I'm selling my HVAC company after 22 years. Had a broker for six months, paid a retainer, got a few tire-kickers, nothing serious. The contract just expired. I have two potential buyers who reached out to me directly, one is a competitor, the other is a former employee who wants to take over. Both are serious and have shown me proof of funds. I'm thinking of just negotiating directly and saving the commission. Has anyone here done a direct sale? What should I watch out for? I'm mostly worried about confidentiality and not getting taken advantage of on terms.
Direct Sales
Dealing with buyers directly without a broker in the way
Did a direct sale two years ago. The biggest thing is getting a proper LOI signed early. Without a broker, people tend to talk loose. Get confidentiality and and exclusivity in writing before you hand over any real financials.
Who Drafts the purchase agreement? You'll still need a lawyer. That's not free. Factor that in before you assume you're saving the whole commission.
I have a business attorney I've used for years. He quoted me a flat fee for the sale paperwork, so that part is covered.
The former employee situation is tricky. I'd be careful there. If it doesn't work out, you've shown him everything and he could walk. Also, employees talk. Make sure he understands this this stays quiet until it's done.
What kind of terms are they proposing? All cash or seller financing?
The competitor is offering 70% cash, 30% over two years. The former employee wants to do 50/50 with a consulting period ror me. I'm more comfortable with the competitor's structure but the employee knows the business inside out.
70/30 over two years is not bad if you get a personal guarantee and a security interest in the assets. Don't just take a promissory note and hope.
HVAC is very relationship-driven. Customers and techs both. The employee buyer might keep more of that intact. But 50% seller financing is a lot of risk for you. Are you willing to carry that much?
No broker means nobody is going to tell you when a buyer is being unreasonable. You have to be comfortable pushing back yourself. That was the hardest part for me.
Also, check the competitor's history. If they've bought other shops, how did they treat the sellers? Ask around.
That's a good point. I know one guy they bought from about four years ago. I'll reach out to him quietly.
Get a valuation done independently if you haven't. Even a cheap one. You need to know what the number is before you negotiate, especially without a broker anchoring it for you.
How did the broker leads compare to these two? Curious if the direct route is actually better or just lesss annoying.
The broker's job is partly to keep you from doign exactly this. It can work, but you have to be disciplined. Good luck with it.