Ways to Buy an HVAC Company

In this article, we cover:

Buying an HVAC company can give you an asset that has steady growth and positive cash flow. Reinforcing this point is data from the US Energy Information Administration which states that 88% of American households use air conditioner equipment. Additionally, the US Bureau of Labor Statistics projects a 5% increase in the employment rate for heating, air conditioning and refrigeration mechanics, installers and techs in 2021-31. With the United States being a strong, mature market for HVAC businesses to flourish, let’s turn up the heat and review the many ways to buy, finance, and customize an HVAC company.

There are several ways to buy an HVAC company, each with their own unique avenues:

  • Franchise: You can buy an HVAC franchise. Opening a franchise allows you to operate a business with a proven model, an established brand that resonates with consumers, and a franchisor to help you succeed. There are many HVAC franchises each with a unique offering. For example, some franchises focus on core HVAC services such as heating and air conditioning while others offer additional services such as duct cleaning and restoration. Each franchise also has fees, royalties and initial investment requirements. HVAC franchises include ServPro, One Hour Heating & Air Conditioning, Array Serv and many more. TopFranchise provides a good analysis of the various HVAC franchise options in its article titled Best 10 HVAC Franchise Opportunities in USA of 2022,
  • Business Brokers: A business broker acts as an intermediary between a business owner who wants to sell his business and an individual, or a company, who wants to buy a business. HVAC companies are relatively common businesses that you can buy through a business broker. Business brokers may be local, independent individuals (who may or may not be licensed depending on the state) or large companies that provide brokerage services across the country. One such resource is BizBuySell which lists several HVAC Business for Sale, The good thing about going through a broker is that you will be able to review detailed information about the HVAC business you are considering acquiring. Financial records, cash flow, how much money it makes for the current owner, and more. You will have all the information you need to make an informed decision.
  • family business: For some, buying an HVAC business is a family affair. This is a unique position that requires direct interaction with a family member who owns the business. Whether it’s a purchase, a planned inheritance, or something else, buying an HVAC business from a family member can be an excellent path to ownership for some. Business sales can be negotiated privately.
  • Apprenticeship: A common career path in the HVAC industry is to start as a field technician under the apprenticeship of an experienced HVAC business owner. By obtaining a license, working on the job, and learning from an established professional, one can gain an in-depth understanding of the HVAC business in its entirety. It is also common for an apprentice to purchase an HVAC company directly from their mentor. These are the details that should be discussed ahead of time.
  • Start New Business: Starting an HVAC company is also an option. Although you are not buying an existing HVAC company, you can have your own HVAC business without any barriers to entry. The main constraint (outside of funding) is that you must be a licensed HVAC contractor to work on HVAC systems. Each state has licensing requirements, so extra precautions are needed for your state.

Each of these paths will have different capital requirements for buying an HVAC company. The good news is that there are many financing options for purchasing an HVAC company.

financing your purchase

In this section, we will review how to finance the purchase of an HVAC company.

