Investing in a commercial HVAC business for sale is a big decision. If you are looking into buying a business, you may have many questions. Here are a few important things to keep in mind.
Thinking of buying an HVAC business?
Wondering where to start? Business Modification Group can help you find the right business and connect you with the right people. Our team not only handles the transactions, but our research, valuations, and insight will help guarantee that you’re making the best decision possible. We have years of experience in the heating and air business and will be with you at every step.
Choosing the Right HVAC Business
There is currently high demand within the HVAC industry. We have seen an increased awareness of and interest in indoor air quality for climate control purposes, good health, and general well-being. These demands are likely to continue, making HVAC businesses a sound investment. There are several factors to consider when looking at commercial HVAC businesses for sale.
Knowing what to look for and what questions to ask will help you sort through the companies on offer. This is another area where Business Modification Group can help. Consider HVAC businesses that fit the following criteria:
- Range in Customer Base: If the HVAC business you’re considering only has one or two big customers, even if it is financially successful, it may not be the best choice for purchase. If just one relationship goes south, it can compromise the entire business. Instead, look for a company with a broader range of customers.
- Dedicated Employees: A successful business is not just about the name or the customer list; quality employees are also essential. Consider the status of employees when looking at a potential commercial HVAC business for sale. Look for well-trained technicians and dedicated staff. A high turnover rate and lack of credentials may indicate that you should look elsewhere.
- Clean Financial Records: Take a good look at all of the financial records before deciding on a business to buy. If there is inconsistent record-keeping, you probably shouldn’t move forward. Working with a quality broker will help you better understand a business’s bookkeeping.
- Efficient Operating Systems: A smooth and organized transition to new ownership is the goal when you purchase a business. If efficient operating systems are already in place, this will all be much easier. Established systems should include accounting, scheduling, and customer communication, among others.
- Bank Approved Seller: Before you make a potential purchase decision, you will need to have a reputable financial institution qualify the business. If you work with a quality broker at Business Modification Group, the company will already be pre-approved by the bank before it goes to market. This is another reason to work with a broker rather than purchasing a commercial HVAC business alone.
Questions to Ask
Before making a decision about which commercial HVAC business to invest in, ask the business owner or broker the following questions:
- What is included in the purchase price?
- Why is the HVAC business for sale?
- How can the financial records be verified?
- Is there any outstanding debt or liability?
- Is there a plan in place for onboarding and a smooth transition?
- Are there current contracts or agreements in place?
Why buy an established HVAC business?
If you are considering the purchase of a commercial HVAC business for sale, you may be wondering about the advantages of buying an established business over starting a company yourself. Many factors go into the decision to buy a business or start your own, and it’s important to look at all the pros and cons before making your decision. Here are some reasons to invest in an existing HVAC business.
- Brand Reputation: An established commercial HVAC business will already have a regional reputation. Purchasing a company with a strong reputation and good brand recognition gives you a leg up in the industry. Existing companies will also have deep knowledge about the local market, including competitors and trends.
- Established Customer Base: Buying an HVAC company will provide you with an automatic loyal customer list. This list will significantly reduce the time and energy you need to build up clientele. Start making money right away while you grow the business further.
- Established Suppliers: Not only does an established business come with a customer list, but it also comes with existing relationships with contractors and suppliers that you will need in every aspect of running the business. These relationships can provide stability during the ownership transition. Good relationships with suppliers can also lead to cost savings on materials and equipment for commercial HVAC business owners.
- Experienced Staff: Buying an established business can also be seen as recruiting reliable technicians and staff. Consider providing incentives for the team to stay onboard during the transition. This can save time and resources when it comes to hiring and training. Keeping existing staff members on board can also build trust with and provide reassurances to current clients.
- Systems in Place: If you’re looking to buy an HVAC business, there are most likely already established processes and systems in place. Keeping the company moving as usual during an ownership transition will be easier on you, as well as on staff and all clients involved.
- Immediate Income: When starting a new business, it can take months or even years before it generates a steady income. On the other hand, acquiring an existing HVAC company can bring in immediate cash flow and a faster return on your investment. With an existing business, your focus can be growing and expanding rather than starting from scratch. Growth investments may center on adding services offered, entering a new market, or enlarging your customer base.
- Lower Risk: Whether starting or buying a business, there are always risks. However, purchasing an established commercial HVAC business can mitigate those risks. When you do your due diligence on valuation and research, and work with a trusted broker, investing in an existing company can provide a functioning business model, solid financial data, and an established customer base.
Why Use an HVAC Business Broker or HVAC Advisor?
A qualified HVAC business broker or adviser can provide invaluable knowledge, advice, research, and assurances during the purchase and sale of an HVAC business. Businesses listed with brokers such as Business Modification Group will already be vetted and valued, with qualified financing pre-approved. Working with a broker will significantly cut down your to-do list and give you peace of mind through the process.
- Experienced Negotiation Skills: An HVAC advisor or commercial HVAC business broker will be able to navigate the negotiation process between the buyer and seller and find solutions for any hurdles that may come up. Experienced brokers can structure the deal to be beneficial for both parties. This deal can include purchase prices, terms, and financing agreements.
