How to Sell Your HVAC Business: An Insider’s Guide
Heating, ventilation, and cooling (HVAC) companies are in high demand by investors seeking to capture a share of the market. According to a recent report from Precedence Research, the HVAC market had an approximate value of $130 billion in 2021, which may grow to $206.89 billion by 2030.
Owners of HVAC companies who are nearing retirement or seeking a career change are in a solid position to earn a significant return on sales of their HVAC companies. Buyers remain attracted to HVAC companies due to their relative stability and substantial revenues.
Demand for HVAC services will remain strong in the coming years. As houses age, people seek to improve their current ventilation systems or install energy-efficient ones. Numerous government initiatives support the growth of the HVAC industry, such as the Energy Star Verified HVAC Installation (ESVI) program, which offers incentives to customers and contractors.
How to Unpack the Value of Your HVAC Business
You should never sell a business without a complete valuation of its worth. A valuation tells you what you should expect from a buyer in exchange for a sale. Without a valuation, you risk accepting an offer that is much lower than the actual value of your HVAC company.
Some company owners wait to undergo a valuation until they’re ready to sell their business. We advise obtaining a valuation every five years and even annually if you’re considering a sale in the not-too-distant future.
A valuation establishes what your business is worth based on various elements, including current revenues and profits, projected future income, location, and market position relative to competitors.
Even if you’re not planning to sell your company soon, the valuation gives you a benchmark of the current performance of your business. It can provide you with valuable insights into potential operational improvements.
Know When to Sell Your HVAC Business & How to Prepare: 3 Steps
Ideally, you’ll sell your HVAC business when it meets its maximum value potential while aligning with your personal goals. The optimal selling point is at its apex in growth, where there’s little room for further improvements.
Of course, reaching that point takes a lot of work, skills, and know-how. The following are a few ways to optimize the value of an HVAC business before it comes time to sell.
1. Get Your Financials Straight
Companies with a clean set of financials are much more attractive than organizations without them. Take a close look at your outstanding receivables, payables, and cash position.
You should:
- Have very few accounts with overdue balances of more than 60 days.
- Put a better collection process in place if your company has many overdue customer receivables.
- Review current contracts to ensure they are up-to-date and available.
- Review your current inventory and ensure that it’s accurate.
- Gather the last five years of your tax returns. Tax returns provide insights into company revenues, expenses, and taxes paid.
- Make sure to keep the payments current if you have any outstanding tax balances due.
2. Set Up an Exit Strategy
At some point, you will sell your business to someone else. When you do so, the company shouldn’t drift into chaos just because you’re no longer there to manage the day-to-day functions. You’ll want an exit strategy to ensure a smooth transition.
An exit strategy ensures that someone on your staff has the necessary skills to step in to perform your job. They’ll handle the operations, making the ownership change to the business seamless while the new owner gets up to speed.
Business sales sometimes happen unexpectedly. If you receive an offer from an interested buyer you can’t refuse, you’ll need to have a plan to protect your staff and customers.
For instance, you could include a contingency that protects your employees from job loss for up to six months following the purchase. While not every business purchase will result in staff changes, many do. It’s best to have some safeguards to protect your employees who may suffer adverse impacts from the change.
3. Make Continuous Operational Improvements
You should strive to improve your organization’s operational and financial efficiency. There are numerous ways to do so. For instance, you may consider your pricing structure. You could increase the cost of priority or emergency calls, which improves your revenues.
If you don’t already have long-term HVAC service agreements, consider adding them as a purchase option. That way, you can guarantee income to future buyers, who may express concern that they’ll lose some customers once they take over your organization.
HVAC company owners should ensure they have a strong presence on the internet and through social media. Build up your website or hire someone to manage it for you. Your website should contain basic information, including the history of your company, contact information, and the services you offer.
Work with a digital marketing agency to build your online presence if you can. While it may be costly, the investment can improve the value of your business when it comes time to sell. Buyers want companies that are well-known in their area and have a positive reputation in the market.
Get a Broker to Sell Your Business
A business broker can help you navigate a sale of your HVAC business. Business brokers will market your business to potential investors and manage all the inquiries you receive. They’ll also oversee the due diligence process and process the final sales offers.
You can find a business broker through local research. You’ll want to search for someone experienced in brokering the sale of HVAC companies. Before hiring them for your job, schedule a consultation to understand their process and determine whether they’d be a good fit.
Selling Your HVAC Business Is Rewarding
Selling your HVAC business is a reward for all the hard work you’ve put into making it a success. Whether you’re ready to retire or simply want to try your hand at another opportunity, make sure to get the most from your sale. You can do this by improving the value of your business in the months and years before you sell.
Need Help Selling Your HVAC Business Confidentially?
Cowen Partners’ approach is notable because we are one of the nation’s leading executive search firms and are in touch with potential buyers daily, including investors who are interested in HVAC companies, software companies, dental practices, and several other enterprises.
Our Partners come from a diverse set of backgrounds and skills, ranging from business owners and entrepreneurs to CPAs and financial analysts.
This diversity of talent enables the team to guide our clients with firsthand knowledge and experience through all phases of the business processes of building, buying, and selling.
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