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Thread: About to Purchase a Commercial HVAC Contractor Business. Big Mistake???

  1. #21
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    Quote Originally Posted by Snaple4 View Post
    Our company doesn't have a backlog of work... Most of our stuff is completed within 24-48 hours. A very FEW things are scheduled out past a week. If they are doing that much revenue they then they are doing something right. I would, however, due your due diligence on their customer base. Do they have a lot of customers or just a select few? Do they have repeat customer or is it mostly new from advertising. Is the equipment new, slightly aged, or old? What is the owners current position? Does he just help organize things or does he actually work out in the field? The owner of my company actually works in the field and is the primary contact for our largest customers. If he quits then there is a large chance our customers may scout the field for other vendors.


    So without knowing more about the business, I will also say it is smoke and mirrors.

    Also, who will hold the contractor licenses?
    Are those snakes in your profile? I HATE snakes! Thanks for you suggestions. This owner claims the work is not seasonal at all and they are usually booked out a few months. My thinking all along is that I must confirm not only a few but a SUBSTANTIAL backlog as part of my due diligence. This business is structured somewhat differently from what you described. Firstly, they sub out most of their work (which I find safer) and secondly the current owner does none of the field work and in fact is not present for significant parts of the year.

  2. #22
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    Quote Originally Posted by rider77 View Post
    Case in point, the company I started with in this trade just sold to a competing company. All the techs were evaluated and many were given raises of $1-$5/hr. Despite that, the new management didn't go over well. The new company lost the service manager to a competing company. About 6 customers followed him there without his request. They also lost about 4 techs, and several customers followed them as well because they liked the tech so much.
    You just have to keep in mind that this isn't an industry that you can just stick an ad in the paper and fill a position within a couple days. This is a career for guys.
    Looks like management-style issues why everybody was leaving, no? Since the new owners were an existing company maybe your colleagues did not like the policies already in place at that company? That would be quite the opposite of wet-behind-the-ears new owner like myself. I would never dream of getting in there and changing anything initially - say the first year - and any changes I may introduced within that time would be by consensus with the key managers. Don't you think that gives me better chance at success, or is everybody here basically suggesting all HVAC workers are *******s?

  3. #23
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    How is this business structured? What are the responsibilities of the owner? Is this company a rep for a manufacturer?
    I havent failed. Ive just found 10,000 ways that wont work. - Thomas Edison

    Its not whether you get knocked down, its whether you get up. - Vince Lombardi

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  4. #24
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    Quote Originally Posted by rider77 View Post
    How is this business structured? What are the responsibilities of the owner? Is this company a rep for a manufacturer?
    Company is owned by an older gentleman past official retirement age and spends 3-4 months of the winter "working" from a warmer location. NOT a manufacturer's rep, they are HVAC contractors, commercial, farms out most of their work to other contractors so their net on projects tend to be smaller. However they still do have trucks and techs and do an estimated 40% of their work themselves, but mostly they manage the projects not do the grunt work. I am told this model gives them more flexibility on number and scope of projects they can take on. Company has been around a LONG time and most of the employees are long term with benefits, which is why I don't think they can just up and walk out, or can they?

  5. #25
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    First of all it is your money and you can place it in as much risk as you wish

    A couple things I have not seen mentioned

    You say this is an old business with a long history and good cash flow and repeat customer. You want your customers to see no difference unless it is an improvement. How are you going to ensure this happens?

    Have you ever run a business before? Huge learning curve and risk.

    Have you ever run a service business before? Even a larger learning curve and risk

    I saw your comment about getting bored where you are at; your current work is as an engineer. Are you a professional engineer? Most localities require a Masters license or a Professional Engineer license within the company as they are the ones who can legally pull permits. That person is the technical expert for the company. If you don't have one how will you secure one?

    Something you may wish to consider is the rights to use the existing business name for a period of time or indefinitely. This can make a big difference if you maintain current contracst, or get new contracts. You may wish to consider a nondisclosure clause of the sale by the previous owner. If he holds the master license you may wish to make him a defacto employee and pay his license fees expenses.

    What will get you a business loan is the value of existing assets, contracts and cash flow history. If you have no experience running a business as this, that will be a detractor and require either more of your money up front or higher interest rates, or a smaller loan or all of these. Your loan and your experience will have an effect on what credit and interest rates your suppliers will offer you for new equipment.

    How old are the assets and employees? Will you need a big outlay of money in the next 5 years for new equipment or training? How sound of a business your employees think it is will make a big difference if the stay or leave

  6. #26
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    Quote Originally Posted by Answer-Man View Post
    First of all it is your money and you can place it in as much risk as you wish

    A couple things I have not seen mentioned

    You say this is an old business with a long history and good cash flow and repeat customer. You want your customers to see no difference unless it is an improvement. How are you going to ensure this happens?

    Have you ever run a business before? Huge learning curve and risk.

    Have you ever run a service business before? Even a larger learning curve and risk

    I saw your comment about getting bored where you are at; your current work is as an engineer. Are you a professional engineer? Most localities require a Masters license or a Professional Engineer license within the company as they are the ones who can legally pull permits. That person is the technical expert for the company. If you don't have one how will you secure one?

