Great, you found a buyer for your heating and air company, agreed to a price, and now you are ready to close. What do you do about work in progress during HVAC sale?
The short answer is, it depends. It depends on my factors. This includes if your company does a lot of new construction. As well as, if you have whole homes with ductwork, equipment, etc.. that needs to be completed. Versus if you are strictly a service and replacement company and all you have going on are change-outs.
Service and Replacement Company
Let’s start by just assuming you are a service and replacement company because that will be the easiest. It depends on the time of day the closing is set. Both sides will agree who the day of closing will belong to. That party will be responsible for all expenses on that day, as well as all income. I try to set it so it belongs to the seller. This is because that way all of the equipment can be bought and paid for. Then, the customer can pay when the job is completed. A typical change out will only take one day. As a result, everything is started, paid, and completed on the same day.
Now let’s talk about what to do if do larger projects or construction work. We typically will set down a few days before closing. During this meeting, we will see what work is anticipated not to be completed by the time you close. We will then look at the overall project and where we will be at the time of closing. If the job has a day left, and all equipment has been purchased, often the parties agree that the seller will complete the project. And the seller will pay the buyer some fee for the daily labor, and then keep all of the profits. However, if the job started the day of closing, and the seller has not purchased equipment, etc.. often both sides will agree that the buyer will reimburse the seller what they are out. Going forward the buyer and be responsible for costs and profit.
Middle of a Project
If we are in day 10 of a 20 day project, it takes a little more work. But still does not pose a big problem. The seller can provide what they have currently invested. In addition to what expenses are remaining. As well as, what the overall income will be at the end. By working together, both sides can determine based on what has been completed, as well as what is outstanding what a fair breakdown or split can be at job completion. Once again, this is a little more work. But can certainly be taken care of prior to closing as long both sides are willing to look at it from an honest prospective.
As I have always preached, my goal is for a buyer and seller to be friends by the end of the transaction, and as long as these items are addressed fairly and honestly, this will help ensure that continues. Reach out to me today regarding your questions about what do you do about work in progress during HVAC sale?