I've been running a residential HVAC company for 16 years. We do about $1.8M in revenue, service and install. I'm ready to retire and want to sell, but I have no idea what a realistic asking price looks like. One broker told me 4x EBITDA, another said 6x. That's a huge difference. Anybody been through this? What actually matters when pricing an HVAC business?
Valuation
How to set a realistic price to sell my hvac business?
4x vs 6x is the difference between a broker who wants a quick sale and one who's blowing smoke to get your listing. What's your EBITDA after add-backs? That's the real starting point.
We sold our plumbing/HVAC shop two years ago. Revenue was similar. Got 4.5x on adjusted EBITDA but it took 11 monwths and we had to carry a note for 20%. Buyers care way more about recurring maintenance contracts than install revenue.
Good point on the maintenance contracts. We have about 600 service agreements. EBITDA is roughly $380k after add-backs. Broker number one said 4x, number two said 6x. i don't know who to believe.
600 agreements is solid. That's your gold. An installer-only shop gets 3x at best. Service contracts get yo into the 5-6x range if they're transferable and not all expired.
Why not just get a third opinion? Or fourth. Brokers are salespeople. A real valuation from a CPA who does HVAC deals is worth the $3-5k.
Also, are you counting your own salary as an add-back? If you're the one running calls, buyers will want a manager in place before they pay top dollar.
This. We had to hire a service manager 18 months before listing. Cost us money but it made the business sellable. A buyer isn't paying 6x for you, they're paying for a business that runs without you.
lol @ 6x. Maybe if you've got a fleet of trucks, 20 techs, and a branded service area. For a 16-year owner-operated shop with 600 contracts? 4.5x is realistic. 5x if you're patient and the buyer is strategic.
Appreciate all this. So it sounds like 4-5x adjusted EBITDA is the real range and the 6x guy is probably overpromising. I'll look into a proper valuation. And yeah, I'm on the truck 3 days a week. That's probably hurting me.
Get off the truck. First thing. Buyers see owner-dependent and discount hard.
One more thing: don't price on revenue. I don't care if you do $1.8M. If your margins are thin, it's worth less. What's your gross margin?
Yeah, and if that 6x broker asks for for a 10% listing fee upfront, run.