  • Write a business plan: Writing an effective HVAC business plan can increase your chances of getting your loan application approved. A good business plan can serve as the foundation of your business because it details how to structure, run and grow your business. This is a way for you to think about the key elements of running your business. For additional information, review our article titled How to write a business plan for loan application,
  • Consider a business loan advisor: Business loan advisors help small business owners understand the loan landscape and figure out which loan is right for them. Business loan advisors can handle the entire loan process by gathering the right documents, preparing the application, submitting paperwork, and working directly with the lender on any follow-up questions. For entrepreneurs with little time, or who may be unsure about getting a loan, business loan advisor Could be a good option.
  • Franchisee Financing: Buying a franchise may give you exclusive access to financing opportunities directly from the franchisor. In some cases, these terms can be very favorable because the franchisor has a strong understanding of the business. title of our article Ways to get a business loan to open a franchise Breaks down all the types of loans you can use to buy and/or operate your franchise.
  • SBA 7(a) Loan: Grow 7(a) SBA loans can be used for a variety of business uses, including the acquisition of an existing business. There are three types of 7(a) loans that can be used in the acquisition of an existing business. they all Standard 7(a) With a maximum loan amount of $5 million and a turnaround time of 5-10 business days, 7(a) Small Loan With a maximum loan amount of $500,000 and a turnaround time of 5-10 business days, and SBA Express With a maximum loan amount of $350,000 and a turnaround time of up to 36 hours. A good resource to learn more about the qualifications and requirements for SBA loans is our guide to Understanding SBA Loans for Small Businesses,
  • term loan: The term loan can be used to buy an HVAC company. Term loans can be obtained from traditional financial services such as banks and credit unions or from online lenders such as Biz2Credit. Term loan proceeds are paid in the form of a lump sum amount that can help with the purchase of a business or as a down payment depending on the financing you have done with the business you are buying. Loan amounts, interest rates, turnaround times and requirements will vary depending on the lender.
  • CRE Loan: A commercial real estate loan Can be used to buy HVAC business. Businesses can leverage the equity of existing commercial real estate to secure the loan. Similar to term loans, CRE loan interest rates, requirements and funding times will vary depending on the lender.
  • Crowdfunding: Most loans from online lenders and traditional financial institutions require you to have an existing business with credit and revenue history. Crowdfunding is an alternative approach if you want to try raising money as an individual by tapping into your network by using a crowdfunding platform like GoFundMe or Kickstarter. Asking friends and family for money for an HVAC business is a personal decision that one must make. However, friends and family members with the means to invest in an HVAC business will ask to hear about your business plan (another great reason to develop a business plan as a first step) and how you plan to pay them back.
  • Negotiate terms directly with the owner: For those looking to buy an HVAC company through family or an apprenticeship, it may be possible (and even favorable) to negotiate terms with the business owner given the existing relationship. They may offer terms that online lenders or banks will not.

Can I use a working capital loan to buy an HVAC company?

working capital loan Not considered for receiving a business. Working capital loan is used to operate an existing business and the loan is repaid from your business receipts. Unfortunately, this type of loan is not an option for buying a business. It also includes invoice financing loans, which are a form of asset-based financing for working capital. A business owner receives an advance of capital against unpaid invoices or accounts receivable.

Similarly, an SBA 504 loan must be used to promote business growth and job creation and not to acquire a business. Once your HVAC business is up and running, an SBA 504 loan is a great option to help you grow, expand, and rent.

Growing Your HVAC Company To Maximize Cash Flow

There are business opportunities for HVAC companies looking to maximize cash flow. To make sure you have a successful HVAC business, let’s break down some of the growth considerations:

Service Based Business: An HVAC company is a home service business. With that, you are entering someone’s home and dealing directly with the landlord. It should go without saying that professionalism and high quality service will lead to word of mouth business and referrals from happy customers. It’s not just working, it’s working and providing that extra special service touch to make you stand out.

Maintenance Agreement: Proactively getting customers to sign maintenance agreements will increase the likelihood that you will retain them as long-term customers and provide continued service. Homeowners would prefer not to have to shop anyway and have a reliable HVAC technician they can trust. The HVAC business can be viewed as being in a service industry.

Expand service areas: Expand your service area in an effort to expand your customer base. Based on the data we referenced in the introduction, potential customers are almost everywhere. That’s where an SBA 504 loan, or working capital loan, can come into play.

Expand Services: One of the biggest growth opportunities is to expand beyond heating and air conditioning into related services. Related services may include duct cleaning, water heaters, air purification, air quality, humidifiers, dehumidifiers, plumping, and more.

marketing strategy: Create a marketing strategy that includes a website, social media and physical marketing materials when you approach homeowners for a quote or after service completion. Online reviews are very important for HVAC businesses because potential customers read them when they are checking you out online.

cash flow: Focus on improving your cash flow. there are many Smart Ways to Increase Cash Flow with Small Business Financing Which can put your HVAC business in the strongest position. A related article titled How To Minimize Credit Card Machine Fees For Your Small Business Breaks down ways to save on collecting payments. These two efforts can help increase profit margins.

summary

HVAC businesses can flourish in the United States. With so many options for buying and financing an HVAC company, entrepreneurs should be excited by this opportunity.

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