Many small HVAC companies work with both residential and commercial accounts. In a small market, it’s natural to get calls from both kinds of customers. Often, they’re simply putting large residential equipment in commercial settings, so it’s not a stretch for the owner or the crew.
When it comes time to sell, owners may think their business is worth more because it’s diversified. The short answer I give them is – it’s not.
I have plenty of buyers looking for commercial companies to buy. And I have plenty of companies looking for residential companies to buy. But I don’t have anyone looking for a company that does a little bit of both.
Here’s why buyers steer clear of companies with mixed portfolios.
Adding commercial accounts to your mostly residential business adds complexity. From having to maintain response times (available 24/7 or within two hours, for example) to adding proposal writing, your business processes have to change. Most companies pay on a net 30 or net 60-day basis, so you’ll need to add Accounts Receivable processes and possibly, staff.
The cash flow implications alone – managing a budget and receivables over multiple months – means that a buyer has to have more cash on hand when he buys the business. Most buyers simply don’t want the headaches.
They also know that it’s hard enough to find good help with strong residential or commercial experience, let alone someone who has the skills and experience to do both. Commercial equipment (the kind that powers large scale buildings) is completely different than residential equipment; you’ll need to add training, certifications, and repair equipment.
It’s rare to find a buyer who has the experience to take on both, so they simply consider the whole idea too risky.
Buyers, especially large ones, want simplicity. If you’re building your business in order to sell it for top value, staying within your strength is the best way to attract buyers and negotiate a great deal.
About the author: Patrick Lange
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 sells a record number of HVAC businesses every year and is currently the President of the Business Brokers of Florida (North Florida District.)
