Here’s the magic formula
If you’re like most people that own an HVAC business, you started out working for someone else. After you gained some experience and learned the soft skills, you figured you could open your own shop. Making more money and having more freedom is something everyone loves.
There’s a pattern that all HVAC owners and their businesses go through. After working hard for years, father time catches up with them and they start to think about selling the business and retiring. Having more fun with the family, and taking that long-promised trip with their spouse has a stronger appeal than spending another day at the office.
The next question becomes, How much can you sell your business for?
Well, that depends on a few things, but that list is shorter than you think. After selling more HVAC businesses than anyone else in the last 3 years, here’s what I’ve learned. You want to sell your business for a million or more dollars? Do these things now while you still can.
Get out of the truck
Your highest and best use is not turning wrenches. If you’re regularly going on service calls, you might as well be paying your customers, instead of the other way around. You’re just too valuable. Your business needs you back in the office making decisions, training, and managing assets.
Buyers will ask what a “day in the life” looks like for you. They want to know someone with a critical eye is watching expenses, maintaining quality standards, and acting like a CEO.
Groom a solid #2
The less important you are to your business, the more valuable it is. Go ahead and read that again, because no truer words have ever been written. A buyer of your business wants to know that you have created such an efficient operation, that it can run without you. Find a good employee that you trust when you’re not there. It should be someone that has the potential to take over for you someday.
The new buyer wants to know there will be no major business interruptions once you’re out of the picture.
Don’t go it alone
You’re not the first person to start and run an HVAC company, so why wouldn’t you want to learn from the experiences others have had? Why make a mistake when you can talk to someone that has walked in your shoes? Seek out the perspective mentors can give. Get involved with industry organizations. Nexstar Network is one to check out. Private coaching companies like the Everrest Group might be a good choice too. If you prefer others that are not as large, Pete Ramsey and Nick McDonald offer coaching and consulting that I have seen transform many business owners.
Keep clean books
This one is a biggie. You absolutely must keep good financial records. Expect buyers to go through line items, examine profit and loss statements, balance sheets, and inventory lists. There is a direct relationship between the quality of your books and the offer the buyer puts on the table. With good books, they have more confidence and make their best offer first.
“HVAC guys” usually make for lousy bookkeepers. If that’s you, step up and get the books professionally done. I promise it will be money well spent.
Sign those PMA’s!
It’s much more difficult to sell a business that only does new construction. It makes buyers nervous that this business will go away or an important relationship with a builder could dissolve. Instead, focus on signing customers to planned maintenance agreements. This is where much of the worth of your company will come from and also affect the speed an offer comes. Buyers want to know where the next dollar is coming from in the business. You may have heard the term “recurring revenue?” It’s what makes this HVAC industry so appealing for buyers and even private equity firms.
Hire an industry-specific broker
Whether it’s me or some other HVAC-specific broker, hire someone to help you sell your business. It’s a complicated process that has to evolve in a specific order. If it doesn’t, your deal can fall apart, or worse, you can lose all your employees and get sued. Doing it alone can be done, but I wouldn’t recommend it. If you’re curious about learning more about selling your business yourself, you better read this article.
Here’s the bottom line. The right HVAC-specific broker can get multiple parties competing to buy your business. That drives the price up and turns you into a rich former owner with potential generational wealth.
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.)