Many HVAC Owners May Be Missing Opportunities to Enhance Business Value Before a Sale.
Not at the sale. In the years before it.
| The decisions you are making today — about your structure, your team, your customers, your processes — may be quietly determining what someone will pay for your business years from now. Most HVAC owners do not realize this until it is too late to do much about it. |
By William Yex, CFP®, CEPA®, Wealth Management Advisor
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SIX BLIND SPOTS COVERED IN THIS ARTICLE
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You know that feeling when you have been sitting in the duck blind since 5am, convinced this is the morning? And then an hour after sunrise comes around and you have not seen any ducks, and you start to lose focus and then finally a few birds fly over and you are not ready for them. That is the unfortunate case for a lot of HVAC business owners when they are ready to retire.
The business is running. Revenue is up. The trucks are busy. Life is good. And somewhere in the back of your head is this vague idea that when the time comes, you will sell the thing and ride off into the sunset.
The problem is, most HVAC owners have never actually looked at their business the way a buyer would. And when they finally do — usually when it is time to sell — the number they get back is a lot lower than the one they had in their head.
This is not an article about selling your business. It is an article about building one worth selling. Those are two very different things, and most owners never get shown the difference.
Here are six things that may be affecting the value of your business right now. Most HVAC owners have never thought about a single one of them.
Illustrative examples only – actual results will vary based on individual circumstances.
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1. You are running the business. Not owning it.
Here is a question worth sitting with over your next cup of coffee. If you took two weeks off — full off, phone in the truck, gone fishing in the Keys — what would happen to your business?
If the honest answer is “it would fall apart,” then you do not own a business. You own a job. A well-paying, truck-having, employee-managing job — but a job. And jobs are a lot harder to sell than businesses.
The most valuable HVAC companies run without the owner in the seat every single day. Not because the owner checked out, but because they built systems, developed their team, and documented how things work. That shift — from operator to owner — may be the single most important thing you can do for the long-term value of what you have built.
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REAL TALK If your top commercial client called right now and you were at your hunting property for the night with no cell phone service — who handles it? If the answer is “nobody,” that gap is worth closing sooner rather than later. |
2. Your business may be worth less than you think
Every HVAC owner has a number in their head. Usually it is based on revenue, or what they heard somebody’s cousin sold his plumbing company for at a cookout three summers ago. That number is almost always high.
Here is how it actually works. Buyers price businesses based on a multiple of earnings. That multiple goes up or down based on how risky the business looks from the outside. How owner-dependent it is. How the books look. Whether the revenue is recurring or one-time. Whether there is a real team or just one person holding the whole thing together with duct tape and determination.
| A TALE OF TWO COMPANIES
Two HVAC companies. Both clearing $500,000 a year. Company A: Owner runs everything. Three big commercial accounts make up most of the revenue. Books are fine but basic. Company B: Service manager runs day-to-day. Maintenance contracts. Diversified customer base. Clean, organized financials. Same earnings. Company A may trade at 3x — a $1.5M valuation. Company B may trade at 6x — a $3M valuation. Same profit. Potentially very different valuations. The difference is not luck. Illustrative valuation multiples may vary significantly based on market conditions, industry trends, buyer demand, and company-specific factors. |
3. Owner dependence is silently killing your value
This is the most common — and most damaging — value problem in HVAC businesses. And almost nobody talks about it until it is time to sell.
Think of it like a hunting club where only one guy knows where all the stands are, which feeders are loaded, and which roads wash out after rain. The club runs great while he’s around. The day he’s not, it is chaos. Nobody would pay full price for that membership.
If you are the best tech in your company, the main contact for your biggest clients, the one who approves every quote — a buyer sees all of that as risk. Because the day you walk out, so does a big chunk of what they paid for.
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QUESTIONS WORTH SITTING WITH • Who handles your top customer relationships if you are unavailable? • Is the knowledge of how your business runs written down, or does it live in your head? • Would your key employees stay if you sold tomorrow? • Could your service manager run things for 30 days without calling you? |
Fixing this is not just a someday problem. It makes the business less stressful to run today, more resilient if something unexpected happens, and may dramatically increase what someone will pay down the road.
4. Customer concentration is a ticking clock
Big commercial accounts feel great. One contract, steady revenue, a name-brand logo on your truck. Nothing wrong with landing those relationships.
But when one customer makes up 30, 40, or 50 percent of your revenue, you have not built a business with a great client. You have built a dependency. It is like having one hunting lease and the landowner’s son just got his real estate license. One phone call and your whole season is gone.
Sophisticated buyers use a simple benchmark: no single customer should represent more than 10–15 percent of revenue. Above 25 percent, red flags go up. Some buyers may view high customer concentration as a significant risk factor. The ones who do will price the risk in — and it shows up in the multiple.