- Listing and Market Knowledge: HVAC business brokers, including Business Modification Group, have access to a wide range of businesses currently on the market, even some that haven’t yet been listed. This knowledge can save time and energy when looking for potential options. HVAC business brokers are also well aware of the local market. They can provide information about industry trends and the local business landscape. This insight can tell you how the potential business compares to local competitors and whether there is room for growth in the market.
- Legal Advice and Due Diligence: A commercial HVAC business adviser will be able to guide you through the due diligence process when the time comes. Brokers and advisers can help gather and review necessary legal documents, coordinate with the business owner, and answer any questions. Once an offer is accepted, the buyer, seller, and the financing institution must access and evaluate risk. A business broker will be able to assess all of the legal and financial documentation for you to provide a smooth process. Brokers will also have access to a vast network of professionals, including accountants, lawyers, and lenders if any additional guidance is needed.
- Management of the Purchase and Confidentiality: Buying and selling a business can eat up a lot of your time. On average, the process can last around 3 to 6 months. Unfortunately, neither the other aspects of your life nor your existing business responsibilities will be put on hold. You’ll be balancing a lot of things at once. A trusted broker will ensure that management of the purchase goes smoothly while you focus on other tasks.
Experienced brokers are also used to keeping sale and purchase information confidential until your business is ready to announce the news. This confidentiality can be essential to avoiding disruptions to ongoing business operations and shielding sensitive data from employees, competitors, and customers.
- Post-Purchase Transition Experience: Commercial HVAC business brokers may assist you even after the offer is accepted. It is not just the purchase cost that will need to be negotiated. Some former business owners stay on for a time to help facilitate, while others may maintain a percentage of the ownership. There may be questions about equipment or real estate and what comes with the purchase price. All of these facets and more will need to be decided on. Many brokers have experience in the ownership transition process. They can help address any challenges that come up in the new ownership phase.
- Valuation Expertise: An HVAC business advisor or brokers will be very familiar with what makes HVAC businesses profitable. This fact is especially significant when it comes to business valuation. The factors that can be important during valuation include the longevity and experience of staff and technicians, all licensing associated with the business and team, the average revenue generated, the current market situation, common buyer preferences, the customer list, how detailed and clean the bookkeeping has been, and the reputation of the business and owner.
Some of these details may not be obvious, but everything can affect valuation. HVAC brokers understand what matters and what doesn’t regarding a business’s bottom line.
- Financing Help: Commercial HVAC business brokers will have connections with reputable financial institutions and will be able to help you obtain financing. These established relationships may be beneficial in getting you the best rates and options.
Working with an HVAC business broker provides several advantages, but choosing the right broker is essential. Business Modification Group has a wealth of experience and a shining track record in the industry.
What To Do When You’re Ready to Purchase an HVAC Business
While it can be easier to buy an existing commercial HVAC business than start one from scratch, to avoid taking over a faulty business model or failing company, there are a few things you will need to do to prepare.
- Identify Transition Costs: Once you’ve established a purchase price for the acquisition of the business, you will also need to calculate the initial investment fees for the ownership transition. Be sure to include these costs in your business loan or financing arrangements. Buying an established HVAC business rather than starting a business from the ground up will help you save costs on business licensing, certification fees for staff, marketing, equipment, and more.
- Research the Market: Before making a business purchase, it is important to research the local market and assess future potential. A business with no growth potential will not be a good financial investment. Examine the company’s existing revenue, the historical industry growth in the geographic area, current market trends, and all competitive businesses.
- Consult a Professional: With any big financial decision, consulting a professional is a good idea. An HVAC business broker will be able to provide valuable guidance. Consulting a professional business broker will also make the rest of this list much more manageable.
- Do Your Due Diligence: Due diligence on a commercial HVAC business purchase includes examining customer lists, contracts with customers and suppliers, the condition of relevant equipment, and employee and contract technician agreements. Ensure that licensing and certifications are up to date and comply with regulations. Identify any issues that may affect the acquisition and transition. Work with a business broker and legal professionals to review all legal documents, including purchasing agreements, existing non-competes, and other contracts.
- Create a Transition Plan: A solid transition plan will make the process easier for everyone. The plan should include a timeline for the transfer of business ownership, any training needed for current and new staff members, and an agreement on necessary ongoing support. Depending on your post-purchase plan, you may also include arrangements for rebranding or introducing new operating procedures.
Working with Business Modification Group
Business Modification Group specializes in heating and air companies and provides a complimentary valuation of HVAC businesses. Business Modification Group has years of experience representing buyers and sellers in the HVAC industry. You will find the most comprehensive database of commercial HVAC businesses for sale. When you’re ready to buy an HVAC business, you can expect a smooth process working with the brokers at Business Modification Group.
About Business Modification Group
Business Modification Group founder Patrick Lange is an expert in his field and a former HVAC business owner himself. He has won multiple regional awards for being a top business broker and for dollar volume of businesses sold. Because of this, Lange understands the unique challenges HVAC business owners face and the process of buying and selling a commercial HVAC business.
Business Modification Group is based in Florida and Georgia but serves the entire United States. The company has facilitated the successful sale and purchase of many nationwide heating, ventilation, and air conditioning companies. Business Modification Group provides pre-sales support, valuation, and buyer and seller strategies. The company is also passionate about educating HVAC business owners and buyers about the industry and the commercial HVAC business sales process.