Have you considered selling an Air Conditioning company in Southwest Florida? Selling an HVAC business can be more difficult than it may initially seem. While it is an industry in high demand, especially in Florida, where everyone needs cooling, it is also a high cost industry. Finding qualified technicians can be difficult as well. In addition, the values of HVAC companies can also vary dramatically. Before selling any business, you must know its value. This is the first step in determining what action you can take next.
How Much is Your HVAC Business Worth?
There are numerous factors that can influence the value of your business. Revenue, assets and liabilities play a significant role. However, there are other intangible aspects that do not show up on your bottom line, but can influence how much a buyer would be willing to pay for the business.
The most reliable method of valuation is the multiple of earnings method. This method considers two different calculations. One of them is to take 2 to 4 times Seller’s Discretionary Earnings (SDE). The other is to take 5 to 7 times Earnings, before Interest, Taxes, Depreciation and Amortization (EBITDA).
SDE represents the total financial benefit a potential buyer can expect to receive from your business. Expenses such as owner’s salary, benefits, depreciation and other one-time and situational expenses are added back into your net profit, before taxes. EBITDA is similar to SDE, but typically used to value very large businesses. The primary difference between the two is that EBITDA assumes that the buyer will not be an owner-operator, so it considers a market-value officer’s salary as an expense, and keeps it as a deduction from net profits.
Outside of the formula for calculating the value of your business, buyers will look at other attributes that will determine what they will ultimately offer. One of these is the diversification of your accounts. Buyers want to see that your revenue is not too dependent on a small group of customers. The wider your reach, the more valuable your business is. If losing a few big clients could cripple your revenue, it will be a big red flag to buyers.
Another big valuation factor is how well the business can run without you. If performance is too dependent on your involvement, what will the new owner do when you are gone? This represents a risk factor, as new owners could experience many costly hiccups while learning to run the business. Having a strong management team in place will help alleviate this issue and also boost the value of your company.
How your business stacks up in the local market will also help determine its value. Where do you rank against your competitors? How is your online presence? In modern times, ranking high on search engines, maps and other business search tools is critical. Buyers will also be looking to see if there is room to grow and expand in your market.
The aforementioned items are just a fraction of the countless factors that can go into valuing your business. Every business if different and has its own intangible assets and liabilities. The best way to get an accurate picture is to get a formal business valuation done by a professional, such as a business broker, who will have the knowledge and experience necessary to properly appraise the company,
How You Can Increase the Value of Your HVAC Business
There are a few ways you can improve operations and increase profits, which can boost the value of your business. They can also help you to run a more successful company while you are waiting for it to sell. Some of these changes start with your staff. If your business depends too much on you as an owner and operator, it is time to bring your management team up to speed. Your goal should be to make yourself replaceable, so that after the sale, the business can transition seamlessly. Another way you can accomplish this is to have an operations manual. If you don’t already have one, an operations manual is a great way to show a potential buyer a path towards learning and running the business. It’s also a great way to develop consistent procedures, which will further enhance the company’s value.
Increasing profits is another, very direct way of increasing the value of your HVAC business, if you can pull it off. One way to do this is to look for more ways of creating recurring income. Buyers love businesses that have a lot of service agreements, because they boost income and make it more predictable. If you have room to improve in this area, start pushing and promoting service and maintenance plans more. Play with the pricing a bit to find the sweet spot where service agreements become more attractive to customers. You could also start charging more for priority or off-hours services. Follow up with your current customers as well. This will help to improve your level of service and help customers to remember you better when the time comes.
If there are any improvements you can make to your business’s tangible assets, you may also want to take care of those before listing it for sale. Do you have equipment that needs to be replaced or upgraded, or vehicles that need servicing? Stay on top of these items, because they will come up during the sale, when you find an interested buyer. In general, buyers do not want to have to invest a lot of additional capital in the business after they purchase it. The more potential problems you can take care of before listing your company for sale, the more attractive, and subsequently more valuable it will be.
Getting Your HVAC Business Ready to Sell
To get the highest possible offers for your business, you must be able to show buyers why it is worth what you are asking. You can do this by getting organized and tying up any loose ends when preparing your business for sale. A big part of this is cleaning up your financials. You should be keeping up with your bookkeeping on a regular basis, but if you aren’t, it’s time to catch up and get organized. Every serious buyer is going to want to see your books. Being ready to pull them at any moment not only shows that you have a well-run business, but it also keeps the momentum in a deal moving forward.
You also need to get caught up with your receivables. Having a bunch of unpaid invoices that have gone past 30 days will be viewed as a risk to buyers. A new owner will need working capital to run the business, which means the business needs to get paid on time. Work on eliminating any existing debt as well. While it is possible to sell a business with outstanding loans, it is much easier to sell one without any.
Consider creating a growth plan for your company that you can present to buyers. If you can show how the business still has room to grow, and be able to show a roadmap to that growth, it will become more attractive to buyers. Having a good growth plan will especially catch the eye of bigger investors, and owners that do not want to have to run the business themselves.
Once you are ready to sell your HVAC business, you will want to consult with an expert. A business broker can help you to market your business for sale, filter and qualify potential buyers and negotiate deal terms, while you continue to run the business. Being able to continue to operate the business smoothly while you are selling it is critical, but so is confidentiality. A broker can keep knowledge about the sale of your company private, so that competitors do not try to purge your company, and sensitive information only gets released to serious buyers who are financially qualified. If you want the best chance to sell your business at the highest possible price, you need to allow an expert to guide you through the process.
If you would like to consult with a broker about selling your HVAC company, contact CIBB. We are a business brokerage with over 100 years of combined experience selling businesses of all sizes. CIBB has helped many HVAC business owners in Fort Myers, Naples and Sarasota maximize their profit potential and sell on their terms. Our process begins with a free, no obligation business valuation. Find out what your business is worth and discover how rewarding selling it can be.
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