I’m getting this question more and more: can I just go online and get a good idea of what my company is worth? The answer is of course you can. And the number you get can be a good place to start a conversation about selling the business with your family, for example.
Selling your company is more than just another transaction. It’s an emotional decision that takes time to process. Getting a quick answer, even if it might not be the final answer, also gives you a basis for discussions about your vision of retirement with your financial planner.
Here’s what you’ll need to take into consideration.
Most HVAC company sales are private, so the data about final sale price, multiples, if any, and terms are not discoverable online.
The numbers you might get from an AI are unverifiable; you don’t know what databases it checked to arrive at a value. AI can also make up sources and data that sound plausible, but doesn’t actually exist. With no way to verify what went into the valuation, you have no way to judge its accuracy, so you should think of it as a starting point, rather than a firm estimate.
General business broker sites may be using comp sales data from outside your industry.
It’s one of the reasons we recommend choosing a broker that has experience in the HVAC industry and other trades. The databases a general broker has access to might include businesses as diverse as restaurants and franchise gas stations and businesses far outside your market. They use what they have in good faith, but the end result might not be all that applicable to your specific business.
Here’s what a broker’s process will include.
Your broker’s team will look at comparables that fit your company’s profile. Not just top line sales, but several factors that determine what a buyer will base an offer on, like these:
● Location and demographics (a company in Atlanta will attract more offers and higher prices than one in Madison, FL, with a population of 3,011.
● Your competition and the market’s potential. If your company is facing new competition, from a national brand, say, it will impact your ability to grow and compete, and thus your value. An AI bot won’t know how to value the number of maintenance agreements you have, for example, or even know that they matter to a buyer. But they represent key factors in a buyer’s decision, like recurring revenue or opportunity for growth.
● Your business mix and customer concentration. I’ve written about this before; buyers are less attracted to companies whose revenue is tied to new construction or dependent on one or two large commercial accounts. Those factors present much more risk when a company changes ownership, since the contracts may be based on relationships with the current owner or pricing models that haven’t been updated in years.
● The tenure of the staff and owner involvement. Buyers aren’t looking for an opportunity to turn a wrench in the field all day and do hours of paperwork every night after dinner. They look for a management structure that allows experienced techs to make decisions and empowers staff to solve problems rather than relying on the owner to tell them what to do. They want to focus on the duties a CEO should be performing, like growing the company and developing talent.
● Your financial and revenue trends. It’s one thing to look at what your revenue and expenses are this year, but the data only matters in the context of the general trend. Have costs, including labor, been increasing disproportionately? Have sales been steady, increasing, or declining? How has the cost of finding leads and converting them to sales changed over the past couple of years? Buyers look for companies whose owners are managing expenses, keeping pricing current, and improving efficiency to increase profitability.
Online systems, including AI, can be useful tools for many brokers and business owners. But if you’re serious about selling your company within the next couple of years, you’ll need to be able to trust and justify the numbers as you make decisions about exiting the business that you worked so hard to build.
