Small and medium-sized businesses keep the U.S. economy alive. The HVAC industry is booming and continues to grow at a rapid rate because heating and air conditioning are a necessity in many parts of the U.S. with extreme temperatures. Despite this, HVAC business owners still decide to sell for a variety of reasons.
Whether it be retirement, the need for a change, financial reasons, technician shortages, capitalizing on industry growth, or personal reasons, it’s wise to weigh your options, research, and ask yourself some critical questions before rushing into selling your HVAC business. Here are five questions to ask yourself before taking the leap toward selling.
1. Do You Know How to Determine a Sales Price?
Coming up with the right price for your HVAC business that is soon to be on the market can take time and effort. It’s more complex than taking a guess and rolling with it. If your price is outside the neighborhood of what your business is worth, potential buyers and investors will grow frustrated, thinking you must not be a serious seller and not take a second look.
Potential buyers want to see the data on several metrics that go into the list price, including:
- Net Income
- Depreciation and Amortization
- Earnings Multiplier
The standard formula for calculating the valuation of an HVAC business is (Net Income + Depreciation and Amortization) x Earnings Multiplier.
2. Do You Know How to Find a Buyer?
Finding the right buyer is often the most challenging part of selling an HVAC business. The process is more complex if you’re not selling your business to a friend, relative, or industry insider. It’s time to do some research. There is an influx of post-military and post-corporate entrepreneurs looking to purchase small and medium-sized businesses. The right buyer doesn’t necessarily have to have experience in your industry. The right buyer might be a talented entrepreneur and dedicated leader looking for an opportunity to take over and build on your business.
Selling a business requires time, so it’s important not to rush into choosing a buyer. Instead, concentrate your research on identifying buyers who are genuinely interested in harnessing your business’s success within your current market.
3. Do You Have a Trusted HVAC Broker?
Having a trusted team by your side, such as an HVAC business broker and lawyer, can make a night and day difference in your selling journey. Your broker will answer all your questions about how to value your HVAC business, explain each process step to you, structure your transaction, negotiate on your behalf, and so much more. Your lawyer will be there to tackle legal hurdles and review contracts.
Take advantage of your resources and find a reputable team. This will make the process so much easier, taking some of the burden off your shoulders so you can continue running your business.
4. Why Do You Want to Sell Right Now?
Believe it or not, sometimes business owners make a hasty decision and later realize they have no idea why they rushed into selling their business. It’s essential to consider the timing of your business sale. If there’s no rush to sell your business, do your research to strategize a timeline that makes the most sense. Consider market valuations, revenue numbers, payroll, and more. In addition, get your financial records in order and put together records that show profit, loss, market interest, and anything else.
In essence, don’t rush into selling your HVAC business. Prepare and strategize, and if you need help figuring out the first step, consult a professional to help you get started. If you know you want to sell as soon as possible, ask yourself, “Why?” If you’ve done the groundwork, prepared immensely, and feel strongly that now is the best time to sell, then you are probably right. Making this decision logically will lead to better results than hastily making it.
5. Do You Have a Plan for Afterward?
It’s easy to get so wrapped up in the exit plan that you forget to have a post-exit plan. What is your next move? What does life look like after the sale closes? Small to medium business owners need to have a plan to dwindle their involvement in a company once a sale closes. It’s also essential to have a contingency plan in place in case the sale doesn’t work out as you had planned.
Selling your HVAC business can start an exciting new journey in your professional and personal life. Even so, there is so much to consider before committing to selling your business. It’s something to take your time with. By asking yourself some important questions, working with an experienced team, being strategic about your timeline, and planning for your post-exit life, you can rest assured that you made a smart decision that will contribute to long-term happiness and peace of mind.
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Before selling your HVAC business, consider key factors like retirement, financial changes, technician shortages, or personal motivations. Take time to research and ask critical questions. Check out this infographic for five important questions to consider before deciding.
