Patrick Lange

I talk with many people who would like to sell their business on their own. It’s understandable why they’d like to manage the process independently, but there are some things an owner must keep in mind.

Confidentiality is essential to any successful sale.

First, it’s crucial that the intent to sell not become common knowledge. Leaked information could affect a company’s ability to close deals, negotiate with vendors, and hire and retain employees. Customers can lose confidence when they think the company is changing ownership. Competitors might use the information to undercut or win deals your company bids on.
Make sure the potential buyer signs an NDA (Non-disclosure Agreement) that protects you and your company’s information. The document should require that if the deal doesn’t go through, the buyer must destroy or return any documentation they have received during the diligence process.
If the buyer volunteers to send their crafted NDA, it may not be written to protect the seller’s interests.

Is the buyer qualified?

We see buyers all the time who just aren’t qualified to buy an HVAC business. There may be something precluding them from getting a license, or they may not have the credit or collateral to earn the confidence of a lender. If you don’t do this every day, these unqualified buyers may be hard to spot. A banker will be happy to take their application and ensure everything looks fine up until the deal reaches an underwriter’s desk. We’ve seen plenty of deals fall apart at the 11th hour. The result is frustration and hundreds of hours of time wasted.
Another thing to consider is who the prospective buyer is. You will want to make sure they are legitimate and not the competitor’s nephew on a phishing expedition. Be careful who you give your company’s financial performance to, even if you have a signed NDA.

Don’t let due diligence distract you from keeping revenues consistent or growing.

The fastest way to lose money is to let revenues slip in the 6 months, or so it takes to get to the closing table. Fulfilling document requests, having phone conversations, working with your CPA, and fielding operations questions takes time -and a lot of it. If you let this distract you from earning revenue, it’s going to cost you big. For every dollar lost, it could cost you 2-4x that in a discounted sale price.

Is the buyer working with the right lender?

There’s hardly a banker in America who won’t initially say yes to an opportunity to lend money to a buyer. After all, that’s their business. Buyers sometimes incorrectly think that just because they have their checking and savings accounts with ABC Bank, they automatically will get a business loan. That’s not necessarily true. Not all banks are the same. Bank portfolios change, and some love to work with HVAC businesses, while others are not comfortable with the industry because they lack experience.

Are you protected from liability?

Not all attorneys are well-equipped to write business sale contracts. They may tell you they are, but you want an experienced attorney who has done many business sale agreements before. Failure to get the right representation may leave loopholes and a dangerous legal predicament. The analogy I use is, would you want your family practice physician to perform open heart surgery on you or go to a cardiac surgeon specialist?

Trade Secrets

Many owners are worried about sharing “trade secrets” with prospects, but that’s rarely an issue. The reality is that there’s not much variation in how HVAC companies do business; a prospect is more interested in whether you’re profitable, and not necessarily in the secret to how you got there. However, you should be careful in how you present your processes so you don’t inadvertently share more information than you should.

So, can you sell your business on your own? The answer is yes. But more importantly, should you? That’s up for you to decide, but mishandling the largest transaction you will likely do in your lifetime can lead to long-term regret. is it worth it?

If I can help you develop a strategy for selling your business, the first step is to determine its current market value. Click here to learn more.