What is my HVAC company worth?

Why a rule of thumb will not get you there

You have probably heard a multiple quoted at a trade association meeting or by someone who sold last year. Rules of thumb are how conversations start, and they are almost never how transactions end.

The reason is that a multiple is an output, not an input. It is what falls out once a buyer has decided how confident they are in your earnings, how durable those earnings are, and how much of the business depends on you personally. Two companies at the same revenue can sit a long way apart on all three.

The revenue mix question, which comes first

Service and replacement work is valued differently from new construction. Service repeats, is easier to forecast, and carries better margin. New construction is project revenue: it is real, but it is episodic and it depends on winning the next bid.

A company that is mostly service will be underwritten more generously than a company at the same revenue that is mostly new construction. If your financials do not separate the two clearly, a buyer will make their own assumption, and it will not be the generous one.

Maintenance agreements

This is the closest thing to contracted recurring revenue in the trades, and buyers pay attention to three things: how many agreements you have, what each is worth annually, and what proportion renew.

A large agreement base with a high renewal rate is the strongest single asset a residential or light commercial HVAC business can bring to a sale. It is also slow to build, which is why owners thinking two or three years ahead should start now.

Labour, which has become central

In a market where licensed technicians are the constraint on growth, your crew is part of what a buyer is acquiring. Headcount, tenure, turnover and how many are fully licensed all get examined.

A buyer looking at two similar companies will pay more for the one whose technicians have been there eight years than the one that has replaced half its crew twice.

The other factors that move the range

Residential versus commercial exposure, and whether the commercial side carries customer concentration. Geographic density, because a tight service area is cheaper to run than a scattered one. Fleet age and deferred capital spending. Whether your dispatch and financial data reconcile. And how much of sales and estimating still runs through you personally.

Underneath all of it sits adjusted EBITDA, and which of your add-backs will survive a buyer's quality of earnings review.

The factor entirely within your control

How many qualified buyers are looking at the business at the same time.

The same company, marketed to one interested party or to a properly built list of strategic acquirers and platform buyers on a common timeline, is frequently not worth the same amount. That has nothing to do with your maintenance agreements or your technician retention. It is a function of process.

It is also the one variable an owner can change entirely in the months before a sale, which is why it deserves more attention than it usually gets.

Getting an actual number

A real range requires someone to look at three years of your financials, normalize the earnings, and compare the result to what buyers are currently paying for companies with your particular mix. That takes a conversation and a few documents, not a formula.

It costs nothing, it is held in confidence, and it is useful whether you sell next year or in five.