I get asked quite often what kind of company is the hardest to sell in the heating and A/C industry. People wonder if the location is the deciding factor – rural areas versus large cities. Or is it about whether the workforce is unionized or non-union? The answer is not based on any of those issues.
The reality is that the hardest company to sell is the one-person operation. It’s not difficult to figure out why. I’ve never had someone come to me and say, “I’d love to buy a business where I’m working on my own 14 hours a day out in the heat and cold, then get to come home and do paperwork all night.” As a single operator, that’s your life, even though it probably wasn’t your dream when you started the business all those years ago. It’s not a buyer’s dream either.
It’s hard to find the right fit in a buyer. You basically have three options. The first is a large company; they can put someone in a truck and take over your customer base quickly. The problem with larger companies is that they have overhead that you don’t as a single operator. They’re not going to net nearly what you did when you were performing the work yourself. You might have had net margins of 40 – 50 percent; a big company’s net might be closer to ten or fifteen percent. That means they won’t offer top dollar for your company because it will take a long time to make it back.
The second potential buyer for your business is another single operator. The problem with them as a buyer is the same challenge you face – they’re already busy with the customers they have. They’re already working long days; they simply don’t have the capacity to take on a whole new set of customers and service them well. They’re working long days just to manage the work they already have.
So that leaves one potential buyer, which I happen to think is the strongest prospect: someone just getting into the industry. It could be a new graduate from a trade school or someone who’s fairly new to the industry and ready to go out on their own. They’re eager, they’re aggressive, and they’re willing to put in the hard work and long hours it takes to be successful.
There’s just one downside with these buyers: they’re often young, and they haven’t had time to accumulate any capital. They can’t afford to buy your business right now. But there is a way to make this kind of deal work.
You’ll need to plan your exit early. Find a likely buyer who’s willing to work with you over two to three years, buying the business over time. Unless you’re willing to serve as the bank and make the loan yourself – which most small business owners aren’t able or willing to do.
So that’s the advice I give single operator business owners: start planning your exit strategy now, well before you’re ready to retire. Your business, no matter how good it is, is going to take longer to sell. You’ll need to start looking now for the right person who’s ready to buy your business and mentor them through the process.
Of course, if I can help in any way, give me a call. I’ll be happy to answer any questions you might have
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 has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the Vice President of the Business Brokers of Florida (North Florida District.)