Several unforeseen circumstances may lead an HVAC business owner to face a tough decision. Should you try to sell your business? Or should you close it?
To an HVAC business broker, it’s a no-brainer. In about 99.9% of cases, you should sell your HVAC business, even if you believe it is not profitable. Why, you ask? Because it has value, and we can help. By closing your business, you’re walking away from value. You get nothing. You accept absolute defeat. We always favor selling your business to walk away with something. It may sound overwhelming, but selling your HVAC business is possible and is the right move.
Very few small HVAC business owners actually plan for their exit. It always seems so far in the distance, and many other tasks take priority. We often fail to think about the future or plan for less-than-ideal situations that may arise in our lives. Even many mid-sized business owners neglect to prepare for their retirement. In addition, business owners often fail to plan for other unforeseen circumstances such as sickness — but emergencies happen all the time. It’s an inevitable part of life.
As a result, when retirement creeps up, challenging times hit, or tragedy strikes, some HVAC business owners may succumb to a belief that they have no other choice but to close their doors for good and walk away. Not true! Let this be your reminder to plan for your future exit. Take time for business and retirement planning because your future self will thank you. And if you’re past that point, that’s OK! You can still get your ducks in a row and sell your business.
Even if your HVAC business isn’t profitable, it may still have value. It may be valuable to professionals in the general business-buying market or a competitor. Here are just a few of the assets that have value:
- Client Lists
- Proprietary Processes
- Trained Staff
If the business isn’t producing a significant profit, its highest value may be to an HVAC industry competitor or a turnaround expert. Consider selling your first option whether your business is small, mid-size, or large. Here are some tips for selling an unprofitable business:
1. Value Your Business
Before selling your business, you must get a business valuation to set a monetary value on your company. That’s always one of the first steps. Your business also has value beyond the profits. If your business has acquired valuable contracts, developed innovative products or technology, or has any other valuable assets, these can be attractive and increase your value to potential buyers. Buyers often purchase companies due to potential earnings as opposed to current profits. Buyers will usually have a vision for the company and be willing to put some work into it to reach a profit goal. Often, a prominent firm will buy a small business to use its deeper resources to turn a profit, whereas the original owners lacked resources and capabilities.
2. Negotiate From a Position of Strength
Never sell yourself or your business short. That mistake is too common in the business-selling world. You may see your low profits as a weakness, but don’t let that deter you or panic sell. Think about all the time, money, and energy you put into your business. When you take a moment to think about the best way to approach your sale and learn the true value of all your assets, you can confidently negotiate with prospective buyers. Focus on the strengths of your business and hold tight to those.
3. Prepare for Due Diligence
Interested buyers will ask many questions if you’re selling an unprofitable business. Make sure to be prepared for due diligence, which allows the buyer to get a clear picture of how your business functions and whether it has potential for future growth and profitability. Due diligence will likely include looking into the company’s personal, financial, and legal records and is crucial to those purchasing an unprofitable company. Here is a comprehensive checklist for this portion of selling your business. The prospective buyer will want a clear picture of why the business failed so they can use that data to make a future profit.
4. Accept an Offer
Even if your business currently lacks profits, you may receive multiple offers if the company has strong potential. Offers may come in cash, a buyer’s company shares, or a combination. Receiving numerous offers is a great position to be in, but it can also be overwhelming to make a decision. Consider the advantages and drawbacks of each offer. As a struggling business owner, your first instinct may be to accept a one-time cash offer to get an immediate reward. However, such an offer will often carry a heavy tax burden. Consider everything when choosing an offer, and if you have an HVAC business broker, they’ll be able to help you weigh the options and pick the best overall offer.
Exit planning is crucial for business owners. But don’t think you’re in the dust if you haven’t planned and prepared as much as you would have liked. You may feel stuck and want to shut the door, close your business, and never deal with it again. That is never the right choice. Don’t let your fears and feelings of failure keep you from selling your business. There is value there, and we can help you find it. And if you’re not quite ready to sell, read about some simple ways to boost the value of your business here.