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Learn to read your business the way they do, well before you need the number.
A RocketLevel playbook for restoration owners thinking about a sale, a recapitalization, or a line of credit, backed by decades of experience in the trade. About a 9-minute read.
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Make your own copy: this is a spreadsheet you can copy and use. Open the spreadsheet. It opens a fresh copy in your own Google Drive, and you fill it in yourself.
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Plenty of owners run the business on two numbers: top-line revenue and what lands in their own account at the end of the year. Both matter, but an institutional buyer or a lender underwrites something else.
A serious buyer or lender is pricing the durability and quality of your earnings, the risk that those earnings walk out the door when you do, and how much cash the business ties up to produce them. None of it is a secret. The numbers below are the same ones a buyer's analyst or a bank's credit team will build a model around.
Think of this as the model a buyer or lender builds before they ever name a price. Eight numbers carry most of the weight.
1. Adjusted EBITDA, and the add-backs behind it. Reported profit is rarely the real earning power of the business. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) normalizes it: it pays the owner a true market wage instead of whatever you actually take, and it removes one-time and personal costs that a new owner would not carry. Those removals are called add-backs. Common, defensible ones include an above-market owner salary, personal vehicles or travel run through the company, family members on payroll who do not work in the business, and genuine one-time events like a lawsuit settlement or a one-time software migration. The discipline here is honesty. Aggressive or undocumented add-backs get challenged in diligence and erode trust; clean, supportable ones build the real earnings picture buyers underwrite. This exercise is the heart of what advisors call a quality-of-earnings review.
2. Margin by division, and blended margin. A single blended margin hides what each division is doing. Buyers want margin broken out by line of work, mitigation, reconstruction, contents, and commercial, because each behaves differently and the mix moves the whole picture. The Deal Sheet's 2026 restoration report puts water mitigation gross margin far above reconstruction. The Restoration Industry Association's (RIA) 2025 Cost of Doing Business Report, built on fiscal 2024 data, finds most firms report mitigation gross margin of 50 percent or better, with 28 percent reporting above 70 percent, and blended gross margin falls as a company grows, to about 39 percent above $30M. Your own numbers are still what matter. Knowing margin by division also tells a buyer you actually run the business by the numbers, which is its own signal of quality.
3. Recurring and contracted revenue share. Revenue you can count on next quarter is worth more per dollar than revenue you have to win again from scratch. Master Service Agreements (MSAs), facility contracts, and standing commercial relationships read as durable. One-time, event-driven work reads as a guess. The higher your contracted and recurring share, the higher the quality of earnings.
4. Commercial versus insurance-program mix. A book weighted toward owned commercial relationships generally reads as more durable than one tied heavily to a single insurance program or carrier panel, because program work can be repriced or pulled by someone other than you. Buyers reward channel balance.
5. Customer and payor concentration. Buyers discount hard for it. If a single customer, carrier, or third-party administrator (TPA) is a large share of your revenue, a buyer prices the risk that you lose it. Use three zones on single-largest-source share, counted at the parent company, so the reading is the same every time: at or under 10 percent is healthy, above 10 and up to 25 percent is caution, and above 25 percent is danger. Boundaries resolve one way only, so exactly 10 reads healthy and exactly 25 reads caution, and every share from 0 to 100 lands in exactly one zone. These lines, and the stability test below, are RocketLevel working thresholds, so present them to a buyer as your own framework rather than as an industry benchmark.
Run a second, separate test alongside it. The zones above measure how big your largest source is. Stability asks how many points of total revenue one realistic decision by that source could move (a rate cut, a routing change, a program ending). Circle anything above 5 points. Above 10 is not up for debate. These are two different questions and a book can pass one while failing the other. Do not collapse them into a single number, and never run the swing test in place of the zones. Two sources can both sit at 12 percent, one on a contract that can't be repriced mid-term and one that can cut your volume with a single routing change. Same zone, very different risk, and a buyer will price them differently. Spreading the book makes the shop safer to run and protects what it sells for.
6. Working capital: how fast the business turns work into cash. Buyers and lenders study days sales outstanding, or DSO (how long it takes you to collect after billing), work in progress, or WIP (jobs underway but not yet billed or collected), and the overall cash conversion cycle. A business that collects quickly and does not let WIP balloon needs less cash to run and is worth more.
7. Labor productivity. Revenue per field employee and, more tellingly, gross margin per field employee, show whether the business produces efficiently or just throws bodies at the work. Strong, stable productivity signals a business that can scale without margin falling apart.