Is Now the Right Time to Sell Your HVAC or Plumbing Business?
If you are asking yourself this question, you’re not alone. Most owners we speak with ask us this question. Selling your business is a big decision, but the bigger decision looming is when to sell. Knowing when the right time to sell is key. After all, you want to make sure you get the best deal possible. Large changes in the below variables can cause significant swings in company valuations. At Leap Partners, we work with a lot of different HVAC and Plumbing company owners and have purchased 37 businesses over the past 14 years. Although we haven’t found a formula for figuring out the right time to sell, below are some things to consider.
Your Company’s Financial Health
The most important factor in deciding when to sell is your company’s financial health. The key to maximizing your valuation is selling when your business is performing well. Your goal is to have multiple years of strong growth and profitability. This seems obvious and straight-forward, but we meet with many owners who are thinking about selling but are waiting for the month, quarter, or year they start to see business slow down. This could negatively impact your company’s valuation in the long run. In fact, most owners we work with maximize their valuation by selling when business is great, and then they structure the deal so they financially benefit when their business continues to grow under new ownership and with new investment.
Remember, the best time to sell if when you have multiple years of strong growth, not necessarily your best month, quarter, or year. Companies pay top dollar for healthy, consistent growth. Erratic ups and downs is a red flag that most buyers will avoid. We meet with a lot of companies who are waiting for that record year that always seems to be looming right around the corner. We love and admire those ambitious owners. Sometimes it does make sense for companies to wait to sell until they are bigger or have achieved more growth. However, tomorrow is unknown and your company is mostly valued on what has happened historically, not what could be tomorrow or next year. The beauty of working with the right buyers, like Leap Partners, is you can sell your company today but continue to run the business like you normally would while benefiting from additional investment in growth. We structure out deals so owners continue to financially benefit from the company’s growth beyond the sale. This makes it so you don’t have to wait for that perfect year or month.
The Economy
When considering selling your business, take note of the economy’s health. Are markets up or down? You might ask — what do the markets and Wall Street have to do with my business? Well, your company’s valuation is closely connected to how optimistic investors or buyers are in the economy’s strength and growth potential. If the economy seems strong right now but you aren’t confident that will continue, valuations could start to decline soon. Declining market performance, rising costs of capital, and pessimistic growth outlooks are the usually the culprits that drive down prices buyers are willing to pay.
The goal is to sell near the top of the market. It is impossible to perfectly time the height of the market by looking at a long-term trend for something like an index fund, you’ll be able to see if valuations are near the top or if they are near the bottom.
Your Goals
What are the goals you hope to accomplish when you sell your business? Are you looking for a quick sale so that you can retire and enjoy life without having to worry about work? Do you need quick access to cash? Or are you more concerned with making sure that whoever buys your business carries on its legacy and continues its success long after you have left? Knowing exactly what kind of outcome you would like is essential in determining if now is the right time for you to sell your business. Your answers to these questions are also key in deciding who to sell your business to. There are a lot of different buyers out there and each of them approached buying and operating your business differently. If your goal is to find a buyer who will take care of your employees and will invest in carrying on your company’s legacy, you might find the company who offers the highest price may not share your same goals. It is better to know that up front.
When Selling Your Business, Timing is Key
When considering whether it’s time for you to sell your business, look carefully at both internal and external factors such as your company’s financial health, current economic conditions, and most importantly –your goals. When selling your business, timing is key. We work with every single owner to structure a unique deal that works best for them, their family, and their employees. Ultimately the perfect time to sell if when you feel confident about the three factors mentioned above. If you wait for perfect conditions, you may be surprised to find they will never come. Instead, set realistic expectations for yourself and start shopping around as soon as you feel comfortable. If you’re interested in hearing honest, transparent, and first-hand experiences from owners like you, let us know here. We’d be happy to put you in touch with any of our owners so you can pick their brains on why and when they decided to sell.