Whether your HVAC business has been passed down through your family, or you have only been the owner for a few years, it is important to understand how to value an HVAC business.
Your HVAC business valuation essentially comes down to two components:
Valuation of a HVAC company shows that the initial range size of adjusted cash flow and the bands work in groupings according to size. As you will quickly see, the higher the cash flow, the higher the multiple.
A buyer’s HVAC valuation also includes a number of secondary considerations that will impact the range of sale, from the top to the bottom. Although the name implies they are secondary, they will certainly impact the range.
We multiply the free cash flow by the multiples, and that equals your HVAC valuation. Along with this number, there are several other considerations for how to value an HVAC business. First, the buyer is purchasing all the assets they deem necessary to run the business. This includes trucks, equipment, inventory, desk, computers and most important of all: employees. Secondly, the buyer will purchase the business on a debt free /cash free basis. This means that any outstanding debt is the seller’s responsibility to pay off, and the two parties will agree upon a specified amount of working capital left in the business at closing. Any excess over that agreed upon capital goes to the seller.
Finally, your business HVAC valuation also needs to include transaction expenses, fees, taxes, and other associated costs. A seller usually nets 70-75% of the price.
Although it would be nice if your business was a publicly traded stock (like Apple) so that you could enjoy very efficient pricing when you go to sell your HVAC company, all is not lost. Even though the process might seem inefficient at first, if you create competitive tension in the sale, your bottom line will benefit.
Let Brentwood Growth find the perfect investment partner for you with a high HVAC business valuation.
Contact us to show you the intricacies of valuing a HVAC business. Our seller side loyalty and plethora of contacts will create top value in your HVAC business.