Want to Sell Your Thriving HVAC Business? Here’s How to Maximize Your Profit on a Sale

The HVAC/ Air Conditioning and Heating industry is a unique space. It has high customer demand, yet the operational costs can also be high, and skilled technicians can be hard to find. Despite these challenges, the industry is poised for significant growth, making it a great time to consider selling your HVAC business.

This article will guide you through the process of selling your HVAC business for the highest possible price.

First, we wanted to discuss two HVAC companies that we recently sold. We always like to discuss deals we have done confidentially. These real-world experiences set Crowne Atlantic apart from other brokers or M&A advisors. 

Home services: There is a huge demand for businesses involving home services.  Why is this?  Because everyone needs someone to service their HVAC system.  This is a need.  The first company had over 2000 maintenance agreements on systems they had installed over the years.  They also had a new construction arm of the company in one of the top neighborhoods in the Orlando area. 

Some homes were so large that they would have 30 HVAC systems between units, mini-splits, condenser units, and compressors.  These were huge homes, and this was a phenomenal business.  The owner started the business and owned it for 45 years. 

Another interesting HVAC company we sold recently was to a commercial HVAC company.  The acquiring company had been buying up commercial HVAC companies to expand their platform and gain highly skilled staff and established accounts.  The business they purchased specialized in commercial HVAC for the utility companies and commercial property managers. 

The owner’s father-in-law started the business; he bought it from him and owned it before exiting after 20 years.  The seller moved out of state but occasionally returns and works periodically for the new company. 

Understanding the Market Landscape

The HVAC industry showcases its resilience and potential every year. As more development occurs in Florida, the need for HVAC services continues to increase. Even those in the industry that have slowed down still hold some value.

What Determines Your HVAC Business’s Valuation?

Several factors influence your business’s value:

• Financial Performance: This includes total sales, profit, and growth rate. Buyers often look at financial performance over the past three years to help formulate their offer by identifying consistencies and inconsistencies.
   
• Customer Base: A loyal customer base with recurring service agreements is highly attractive. Buyers look at the spread of customers to see if there are customers who make up a significant portion of the business, and they look at where customers are geographically located. They also evaluate whether the customers are commercial or residential and whether they are looking for service, maintenance, replacement, or new construction.
   
• Market Position: How do you compare to competitors? Have you had the same customers for many years? Are your workers more skilled and seasoned than those of other companies? Location can also play a role, especially if few are in the space.
   
• Team Strength: A skilled and reliable workforce adds significant value. Buyers are often interested in the number of technicians that work in the business, how long they have been working in the business, and how long they have been in the trade.
   
• Business Continuity: Can your business run smoothly without you? Do you have an office manager, a foreman, or a warehouse person who helps run the business without you present? Any management structure in a business builds more value for buyers.
   
• New Construction Verses Repair/ Maintenance Construction: Both new construction and repair maintenance HVAC companies hold value, however as business brokers we see that most buyers tend to value the repair and maintenance HVAC companies at much higher premiums. Many buyers tend to feel as though HVAC new construction companies have ending dates with large voids that must be filled again. It does not mean, however, that new construction HVAC businesses are out of luck; many are still very valuable, especially if they can demonstrate a constant flow of work throughout the years and can show a backlog of future work booked. For a new construction HVAC company looking to increase its value to a buyer, adding a division that does maintenance and repair may be worthwhile.
   
• Residential Versus Commercial: In many cases, buyers are open to both commercial and residential HVAC work, especially if there is a focus on one or the other. Many HVAC businesses handle both residential and commercial HVAC jobs. Buyers will be interested as long as the business has a solid plan in place for handling the work. 

Maximizing the Value of Your Company

There are two key phases to maximize your business value before selling in order to get the best price:

Phase One: Preparation and Organization

• Organize Your Finances: Ensure your books for the last three years are in order. Buyers typically like to see the last few years tax returns, profit and loss statements, and balance sheets. Buyers will likely ask more questions during a due diligence period, however having this paperwork available is a great starting point.
   
• Streamline Operations: Clearly define daily operations for a seamless handover. It always helps when business owners put together a list of their employees, list what they do, how long they have worked in the business and what they get paid. It is also helpful to buyers to have a list of tasks the seller is responsible for each week.
   
