Outside of your decision to get married, selling your HVAC business is likely to be the second-most important decision you will make in your lifetime.
When you’ve decided to sell your HVAC business, the time of year to close is an important detail. The answer largely depends on your geographic location and perspective.
“In the summer, contractors are slammed,” says Patrick Lange, owner of Business Modification Group, a business brokerage firm that specializes in finding buyers for HVAC companies. Merger and acquisition activity is actually quite slow because there is usually more demand for HVAC service than supply. HVAC company owners are focused on making money and don’t want to be distracted with much else. They need this revenue to support them in the slower months to come.
The summer months are intimidating to buyers. A frequently ringing telephone can stress most companies to their breaking point and starting a strategic conversation is not going to be in their
The summer months are also intimidating to buyers. They know that a frequently ringing telephone can stress most companies to their breaking point and starting a strategic conversation is not going to be in their best interest. It’s a difficult task to make an ownership transition in peak season, so most don’t even try. Lange’s advice for HVAC company owners? “Focus on making as much revenue as you can so that you have a good financial story to tell for later on in the year when you want to list your company. It’s in your best interest and will make you more money at the closing table.”
While commercial and residential customers enjoy 70ish degree outside temperatures, they keep their HVAC units off and enjoy fresh air from mother nature. That’s a nice treat to have a respite from utility bills, but it can spell disaster for an ill-prepared HVAC company.
The problem is that even if consumers know that they need major service, they can delay the decision until temperatures become unbearable. Unfortunately for the HVAC company, this may not happen for a couple of months.
Lange stresses maintenance agreements. “I see it happen all the time. HVAC companies get caught up in the delivery and installation of new units and lose focus on what builds real value in the business. It’s the maintenance agreements that will keep the company going in the lean months of spring and fall. Buyers want to see consistent recurring revenue flow. This reduces their anxiety and takes some of the risks out of the buying decision. The result is they will pay more for the company.”
While this is a tough time for HVAC companies, it’s prime season for HVAC company buyers. Lange explains the reason buyers like this time of year is because they know it’s slow. Therefore, it is easier to get the owners attention and go through the necessary due diligence process it takes to make a deal. Ideally, the new owner wants at least a couple of months to understand the inner workings, make any necessary staff changes, and tighten up processes. They know that when the season starts, they won’t have time to work on the business. Customer calls will take priority.
The geographical location of an HVAC company makes a big difference in the winter months. For example, homeowners in Miami, Florida may not turn on their heat at all because their average low temperature in February is just 65 degrees, also known as “sweater weather.”
HVAC companies have a different season in this area because winter heating season is short and the cooling season is up to 10 months long.
Conversely, the average low in Raleigh, North Carolina is 33 degrees. Even the diehard penny pinchers will click on the electric heat in these climates so HVAC companies stay busy.
In the southeast, generally, January and February are still great times to engage with a buyer.
Lange says that during fall it's easier to get the owners attention and go through the necessary due diligence process it takes to make a deal.
Similar to fall, moderate temperatures slow the industry, but unseasonably hot or cold temps could bring a welcomed revenue boost. Time is well spent here on training, equipment maintenance, and new hires. In the spring, most buyers of HVAC businesses have already made their decisions. If you have a buyer you have been in negotiation with, they may put pressure on you to close by the end of May. They want to realize the revenue in the upcoming summer months. If you miss your window, your next opportunity to sell will likely be in the fall.
Patrick Lange is an experienced HVAC specific business broker and previous owner of an HVAC business. He is based in Horseshoe Beach, Fla. He has a unique background in financial planning and has even owned an HVAC business himself. Specializing in companies with $1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has reportedly sold more HVAC businesses than any other broker in the United States over the last 12 months, and is currently the Vice President of the Business Brokers of Florida (North Florida District.) He can be reached HERE.