The reality is, your peers know what it costs to operate a heating and air company. Running trucks, paying salaries, and vendor pricing all run pretty consistent for the whole industry. So if your asking price is out of line, it hurts the chances of selling your company.

Trust is the Foundation for the Deal

When buyers see your business listing, they will usually contact a broker, and sign a nondisclosure agreement (NDA). This document makes sure sensitive business details are only shared with interested parties. It’s the first step in the process to get to know your company. Next, the buyer will perform their due diligence and take a closer look at sales and expenses. Understand that this whole time, they are evaluating the opportunity and seeing if it’s worth the capital risk to buy.

If the buyer finds an anomaly and the numbers don’t add up, they immediately become skeptical, and anything more the seller tells them is met with a cynical eye. Simply put, lack of trust (specifically early on in the process) kills deals.

In these cases, the seller usually has an answer they have rationalized. I frequently hear, “Well the business could have these numbers if I had another technician” or “We used to do those numbers and we can again.” The reality is, you can’t expect the buyer to pay for hypotheticals. Your business is what it is.

I understand why HVAC owners would want to “round up” their numbers, but I would encourage them to stick to the facts and accurately represent their performance. If not, the seller and buyer may have spent dozens of hours and thousands of dollars only to come to an impasse. The result is frustration all around and reputations tarnished.

It is far better to either list fair numbers or take the extra time needed to create the multiples you are looking for by growing your business.

Beware of Your Broker

I see inexperience brokers all the time make strategic errors by telling the HVAC owner what they want to hear. The broker may have listed a pizza joint last week and a heating and air business the next. They just don’t know what is realistic in the industry.

My advice is to ask your broker how many HVAC businesses they have not just listed, but sold. Then, ask for specific references. The best HVAC business brokers in our industry are ones that push back when warranted and work with sellers to come up with a realistic asking price. While it is not always what the business owner wants to hear, it will save time and money for everyone in the deal.

Don’t Forget about the Bank

Even if you are asking the upper limit of what is justifiable, and you have a willing buyer, the bank also needs to approve the deal. They will benchmark numbers against other similar deals and come up with their own set of numbers they are comfortable with. There is even more scrutiny if it is a deal underwritten by the Small Business Administration (SBA). In most cases, if the bank does not approve, then no deal happens unless the seller takes less or the buyer puts more money down. In either case, getting the deal done at this stage becomes exponentially more difficult and rarely holds together.

If you have built a great company, your accurate numbers should speak for themselves. As simple as it sounds, representing yourself with honesty and integrity is the best way to find the right buyer quickly.