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NOT JUST A FUTURE PROBLEM That big account could go in-house, get acquired by a national chain with a preferred vendor contract, or just decide to switch. When it happens, the revenue hit may be very hard to recover from quickly. Diversification protects you right now — and may make your business worth dramatically more when the time comes. |
5. Your financials may be telling the wrong story
Most HVAC businesses keep books that are good enough for the CPA and accurate enough for the tax return. That is fine. It is not what a buyer wants to see.
Buyers do not read your tax return the way your accountant does. They read it the way an investor does — looking for the real earnings of the business once you strip out personal expenses, above-market owner salary, one-time costs, and the truck that is technically a company vehicle but has never been within ten miles of a job site. They recast your numbers to get to the truth.
Most HVAC owners have never calculated that real number. They find out what it is during a negotiation they were not ready for. That is a bad time to learn.
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THE TAX NUMBER VS. THE REAL NUMBER Your tax return is built to be as low as possible. Intentionally. Your “real number” — your re-casted earnings — is what the business generates when normalized for owner-specific items. Understanding it may be an important component of long-term business planning. Side note: buyers who ask for clean financials and get a shoebox full of spreadsheets two weeks later assume the worst. Not just about the books. About the whole operation. |
6. You have more options than you think
Most HVAC owners assume exit is either sell to a competitor or hand it to the kids. There are actually at least six meaningfully different paths — and the right one depends entirely on what you want out of it.
Do you want to maximize the number? Make sure your employees land somewhere good? Stay involved or make a clean break? Get clear on that first. The strategy follows.
| Exit Path | What It Means | Best Fit For |
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Family Transfer |
Sell or gift equity to your kids or next generation. You typically become the lender. Needs years of lead time. |
Legacy-focused owners who want to keep it in the family |
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Management Buyout |
Your key managers buy you out — often financed through the business or a lender. Rewards the crew that helped build it. |
Owners with a strong internal team they trust |
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ESOP (Employee Ownership) |
A trust buys equity on behalf of your employees. Significant tax advantages. Your team becomes the owners. |
Owners with strong cash flow, 30+ employees, and a team worth rewarding |
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Strategic Sale |
Sell to another operating company — a competitor, regional player, or industry consolidator. May provide attractive valuation opportunities when pursued through a competitive process. |
Owners prioritizing maximum liquidity |
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Private Equity |
Sell a majority stake, retain equity, stay in the seat. Many owners are skeptical — and that wariness is worth understanding. But for the right situation, it may create additional liquidity and planning opportunities. |
Owners open to a partial exit now and a second payout later |
| Wind Down / Transition | Gradually reduce operations and hand off relationships over time. Lower proceeds, but sometimes the right call. |
Owners without a clear successor and limited runway |
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A NOTE ON PRIVATE EQUITY A lot of HVAC owners hear “private equity” and picture a bunch of guys in suits showing up to cut headcount and flip the business in three years. That picture is sometimes accurate — and it is worth going in with clear eyes. But PE structures vary widely. A partial sale, where you sell a majority stake and retain equity, may provide real liquidity today while keeping you in the driver’s seat for a second, potentially larger payout down the road. Worth understanding the option before you rule it out. |
The Bigger Picture
None of this is about selling. It is about building a business that you could sell — and recognizing that those two goals are not in conflict. A business that is not dependent on the owner, financially clean, and built on recurring customer relationships is also a better business to run today. Potentially more efficient, scalable, and resilient.
The HVAC owners who end up on their own terms — at a time of their choosing, for a number they are proud of — are the ones who started thinking about these things years before they needed to. Not because they were in a hurry to leave. Because they understood what they were building had real value, and they chose to protect it.
The question is not whether you will ever step back from this business. The question is whether, when that day comes, you will have built something worth handing off — or just a very long to-do list with your name on it.
Want to Know How Much You Could Be Saving?
William Yex works exclusively with trade business owners — HVAC, plumbing, electrical, landscaping, and construction — helping them build and protect real wealth around their business. A 30-minute conversation is all it takes to identify where the opportunities are.
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Apollon Wealth Management, LLC (“Apollon”) provides advice and make recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment advice. See Apollon’s Form ADV Client Disclosure Brochure for information about risks and considerations relating to the services offered through Apollon. This is available on our website, www.apollonwealthmanagement.com.
Apollon does not provide tax advice; individuals are strongly advised to consult with a tax professional before making any tax-related decisions. Tax strategies are general in nature and may not be suitable for all individuals. The information provided herein may not be relied on for purposes of avoiding taxes. The specific considerations for you may need expertise or review by a tax professional, licensed insurance provider, estate planning attorney or other professional to determine how it applies to you. Information provided is generic in nature, for educational purposes and not specific advice. Speak with your tax professional about your specific personal considerations before making any planning decisions.
Any examples, scenarios, or business outcomes discussed are hypothetical and provided for illustrative purposes only. Actual business valuations, transaction outcomes, and planning results will vary based on individual circumstances, market conditions, and other factors.
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