The pace of air conditioning and plumbing business sales continues to be consistent. Although there is consistency, the landscape to successfully complete a transaction remains laced with many pitfalls for the unprepared.
Contracting businesses with reliable profitability, a longer operating history, a transferable customer base and fortunate enough to be operating in a growing market will find themselves entertaining multiple offers. Despite the good need, It is imperative that these business owners understand their company’s value as they will be approached by several would-be investors seeking to pay less than fair market. In many cases, buyers will be looking to shift the risk totally to the seller by offering far less than fair market value.
I recently assisted Banner Air Conditioning in valuing and then selling their business to Milton Frank Plumbing here in Houston. The purchase of Banner Air gives Milton Frank an entry into the residential air conditioning service and replacement business. Banner’s customer base perfectly dovetailed into Milton Frank’s long term Northwest Houston’s customer base. Former owner of Banner Air, Pam Kuhn, said, “this is a win-win for everybody”, when I asked her how she felt after the transaction was completed.
Transactions like this are occurring across the country. It remains a buyers market however and those business owners not seeking proper valuation advice on the front end and supporting advice throughout the entire process are leaving money on the table. Business owners going it alone and relying on one buyer to set the market are being slaughtered.
I always encourage business owners to do their own due diligence prior to attempting to sell their business. Better yet, consider formulating an exit strategy and actually prepare your business prior to putting it out to market. For many owners this will be a once in a lifetime shot. I strongly suggest seeking help from someone who has experience in transactions.
In the case of Banner Air, the difference between success and failure was my client gaining an understanding as to what her business was worth and then finding the right buyer who was able to understand the value and step up to making a fair offer.
I always welcome business owners to contact me with questions regarding the sale of their contracting business. Whether you are a buyer or seller of an air conditioning or plumbing business, shift the risk by seeking the right amount of support.
Brandon Jacob’s career spans 23 years and includes extensive experience in business valuations, mergers and acquisitions, profit improvements, finance and accounting. Specific to the air conditioning and plumbing contracting trades, Brandon has 18 years of assisting in the sale and purchase of contracting businesses ranging from $100,000 to $50,000,000 in annual revenues.