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Prepare Your Business for Sale

Originally published
Originally published: 11/1/2017

Whether you’re looking to retire or are simply ready to move on to a new challenge, here’s what you can do to prepare for the sale of your business


In recent years, HVACR businesses have been more and more in demand. As trained and experienced HVACR professionals become limited, individuals and strategic companies are looking to buy an existing business in the industry with an infrastructure in place.

For example, an HVACR business in the Chicagoland area that serviced a variety of commercial clients it had accumulated over the course of 35 years, largely focused on refrigeration services, recently sold. There were multiple offers on the business and the buyer was a strategic company that wanted to expand its reach and services.

The owner of this HVACR business thought about selling several years earlier, but during initial conversations it was obvious that he wasn’t financially or emotionally ready to move on.

The value of the business was not quite where the owner had hoped it would be, and it was clear he still liked operating the business, so he held on until he reached the point of realizing there were other things he wanted to pursue. As it turned out, the value of the business had not increased substantially during that period, but it did give him the necessary time to realize how he wanted to spend his time post sale.

To get to the point where the business had multiple offers that lead to a successful sale, there was much planning involved. Additionally, having the right team of advisors and a motivated and prepared seller helped drive the process in the right direction.

Whether you’re looking to retire or are simply ready to move on to a new challenge, here’s what you can do to prepare for the sale of your business.

Financial Readiness

Your business probably provides you with your main source of income. For this reason, it’s important to evaluate your financial readiness to sell your business.

The sale of your business will likely fund whatever lifestyle you have planned or the next phase of your career. Unless there are other means that you plan on using to support yourself, it’s essential that you determine whether the proceeds from the sale will support your intended lifestyle and living expenses.

If the proceeds will not be enough, you should build value in the business, modify your plans or find other sources of income.

Emotional Readiness

It’s no doubt that your business has been a significant part of your life thus far and that you have expended time and energy to build your business. As you considering selling, ask yourself whether you’re ready to let go of your business and perhaps even have your lifestyle change.

Find out the reasons why you want to sell your business. Is it because you’re ready to pursue other interests? Or maybe you’re burned out and ready to pass the baton? Whatever your reasons, make sure that you’re being honest with yourself and that you’re truly motivated to sell.

The most successful transactions happen when the seller is motivated and has a plan in place that facilitates the transition.

Financial Records

One of the preliminary steps that takes place once you meet with your business broker is valuing your business.

To determine the appropriate value of the business and obtain bank pre-qualification, you should be prepared to provide your broker with the following; (a) the last three years of tax returns, (b) the last three years of profit and loss statements and (c) the balance sheets and other miscellaneous statements specific to your type of business.

As you prepare these financial statements, keep in mind that you should do your best to minimize any discretionary expenses (add-backs) and maximize your revenues. Add-backs are personal expenses that you may run through the business and can complicate the valuation process, especially as it relates to banks that will be providing loans to any potential buyer.

As such, do your best to clearly delineate personal expenses from business expenses. Whenever possible, it’s best to eliminate add-backs altogether as some expenses cannot be added back and the cash flow of your business will be diminished and so will the value of your business.

Remember to consult with your accountant before making any decisions that would likely have tax consequences

Customer Diversity

As a business owner, you’re likely aware that you should not depend on one or few customers for a significant portion of your revenues. As you get ready to sell your business, keep this in mind and know the source of your revenues.

If you have customer concentration where more than 10 percent of your revenues are from one customer, spend a few years, if possible, diversifying your customer base. Customer concentration issues will depress the value of your business and be an obstacle for potential buyers.

Knowing where and how your revenues are derived and the nature of your relationships with customers will be much appreciated by buyers.


Currently in the HVACR industry, there is short supply of skilled professionals. As such, it’s important to have your key employees sorted out and in good standing with the company. Make sure your employees are well trained and happy with their employment.

Additionally, if some of your employees are approaching retirement, keep the current market conditions in mind and start looking for a replacement hire well in advance so there’s ample time to train the new person if needed.

It’s also helpful if your key employees have non-compete and/or non-solicit agreements that can be assigned to a new owner upon a closing.


The percentage of revenue attributable to annual services can increase the value of your company. If you’re a commercial contractor, you’re likely to have many contracts with clients.

As the business owner, you should get these contracts in order and make sure that the contracts are transferable to a new owner.

Owner Dependency

To fully maximize value, a business needs to operate independently of its owner. You should take steps to ensure that you’re not the face of the business and that your clients have a strong relationship with the business and not just with you.

Taking these steps will help the business preserve its clients as the business changes hands. The extent to which you can develop a sales team that generates new business will have a significant impact in helping your business stand out from the other HVACR businesses for sale.


Making the decision to sell your business is significant and excitement is understandable. You should avoid sharing your plans for a potential sale with anyone, however, unless it’s absolutely necessary.

Maintaining confidentiality is essential to retaining value in the business. Abstain from telling your employees, customers, vendors and bankers about your plans for sale. Should word of a potential sale become public knowledge, it’s likely that employees will lose focus and potentially look for other employment, clients will begin sourcing new vendors and suppliers will tighten their credit terms.

Any of these scenarios could not only impact the value of your business but potentially it’s saleability.

Advisors/Deal Team

Well before the moment you decide to sell your business, you should assemble an experienced team of advisors. Your team should include an attorney, accountant, exit planner, wealth manager and business broker.

Your team should have the experience and knowledge to advise you on all facets of an exit plan including implementation.

Running the Business

One of the most important things to keep in mind as you get ready to sell your business is to actively run your business to ensure it’s operating efficiently.

It’s a natural temptation to take your focus off of the business once you make the decision to sell — thinking that the business will be sold in short order.

Any experienced advisor will tell you it takes time and effort to sell a business and having it operate on all cylinders during the sale process is the best insurance policy for a successful outcome.

During the sale process, both buyers and banks will place heavy emphasis on the current performance of the company as it relates to comparable periods.

Selling your business is an intricate process and you should do your best to be prepared for each stage. Knowing what to expect will ease many concerns and facilitate the process.

While you’re waiting for the right time, be sure to run your business to maximize value and assemble the right team of advisors along the way.


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Prepare Your Business for Sale

Whether you’re looking to retire or are simply ready to move on to a new challenge, here’s what you can do to prepare for the sale of your business.