• Develop an Exit Strategy: Outline a plan for yourself, your staff, and potential buyers. When speaking with buyers, a seller will often have to answer questions about why they are selling the business. It is recommended that a business seller have ideas about how they will pass on the business and what their plans are after they sell the business. If the seller’s plan involves staying on with the business for a few months after the sale, many buyers also find that attractive.
   
• Reduce Outstanding Debts: A debt-free business is more attractive, but having debt in a business is not a deal killer if the debt can easily be paid off at the time of a sale. Debt can be considered a good thing if it is taken on for the expansion of the business.
   
• Prepare Your Team: In most instances, the potential sale of the business is kept confidential from both a business’s customers and employees, but that does not mean that the staff cannot be prepared for a potential sale. Prior to selling, make sure all the staff is focused and aware of their roles and responsibilities in the business. If some of the staff is ready to take on more responsibilities, put those steps into place as it will make the business more attractive to a buyer.
   
• Craft a Growth Strategy: Showcase future growth potential for buyers, particularly in the HVAC and home services market, to attract serious interest and a favorable selling price.  Plans for customer retention and plans for obtaining more customers through marketing and advertising are always helpful. It shows that there is room for growth in the business, which always adds to the appeal. Putting together an advertising or marketing plan that shows where and how the marketing would take place would build confidence for a buyer about to take over the operation.

Phase Two: Boosting Profitability

While HVAC profit margins can range according to the involvement of the owner, staff salaries, and operating budgets, there are ways to potentially boost profitability in the business:

• Optimize Pricing Models: Consider premium rates for priority service. If calls are answered in a timely manner, these elite customers may not mind the fee.
   
• Promote Service Agreements: Recurring revenue streams are highly attractive. For some customers, paying a premium for monthly check-ups and priority service calls is worth paying a small premium fee every month or every year, especially if it means their service has a minimal risk of being down.
   
• Digital Marketing: A key strategy in increasing the visibility of your business for sale. Transition of your advertising to online platforms. If the business does not already market its service online, it is possible that optimizing the business’s presence online could increase the business’s customer base.
   
• Upselling Opportunities: Follow up with previous customers for system upgrades. Often, there are customers who know they need to replace and maintain their systems, and all it takes is a little outreach for them to activate these necessary modifications.
   
• Performance Incentives: Motivate technicians to boost output. Incentivize technicians to perform better in product sales and maintenance agreement sales or incentivize them to help bring in new customers to enhance the business valuation before selling.

Partnering with a Business Broker with HVAC Industry Experience

 

A business broker with HVAC industry expertise is invaluable. They can:

• Provide Accurate Valuation: Get a realistic assessment of your business’s worth and advise what rates buyers in the market are currently paying for these businesses.
   
• Craft a Compelling Sales Proposal: Attract qualified buyers. Seasoned business brokers know what information to ask for and how to package a deal so that it can be presented to potential buyers, their lenders, attorneys, accountants, financial advisors along with any investors or partners in the deal.
   
• Market and Vet Potential Buyers: Find the ideal buyer for your business. Business brokers who have performed in this market can help determine which buyers can follow through with a deal.
   
• Negotiate the Sale: Secure the best possible price and terms. While it is ultimately a seller’s decision to accept a deal, business brokers can help manage the deal-making process and help potential buyers formulate and put together offers to submit to a seller.
   
• Handle Paperwork and Closing: Ensure a smooth handover process. Business brokers help coordinate deals and help keep business sellers and buyers on task. They also help manage the process and the information flow amongst the buyer’s and seller’s accountants, attorneys, lenders, and other advisors involved in the deal.
   

Looking to Sell? The Selling Timeline

Selling a business can take anywhere from 8 to 12 months, depending on market conditions, your business’s state, and how well you navigate the selling process. This timeline also includes the lending/ financing process which can take a few months by itself. The industry’s projected growth makes it a worthwhile endeavor.

Crowne Atlantic: Your Trusted HVAC Business Broker

At Crowne Atlantic, we pride ourselves on being more than just experienced business brokers; we are your strategic partners. Our value proposition is clear: with over two decades of selling businesses, we specialize in confidentially matching sellers with the ideal buyers, ensuring a smooth transition and maximizing your profit. 

Whether you’re considering retirement, pursuing new ventures, or aiming to leverage market growth, selling your HVAC business with us ensures a profitable and rewarding process. Our expertise and strategic approach, tailored specifically to HVAC business owners, offer an unparalleled advantage. We navigate the intricacies of the sale, securing the best possible outcome for your hard work. Partner with us to sell your business confidentially today. 

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