Increasing the Value of an HVAC Company
If you’re in the HVAC industry or looking to buy a business in the HVAC industry, this article is for you! We have many conversations each week with individuals looking to buy or sell an HVAC company. Peak Business Valuation, business appraiser Utah, specializes in performing business valuations for HVAC business owners and those looking to finance an HVAC transaction. Schedule a free consultation today! Below we discuss a few aspects that influence the value of an HVAC business. And, a few tips for increasing the value of an HVAC company.
Understanding Customer Mix
One of the main aspects that influence the value of an HVAC company is the customer mix. Customer mix is who you work with. For example, if you’re an HVAC company that focuses on residential new builds, then your main line of business is HVAC installations. If you are a general residential HVAC company, then your primary focus is on repairs and maintenance. The same principle applies if you are looking at the commercial HVAC segment. There are new-build installation HVAC companies and commercial repair and maintenance HVAC companies.
Although both of these business models operate in the same industry, the business models are slightly different. Your business model is important for increasing the value of your company. Discover what other factors drive the value by reading Value Drivers for an HVAC Company.
Differentiating Your HVAC Business
Differentiating yourself from your competition is important despite the industry you are in. Differentiation is generally accomplished via price differentiation or product/service differentiation. Charging lower prices than your competitors is one way to attract customers. However, another way to attract customers is to provide a different service than your competitors. Most HVAC companies sell similar brand HVAC systems, for similar prices. This leads most HVAC companies to try to differentiate their services. One of the best ways to differentiate yourself is by adding value to existing customers. Below we discuss how to better serve your HVAC customers through recurring revenue streams.
Creating Recurring Revenue Streams
Here are two examples of HVAC companies that differentiate their services through recurring revenue. The first is a commercial HVAC installation company. This HVAC company differentiates itself by establishing monthly maintenance contracts with property owners after installing HVAC systems. In this case, the company comes back a couple of times a year to perform regular maintenance and service. The company also assesses whether a major overhaul or replacement system is necessary. The service is set up as a monthly contract. Setting up monthly contracts is a unique way that an HVAC company is able to increase its value with a recurring revenue structure.
The second example is for an HVAC company specializing in residential. Like the above example, this company created a valuable recurring revenue stream. This HVAC company sends out air ventilation filters to homeowners for their HVAC system on a regular schedule. Most homeowners don’t know that they need to replace their air filters every six months. This company recognized a need in the marketplace. So, they send out a new air filter twice a year to each of their customers. Besides this service, the company also does bi-annual maintenance and service checkups.
Creating recurring revenue streams will increase your current revenue. It can also make your HVAC company more valuable when it comes time to sell. For more ideas on creating recurring revenue, check out our article on Recurring Revenue, or schedule a free consultation.
There are several different business models you can pursue within the HVAC Industry. The valuation multiple that you would assess for your HVAC company will vary depending on your revenue, makeup, and customers. For more information on multiples, see Valuation Multiples for an HVAC company.
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