Buying a Plumbing or HVAC Business

Most business for sale offerings can be separated into 3 categories 

Squared-Up Businesses

These are established, well-run, dialed-in businesses. They will have owner benefits and EBITA numbers larger than most companies’ annual sales and typically do more than 3 million of residential service revenue. They also likely have layers of management in place and significant assets. Businesses like these are often purchased by large investors or major players in the space. 

Diamonds In the Rough

This is the type of company where PlumbAmatic™ sees the most value. The sellers of these businesses are typically looking forward to retirement and have been in business for a very long time. They often have a very loyal client base and long term employees. In the right hands, these businesses will make you very wealthy. 

Not Worth Anything

Sadly, you will come across many plumbing, HVAC, and electrical businesses that fit into this category. These are businesses that have been in the hands of an unqualified business owner for too long. On paper, they aren’t worth a penny more than asset value.

You can find businesses for sale using many of the resources listed on our Businesses For Sale page.

Find Business For Sale

This is likely the most important step in buying a business. 

One of the biggest mistakes made by small business owners is buying a business without assembling an acquisition team. This team will help serve as a board of advisors to help you see different perspectives and assist you as the process develops. Having your own team that serves you and your best interests is the only way to ensure you’re making a sound investment decision. 

Your acquisition team can be made up of anyone you like. At a minimum we suggest: 

• Your accountant 
• Your attorney 
• PlumbAmatic™

You won’t be able to obtain any real hard fast information about a target company without making contact with the seller. If you find a business for sale on the internet, there is a very good chance you’ll be dealing with a broker.

There will be paperwork to sign before the business broker will give you any real information about the listed business. Be sure to consult the legal advisor on your acquisition team before signing anything. Generally, you will be asked to sign and/or fill out 3 things:

Non-Disclosure Agreement 

These agreements are to protect the confidentiality of all information transferred to you and disclose how you may and may not use the information. Again, consult your attorney.

Buyer’s Profile

This is where the business broker gathers information about you to quickly determine if you’re an actual prospective buyer for this business and what other businesses you may find interesting in the event this inquiry doesn’t work out. This form will require income information, asset information, liquid net worth info, business interests, etc. 

Business Broker Disclosure

This document typically spells out the nature of the relationship of the business broker in this deal, who they work for, how they are paid, and usually states they have not verified any information they are about to provide you. It will also outline how all communication will take place between the buyer and seller, etc.

After you complete the paperwork requirements and the broker deems you a qualified buyer, they will send you a more comprehensive report on the business. Depending on the complexity of the business, this report may or may not contain complete profit/loss reports, balance sheets, and other financial data. 

This is where you’ll want PlumbAmatic in your corner. 

Even though the information you’ll get at this phase isn’t complete, it should be enough to decide if this particular business has the potential to meet your requirements. Most home service businesses keep less than desirable records and have loose accounting practices. 

With our vast experience working with companies at all levels, we have seen just about everything and will be able to quickly sift through the information to expose the true colors of the potential target business. 

Because the information provided at this point isn’t complete, oftentimes a request for deeper information is submitted. This is where the push from the business broker comes in.

When you begin to request deeper information about a business, you will encounter a push to write an offer and get it under contract. If you write an offer and begin the due diligence process, you’ll use the information you gather to justify the reason to buy the business versus using the information to decide if you want to write an offer. 

Before writing an offer, call together your entire acquisition team. In one quick meeting, your legal advisor, your financial advisor, and your PlumbAmatic™ business strategist can weigh in and formulate a plan on your behalf.

If you’re getting sound advice from your acquisition team (and you will if we’re on it), your first offer will be littered with contingencies (ways for you to get out of the deal). 

For some reason, writing an offer that is easy to get out of will make the seller side more comfortable answering the questions you need in order to close the deal.

This phase of the process is where the real fun happens and PlumbAmatic™ will shine. 

We peel the targeted business apart to expose what it really is. We dig deep into the accounting of the business to determine the real state of this business’s current form. 

Analysis of the existing employees, business financials, call count, business expenses, and all other key performance indicators will provide you with a clear picture of where this business is and where you can take it. 

With this information, together we can start to make projections about what potential lies within. It is also during the due diligence process that you may elect to have an independent valuation completed on the business and have the assets and/or real estate appraised if it’s included in the purchase. 

Learn more about PlumbAmatic’s Due Diligence process.

Because of the way businesses are priced for sale, unless you grow sales, grow profitability, and make other improvements to the business you are not likely to make a great return on your investment. 

During the projection phase, PlumbAmatic takes all the information that we gathered during the due diligence and assembles the financial and operations model to square up this business. 

These projections will also be helpful when it comes time to obtain financing for your new plumbing or HVAC company.

Unless you’re a cash buyer, in the early stages of the due diligence phase you’ll need to explore what financing options you have. 

Together with the financial arm of your acquisition team, you can decide what the best financing options are for you and your future new business. 

Some of the more common financing vehicles for buying a plumbing or HVAC business are: 

• Traditional bank financing
• SBA loans
• Using a retirement account to fully or partially fund a business purchase 
• Private equity investors 
• Seller financing

During the due diligence process, there will likely be some things exposed that will need to be negotiated to come to a final agreement. Typically, these are things like non-compete agreements, owner training arrangements, purchase price adjustments, seller financing details, real estate matters, and general logistics of the deal.

When the seller of this business hands you the keys, you better know exactly what you’re going to do and how you’re going to do it. You likely just put your life’s net worth on the line to buy this business and you have one shot at making it work. 

PlumbAmatic™ will work with you to build a strategy to minimize client attrition after the sale, maximize employee retention, identify key areas that must be addressed quickly, and other long-term concerns to address. Your best bet to ensure the successful execution of a home service business purchase is to have PlumbAmatic™ standing shoulder to shoulder with you.

Buying a business is electric and quite exciting. The actual closing, however, is usually very boring. Sign papers, write checks, shake hands… and then it’s time to get to work!

The first few weeks of the stewardship of your new business will be a learning process for all. 

It’s best not to make too many changes too quickly. 

The entire organization just went through a stressful and emotional event. They don’t know you and you don’t know them. It’s important to be patient, learn the business, and most importantly, learn the team. Get them to like you and get them to trust you by getting to know them.

At some point after the honeymoon period, it will be time to put the carefully crafted strategy we built into place. This is where we begin to mine the overlooked gold from this business. This is where we create a highly profitable, virtually recession-proof, easy-to-manage home service business.