We know your HVAC company is more than just a transaction to you. It’s a symbol of your dedication, hard work, and growth. You put your blood, sweat, and tears into it. And now that it’s time to sell, you want to do it right. Knowledge is power, so make sure you know as much about the selling process as possible to do it with precision and strategy.
As HVAC business brokers, we know the complexities of selling an HVAC business, the proper steps to ensure a smooth sale, and the demanding planning and strategizing needed to receive top dollar and walk away happy. For first-time sellers, the process can be overwhelmingly confusing and sometimes lead to pitfalls you could have avoided. From the preparation phase to the actual sale and afterward, here are common mistakes to become aware of so you can avoid them like the plague:
1. Not Preparing Enough
You may have been the type in high school to cram the night before a test and ace it with flying colors. However, that strategy won’t lead to success when selling your business. An HVAC business sale takes tons of preparation and planning. Not adequately preparing can mean a significantly lower selling price, delays in sales, and missed opportunities. The first steps to take when preparing to sell your business include:
- Cleaning up your books, financials, and records
- Streamlining your infrastructure and operations
- Creating a well-developed marketing plan
- Working with your financial advisor and accountant to set up a tax plan
- Hiring an experienced HVAC business broker
Start with the above steps, and then work with your HVAC broker to move forward in the sale process. Preparing first will significantly enhance the process regarding the value, length, and productivity of the sale.
2. Valuing Your Business Incorrectly
An inaccurate valuation can be very problematic in the sale process.
Problems with Overvaluing
Overvaluing your business could keep interested buyers from even looking at your company. They might not even allow themselves to look at companies above a specific asking price. Overvaluing can also result in lengthy negotiations, as buyers and sellers take longer to reach a compromise. Lengthy negotiations can frustrate all parties. If your HVAC company sits for sale for too long because it’s overpriced, it may become stigmatized and continue to sit with no action.
Problems with Undervaluing
Undervaluing your company means walking away from money you could have had in your pocket. You may set a low asking price in hopes of selling quickly, but then you won’t acquire as high a profit. Buyers who are knowledgeable about buying an HVAC business may raise their eyebrows at a price that seems relatively low. “What is wrong with it?”
How to Price It Right
Correctly valuing your HVAC business involves different methods and tailoring it to your unique company. Some typical approaches include:
- Market-based Valuation: This involves comparing your company to similar recently sold companies. An HVAC market valuation gives great insight into the current market pricing. Your HVAC broker will have access to sales databases that show sale histories and the multiple of Discretionary Earnings (DE) and EBITDA the business sold for.
- Third-Party Appraisal: You may require a third-party business valuation if there are any partnership disputes
The accuracy of your valuation is everything when aiming for a smooth and profitable sale. Undervaluing or overvaluing can prolong the process and keep you from attaining the deal you deserve. By working with your broker and using financial, asset-based, and market-based, you can formulate a valuation to attract the right investors and buyers.
3. Negotiating Poorly
Negotiating is often a big part of an HVAC business sale, and performing poorly can leave you with the short end of the stick. You might be in negotiations regarding the terms, price, conditions, deal structure, and contingencies. Poor negotiating can leave you with unfavorable terms or even a dead deal.
Sellers often get nervous about negotiating. That’s often their motivation to hire an HVAC broker. By being educated, leaning on your broker for guidance, and setting attainable goals, you can ensure your terms don’t fall apart in the negotiations phase.
4. Selling on Your Own
Sellers who decide on a DIY sale often regret it when they soon realize how complicated and time-consuming it is to sell a business. Seeking professional guidance means having invaluable expertise in your back pocket and someone to walk you through the process. A good HVAC business broker will help to streamline the process and give you access to their extensive network of buyers while maintaining confidentiality.
5. Not Developing a Five-Year Plan
Potential buyers want to see the potential of your company. In addition, a buyer may need to learn more about the HVAC industry. Laying out a tangible five-year plan will make your company very attractive to prospective buyers because they will see it as a guide in leading the business moving forward. It will be a blueprint for them to refer to as much as they’d like. A five-year plan will set you apart from other businesses and give you a leg up.
Selling a business with smooth sailing is no small feat. Your business is a culmination of your perseverance and success. Make sure to avoid the common pitfalls that can hinder your sale and leave you in a position you don’t want to be in.
