Selling your business is one of the toughest decisions for any business owner.
Here are some key considerations to consider:
- Are you emotionally ready to sell? Many HVAC owners spend considerable time at the office. Leaving the job behind can leave a huge void to fill in one’s schedule. Can that be filled with hobbies, family, friends, volunteer work, etc.? Or maybe there’s simply another business you are looking to start. And are you and your significant other on the same page? I’m reminded of a story of a financial planner working with a couple near retirement — one spouse wanted to buy an RV and tour the country, while the other simply wanted to hang out with the grandkids.
- Are you financially ready to sell? Most small HVAC businesses sell between 3 to 5 times Seller’s Discretionary Earnings (SDE). SDE can be a complex to determine, but it is essentially how much money in a normal environment an owner can take in a given year. A better definition can be seen on this website: https://morganandwestfield.com/knowledge/sde/
When considering selling, it is best to hire a broker for a business valuation, since they are skilled at calculating SDE and have knowledge of current industry multiples. And then taking that valuation to your accountant and financial planner to see if the after-tax sale proceeds would be enough to meet your longer-term or retirement needs.
- Has the business been optimized for sale? Generally, you will want to have two consistent solid years of performance reflected in both the financial statements and tax returns. Additionally, consider transferring some of your day-to-day duties to your Office Manager, Sales Manager or other staff if possible. Buyers value turn-key businesses. And given the state of the HVAC industry, having as few open technician positions as possible would be a big plus.
- Are you prepared for the deal process ahead? The perfect deal and the perfect business do not exist. Deals have many ups and downs. It takes a committed buyer and seller to manage through the process along with strong advisors. Expect the marketing process to take 3-6 months and potentially another 3-5 months to get to closing. Surround yourself with accomplished and trusted advisors that have a depth of mergers and acquisitions experience. That experience will get you through the normal hiccups that occur with any deal.
Determining the right time to sell your HVAC business requires a careful evaluation of personal motivations and the current state of your business. Whether due to personal reasons like retirement or simply seeking new challenges, the decision to sell should be made with thorough research and planning. Ultimately, the optimal time to sell varies for each business owner, but selling your HVAC business can be a rewarding and profitable venture with the right approach and timing.