Selling your HVAC company is a big deal. Actually is the biggest deal, you’ll likely do in your lifetime. So you can’t risk getting it wrong. It’s generally accepted good advice to look for the services of an industry-specific HVAC broker that negotiates deals like this every day. However, if you’re determined to go it alone, here’s the advice of respected intermediary, Patrick Lange.
If you’re ready to sell, give the decision the respect and consideration it deserves. Think about what you will do when you don’t go to work every day and plan out every detail prior to closing. To do anything less is a disservice to your family, employees, and yourself. If you do, you’ll be in a much better position to negotiate and bring the best possible price and terms for your business.
Do your homework
Your negotiation will work much more in your favor if you work hard to get your ducks in a row. What this means is staying organized and anticipating any questions or objections that will surely come up. The process of negotiation starts even before you list the business. Tune-up your QuickBooks or another accounting tool you use and make sure all expenses are properly categorized. Be ready to answer questions about profit margins, average sale sizes, profit and loss, and total owner benefit.
Once that’s done, you’ll need to properly estimate what the business is worth. This is a step HVAC owners struggle with because the information is difficult or impossible to get. You’re looking for comparable HVAC companies in size and geographic region. If you price the business too high, it will sit and have little interest from buyers. If you price it too low, you’ll leave money on the table. If you don’t know where to start, you’ll need to enlist the help of a qualified broker. In Lange’s case, he offers a price opinion at no charge to HVAC owners. While it’s not an official appraisal, it does give you enough information to understand the market and price accordingly.
If you have done the proper preparation, you’ll be able to justify any of your numbers and back them up with data. The person with the most proof has an advantage in negotiation.
Lange also advises understanding different types of buyers. He usually sees three varieties:
- First time HVAC business owners
- Existing HVAC owners wanting to acquire a business
- Private equity firms
First-time buyers may be business savvy, but inexperienced with the heating and air world. They may need to operate under your license until they can qualify for their own. Existing owners may just want your client list and trained employees. They know what questions to ask and can be shrewd negotiators. Private equity firms only deal in larger HVAC companies and have slightly different processes. Negotiating deals is what they do for a living so going in unprepared without the right representation can be like showing up to a gunfight with a knife.
It’s not personal
Negotiating to sell a business isn’t personal. It’s simply a transaction between interested parties. Or, at least that’s how it should be. Lang comments “It’s impossible to not take some parts of a negotiation personally. How could you not? Your decisions over the last number of years are scrutinized and criticized. People that don’t know your business as well as you do tell you how you should have done XYZ maneuver or implemented “that” solution.” Even the most patient seller has to bite their lip and not tell the buyer to go fly a kite! (or another more colorful term.)
When Lange works with sellers, he is not only there for his expertise and experience, but his skills as an intermediary. Sellers can vent to Lange and he communicates back to the buyer in more civil and logical terms to keep the deal together.
“There’s only one thing that matters, getting the best terms and price for your business. Keep everything else emotionally in check.” Patrick Lange
Getting a company prepared and listed for sale is just the beginning. Up until this point, everything has been within your control. The next step in the process can be frustrating if you don’t temper your expectations.
There is no guarantee when an interested buyer will come along so be patient. Especially if you don’t have a database of thousands of HVAC buyers like an active broker does. Even after you identify one or more buyers, you’ll need to interview them to see which is the most financially qualified and also who you can stand communicating with over the next 60 days or so. It’s not realistic to list this week and have it sold next.
Once the negotiation phase starts, it’s critical that you move with purpose and keep momentum. This is why doing your financial analysis and getting the business pre-qualified with a bank is so important. When you know your numbers, you can make decisions quicker. Waiting a week or longer to get back to the buyer on a detail is a great way to kill the deal. Understand that your buyer is looking at many businesses, just not yours. Move fast!
About the author:
Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last 12 months and is currently the Vice President of the Business Brokers of Florida (North Florida District.)