    Something you may wish to consider is the rights to use the existing business name for a period of time or indefinitely. This can make a big difference if you maintain current contracst, or get new contracts. You may wish to consider a nondisclosure clause of the sale by the previous owner. If he holds the master license you may wish to make him a defacto employee and pay his license fees expenses.

    What will get you a business loan is the value of existing assets, contracts and cash flow history. If you have no experience running a business as this, that will be a detractor and require either more of your money up front or higher interest rates, or a smaller loan or all of these. Your loan and your experience will have an effect on what credit and interest rates your suppliers will offer you for new equipment.

    How old are the assets and employees? Will you need a big outlay of money in the next 5 years for new equipment or training? How sound of a business your employees think it is will make a big difference if the stay or leave
    Thanks for the pointers.

  7. #27
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    Quote Originally Posted by minisplit1999 View Post
    Are those snakes in your profile? I HATE snakes! Thanks for you suggestions. This owner claims the work is not seasonal at all and they are usually booked out a few months. My thinking all along is that I must confirm not only a few but a SUBSTANTIAL backlog as part of my due diligence. This business is structured somewhat differently from what you described. Firstly, they sub out most of their work (which I find safer) and secondly the current owner does none of the field work and in fact is not present for significant parts of the year.
    Yep, it is a snake. It found its way into the electrical panel of a unit and shorted out on the run capacitor.

    Every hvac business runs things a little differently so I am not surprised that our model isn't the same. I was just providing a different view. Being the organizing/contracting company can have many benefits over doing all the work in-house. Mainly utilizing other companies to provide insurance, training, and tools of their employees. It also comes with many problems. You have to manage them differently, quality control is harder, you will pay more, they can be unreliable since they will have other priorities that don't always work with yours, you may not find any available when the time comes to do a job.

    We still need to know who will hold the contractors license. Keep in mind, our state has two different kinds with sub-types; 1st is a "Trades License" that allows work up to but not exceeding 20k. 2nd is a "Contractors License" that has no restriction on $. You have to get the 1st before you can get the 2nd. Within these you have the sub-types that specify the type of work your allowed to do or oversee. Not sure how your state is setup.

  8. #28
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    1. High Risk, Seasonal business, Winters slow, summer picks up.

    2. Biased opinion, but essentially if you do have a "good" year, 9-10 million of revenue would give you roughly 9-10% Net profit

    3. Biased opinion, it's not rosy, can be higher...but like your comment it's "EBIT", taxes that will have to be paid for that projection will make you cry

    4. Bad reason

    5. Don't know

    Personal Opinions

    1. Service Contracts are a must - HVAC installations, will be the most profitable however; this can go from good sales to bad sales in matter of days, need to have service contracts to fall back on
    2. Service Tech's - Are they capable of turning a service job into sales?
    3. Warranty's - Who is responsible for going back on previous installed jobs?

    Hope some of my notes above helps

  9. #29
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    I wish I had slow seasons

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  10. #30
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    Quote Originally Posted by Johndoe911 View Post
    1. High Risk, Seasonal business, Winters slow, summer picks up.

    2. Biased opinion, but essentially if you do have a "good" year, 9-10 million of revenue would give you roughly 9-10% Net profit

    3. Biased opinion, it's not rosy, can be higher...but like your comment it's "EBIT", taxes that will have to be paid for that projection will make you cry

    4. Bad reason

    5. Don't know

    Personal Opinions

    1. Service Contracts are a must - HVAC installations, will be the most profitable however; this can go from good sales to bad sales in matter of days, need to have service contracts to fall back on
    2. Service Tech's - Are they capable of turning a service job into sales?
    3. Warranty's - Who is responsible for going back on previous installed jobs?

    Hope some of my notes above helps
    The OP is looking at a commercial company. Oftentimes service techs don't handle any sales at all. And they sub work out so new installs wouldn't lead to any more work for the company, aside from commissioning and warranty work.
    I havent failed. Ive just found 10,000 ways that wont work. - Thomas Edison

    Its not whether you get knocked down, its whether you get up. - Vince Lombardi

    "In this house we obey the laws of thermodynamics" - Homer Simpson

    Local 486 Instructor & Service Technician

  11. #31
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    Hello minisplit1999,
    I just came across this thread you started in 2016, while researching hvac business purchase experiences. Its now 2022 and Im in a very similar situation as you when you were researching your purchase. Hopefully it went ahead and you are running a successful company. Could you please share your experiences in the purchase and running of the business you mentioned back in 2016? How did you manage your employees? What were some early challenges and how did they evolve over time? What are your current challenges? What are some mistakes you made and what would you change now that you have the benefit of hindsight? Your experiences would be very helpful.

  12. #32
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    Quote Originally Posted by Analogmatch View Post
    Hello minisplit1999,
    Could you please share your experiences in the purchase and running of the business you mentioned back in 2016?
    Please do not bring back to life 6 year old threads. Always start a new thread like you just did in this forum to ask your questions.

    "minisplit1999" hasn't been on this forum since 2018, so I seriously doubt he will answer your questions.

    Thanks for your understanding.
    Instead of learning the tricks of the trade, learn the trade.

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