Over/Under-Billing Diligence Guide.
- Move estimating and GC walk-throughs off your desk: If every bid over
$50,000requires you to price the takeoff in Accubid or McCormick, the buyer is still buying you. Put a two-person estimating review rule in place so your lead estimator prices the job and you only audit margin exceptions.
Start with the electrical diagnostic before you sign an NDA
SweetSpot Business Advisors is an operator-led advisory firm, not a broker. We work for fixed, published fees and 0% commission:
- Read our step-by-step answer on How do I sell my electrical business in Texas? and explore our Texas Electrical Contractor Advisory Hub.
- Preview actual diagnostic pages in the 24-Page Electrical Contracting Field Guide Sample or run the free 12-minute Sale Readiness Self-Assessment (
$0). - Order your custom 24-page $250 Sale Readiness Field Guide, book a remote $2,500 Business System Inspection, or book a 30-Minute Working Call directly.