In just a few months, our country will know our leaders for the next four years and beyond. While the passion behind politics is nothing new, neither are the cycles for business sale activity. With a fair degree of certainty, we can accurately predict what happens next in our economy, and when an HVAC owner should consider selling their business.
I had a conversation recently with an HVAC business owner and our discussion turned to politics. He remarked how he simply does not care who is in office because it has no impact on his business.
“People want to be warm in the wintertime and cool in the summertime,” he said.
He’s not necessarily wrong, but what happens politically can absolutely have an impact on his ability to sell the business. When money is cheap and capital is available like it is now, conditions set up perfect for both buyers and sellers. Both are deeply incentivized to do a deal as soon as possible. For example, the Small Business Administration (SBA) was so desperate to keep loan activity high during the pandemic, they offered to pay the first six months of principal and interest for buyers. That’s never happened before. But that offer expires on September 27.
However, history has taught us that such favorable conditions don’t last forever and eventually merger and acquisition activity will wane. It could be caused by high fuel prices, rising interest rates, terrorism, global health crisis, and even a presidential election. A previous generation of HVAC owners remembers inflation at 13 percent and interest rates approaching 20 percent during the Jimmy Carter administration. While that was a long time ago, it still serves as a reminder that when a perfect storm of events (like the oil crisis of 1979) happens, it can kill any dreams of selling your business and padding your nest egg.
More recently in 2008, we had the Great Recession, mostly fueled by a housing crisis that pushed our financial system to the brink. HVAC owners that wanted to exit around that time saw the value of their companies cut in half. They had to wait a decade to get back to pre-recession levels. That’s a hard pill to swallow when a personal health crisis or retirement is forcing your sale.
As your financial planner may have told you, trying to time the market is not a good idea. However, when you are trying to sell the most valuable asset you will ever own, choosing your window of sale opportunity is the prudent thing to do. Historically speaking, it’s clear we are currently in one of these opportunity windows now, but the results of the election could change this.
If you’re considering selling, the first thing to do is to inquire about the value of your company. Once you know your “number” you can have conversations with your spouse, financial planner, and family if it’s enough to retire or move onto another challenge. These types of decisions aren’t affected by who holds political office. However, finding an available buyer and getting them financed has a direct correlation.
Any election season brings with it some uncertainty, but the entrepreneur finds a way to thrive. One thing is for certain, regardless of your political affiliation, we still live in what I believe is the best country in the world. God Bless America!