As I write this, it’s 70 degrees outside my office on the west coast of Florida. It’s 45 degrees in Nashville, 27 degrees in Minneapolis, and 83 degrees in Miami. If you’re in any of these cities, is this the right time to put your HVAC company up for sale? Or do you wait for the “right” time of year?
I get the question all the time from business owners: should the decision of when to put my company on the market be based on the season? Should I hang on to it during the best sales season (summer) so that revenue is on the books and we can set the price higher? Should we sell before the summer rush so the new owner can see that he’ll be making a lot of sales right away? How do potential buyers look at it? Which season shows the most buyer activity?
The answer is that buyers buy when they’re ready to acquire. If they’re in the financial position to start looking and they find the right company, they’ll make an offer, whether it’s July 4th or Groundhog’s Day. In my experience, there’s no seasonality to deals. The real determining factor is what season the seller’s career is in.
I can’t tell you the right time to put your business up for sale, but I can tell you the wrong time. Owners who are burned out are probably choosing to sell too late. The sale process, whether you start in the summer boom or the winter doldrums, will realistically take up to a couple of months to complete (making the listing date irrelevant.) That’s after you find and vet the right buyer, which can also take weeks.
An owner who’s exhausted and ready to retire will probably not be running the business or pursuing new sales with the same passion he had a few years ago. Declining revenue and less efficient management will have a negative impact on the sale price and the pool of potential buyers. A burned-out owner will also be tempted to take a discounted offer just so he can get free of the business (and smart buyers know that.)
The ideal time to sell is when your company is running well and profitably and still has potential for growth in the market. The bottom line for buyers is based on cash flow and future earnings. An experienced business broker can help you determine where you are in the arc of your company’s value. He can also give you advice on what could increase the value and the multiple and the pool of interested buyers. (He can also help you estimate how long it might take you to get there.)
In the end, it’s the buyer who determines when it might be best to take over the company. Some new owners will be looking to make improvements a few months before the summer boom. Some might be glad to take over in the slower winter months because it gives them time to learn the business and make the transition (especially if they’re relatively new to the industry or the market.) They’ll have a timeline in mind which may or may not match your expectations; part of what you think about when you consider a prospect is how quickly he wants to close. If he’s in no hurry and you are, you might get frustrated before the deal can get done.
Because the time from listing to the completion of the sale is unpredictable, there’s no single right time to sell. The value of your company won’t vary that much based on the month it goes on the market. And deals, like heating and cooling system breakdowns, can happen year-round.
If you’re wondering if this is the right time to sell, the first step is to get an opinion of value.
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 President of the Business Brokers of Florida (North Florida District.)