Why 52% of HVAC Companies That Go to Market Don't Sell

Here's a number that should keep every HVAC business owner up at night: 52% of HVAC companies that go to market do not sell. Not "sell for less than expected." Don't sell at all. The owner lists the business, pays a broker, goes through months of due diligence headaches—and walks away with nothing.

Private equity has purchased nearly 800 HVAC, plumbing, and electrical companies since 2022. Money is pouring into the trades. So why are more than half of the businesses that list getting passed over?

Because buyers aren't buying revenue. They're buying predictability. And most contractors—even profitable ones—can't demonstrate it.

The Two Reasons Buyers Walk Away

Research across hundreds of failed HVAC transactions points to two consistent deal-killers: owner dependency and customer attrition. Everything else—revenue, equipment, brand—is secondary.

Reason #1: The Business Can't Run Without You

If you're the one answering the phone, pricing the jobs, managing the techs, and handling complaints, a buyer isn't purchasing a business. They're purchasing a job. A very expensive, very risky job.

Owner dependency is the single biggest reason PE firms and strategic acquirers pass on otherwise strong companies. They're not worried about whether the business is profitable today. They're worried about whether it stays profitable the day after you leave.

The fix isn't complicated, but it takes time:

• Document every process. Dispatch, estimating, hiring, collections—if it lives in your head, it dies when you walk out the door.
• Build a management layer. You need at least one person who can run daily operations without calling you.
• Remove yourself from sales. If every deal flows through you, the revenue stream is tied to your personal relationships, not the company's brand.

Reason #2: No Recurring Revenue

A company that survives on one-off installation jobs has to win new business every single month just to stay alive. That's risk. Buyers hate risk.

Compare that to a company where 30-50% of annual revenue comes from service agreements and maintenance contracts. That revenue shows up whether the owner is there or not. It's predictable, renewable, and it tells buyers the company has real relationships—not just one-time transactions.

Recurring service agreements can make up 30%–50% of a successful HVAC company's total revenue. Businesses with over $1 million in service agreement revenue often command significantly higher valuation multiples.

The math is simple: two HVAC companies both doing $5 million in revenue and $800,000 in earnings. Company A runs on 80% installation work—the owner handles all the sales. Company B has 60% service and maintenance revenue with a management team in place. Company A might get a 2.5x multiple. Company B could get 3.5x or higher. That's a $800,000 difference in sale price from the exact same earnings.

What Buyers Are Actually Paying For

When a PE firm or strategic buyer evaluates your HVAC, plumbing, or electrical business, they're scoring you across a specific set of criteria. Here's the hierarchy, ranked from most to least impactful on your valuation multiple:

1. Recurring revenue percentage — Service agreements, maintenance contracts, membership programs
2. Owner dependency — Can the business operate for 90 days without you?
3. Clean financials — 3-5 years of organized P&Ls, tax returns, and balance sheets
4. Technician retention — Low turnover signals a healthy culture
5. Customer diversification — 200 customers is better than 10 big ones
6. Documented systems — SOPs for dispatch, sales, hiring, service
7. Service mix balance — Service and repair work valued higher than new construction
8. Digital presence — Reviews, SEO, lead generation systems

Notice what's not at the top: total revenue. A $3 million company that checks boxes 1-6 will sell faster—and at a higher multiple—than a $7 million company that checks none of them.

The 3-Year Timeline

You can't fix these problems in 90 days. Most owners start thinking about selling 6 months before they want to be done. That's 2.5 years too late.

Here's a realistic timeline:

Year 1: Clean the foundation. Get your financials in order. Separate personal expenses from the business. Start tracking job costs properly. If you're not already doing this, read why your P&L is lying to you—it's the first gap most contractors need to close.

Year 2: Build the machine. Launch or expand service agreements. Hire or promote a field manager who can handle operations. Document your processes. Start removing yourself from day-to-day decisions.

Year 3: Prove it works. Run the business without being the bottleneck for 12 months. Generate clean financial statements that show consistent profitability and growing recurring revenue. This is the year your numbers tell the story a buyer needs to hear.

The EBITDA Multiples in Play Right Now

The current M&A market for trade contractors is historically strong. As of 2025:

• Small owner-operated businesses: 2x–4x SDE (Seller's Discretionary Earnings)
• Mid-market with management in place: 4x–6x EBITDA
• High-performing with strong recurring revenue: 7x–10x+ EBITDA

The gap between 3x and 8x on even $500,000 in earnings is the difference between a $1.5 million payout and a $4 million payout. That gap is what you're building toward—and it's entirely within your control.

The Bottom Line

Half of HVAC companies that go to market don't sell. Not because the businesses are bad, but because the owners didn't prepare for what buyers actually want: a predictable, transferable operation with recurring revenue and clean books.

The good news is that every one of these problems is fixable. The bad news is that they take 2-3 years to fix properly. Which means the best time to start preparing for an exit is long before you're ready to leave.

Whether you're thinking about selling in 3 years or just want a business that's worth more on paper, the playbook is the same: build recurring revenue, reduce owner dependency, and clean up the financials. The multiple takes care of itself.