An uncertain economic climate (like during a global pandemic) can cause business owners to ask questions they maybe hadn’t faced before. One of those questions is, “How do I sell my business?” Although HVAC industry trends post-corona reflect a trajectory of recovery in the industry, this was preceded by an economic shutdown that has understandably left many HVAC company owners unsettled in its wake. If you’re wondering how to sell your HVAC business, you’ll want to begin with 5 key considerations we’ve identified through decades of experience.
Consider what goes into a business valuation.
Being able to present a fair and accurate accounting of your HVAC business’s value is essential for a number of reasons, but a professional business appraisal is particularly important when attempting to sell your business. This valuation document is the single most useful piece of financial information about any company, and as such, demands an accurate and comprehensive approach. A professional valuation of your HVAC business may require:
- Tax returns for the last 3 years Federal Tax Return
- Interim Profit and Loss Statement (P&L), including balance sheet
- Last 3 years Profit and Loss Statement (P&L), including balance sheet
- Average value of inventory of saleable product on hand at any time of year
- Equipment List
- Copy of tax bill on real estate; if the real estate may be included in the sale
- Copy of any real estate appraisal that is available
- Lease information
Consider how to maximize your valuation.
Having sold more than 500 businesses over the past 20 years (and specifically, 10 HVAC companies), we’ve seen what factors tend to increase or decrease the value of a business. The good news is this: in addition to the aforementioned numbers entered into standard market multiples, there are actionable steps you can take to improve your HVAC business’s value.
- Staff Training
Most buyers want to know they’re walking into a “well-oiled machine.” A well-run HVAC business has well-trained employees. Trained employees show buyers that your business is reputable and organized; this requires a foundation of advanced and consistent training. If you don’t already have a consistent employee training program in place, it’s never too late to start.
Do you have multiple employees with various HVAC licenses on your payroll? Or are you the only person in the company who holds a license? As you know, it can take years to obtain the highest level licenses for HVAC work. Identify key, loyal employees, and invest in their licensing. This allows your employees to practice a higher level of HVAC work and adds value to your HVAC business.
- Client Service Agreements
Annual renewable service agreements are a familiar concept to HVAC companies. They are a great tool to ensure consistent revenue and repeat customers. If you’ve never actively prioritized building up your recurring service agreements, now is the time. There are many ways to sell a service contract to a customer, and your employees must be comfortable and familiar with presenting these benefits to clients at every sale, service, and repair. By securing additional service agreements, you increase your upfront revenue stream, establish repeat customers, and show financial stability to buyers.
- Growth Plans
If you’re asking how to sell your business, it may feel counterintuitive to talk about growth plans. But remember: higher profits = higher value. If you can show a steady increase in profits and a business model that shows future growth, buyers will want to buy your business. So, now really is the time to sit down and brainstorm growth strategies. Can you increase your service radius to cover a larger area? Are there any additional products, services, or specialties you can offer? Think about how you can grow your business, and then start taking steps to make it happen, and get your plans on paper. This will be the hard evidence of your growth plans and will help when you begin meeting with potential buyers.
Consider why you want to sell.
There are many reasons to sell a business. Why you want to sell your HVAC business will help inform how to sell your HVAC business.
You’ve determined it’s time to retire. Perhaps it will be a family succession, or you want to give an employee the opportunity to buy the business, or you’re dissolving a business partnership; regardless, it’s essential that you work with an experienced partner to ensure a smooth transition, maintain business continuity, and preserve your business legacy and reputation.
You have another investment opportunity you want to take advantage of, but you’re not ready to retire from the HVAC business. You are still committed to the growth of your HVAC company, but you’d like to free yourself up enough to invest in another business or project. Here, a strategic buyer like a private equity firm may be interested. In this case, you maintain income and benefits, likely even a minority stake in the company, but reduce exposure and gain financial security.
- Asset Liquidation
Life has presented you with circumstances that demand an influx of cash. You are not ready to launch an exit strategy, but you need to liquidate. Again, finding a strategic buyer opens up valuable options. Look for an upfront liquidity event that allows you to keep your job and ideally offers you a minority stake in the business. This provides your financial security along with long term income and growth opportunities.
Consider when it’s best to sell.
Simply put, the best time to sell your HVAC business when it is doing well. This really applies to any business, and yes, we know it feels counter-intuitive. If your HVAC business is trending up, it’s normal to assume that if you wait a little longer, you can get even more for your company. Sadly, we’ve seen that rationale end in a great deal of regret for many sellers we know. These owners often encountered an unforeseen circumstance like a change in their health, the loss of a key client, or *ahem* a global pandemic.
We understand the heartache and frustration that comes with this type of situation, especially after years of pouring blood, sweat, and tears into a business. A confidential, professional business valuation provides essential information that helps indicate the best time to sell a company. As we’ve all been reminded, we can’t see what the future holds. So, we must focus on what we do know, and financials are the best evidence of where your HVAC business is going. Timing is key; you don’t want to look back and wish you had acted sooner.
Consider who can help.
As we’ve already mentioned, to sell your HVAC business it is imperative that you obtain an accurate, comprehensive business valuation from experienced professionals. Also, when considering various reasons for wanting or needing to sell, it’s advantageous to utilize a broker with a large network of potential buyers. All of this is where we come in. Our brokers have almost nine decades of combined experience buying and selling businesses; our closing rate is 4x the industry average; and businesses we represent sell for, on average, 96%+ of their asking price.
Bottom line: we know how to sell your HVAC business. Furthermore, Viking has been retained by an HVAC industry buyer investing in industry-leading HVAC owner/operators. Our buyer has proven operational processes which will provide a platform that allows you to maximize future growth, creating maximum value for you and your employees. Viking’s confidential process is designed to help your company expand in the HVAC industry while providing you with a clear, successful, long-term exit strategy. Viking Mergers is actively seeking HVAC owner/operators who desire to capitalize on this strategic expansion opportunity. If this might be you, contact us for a confidential inquiry.