How do I read an HVAC company’s mix of installs, service and maintenance plans?

Two HVAC companies can report the same total revenue and be very different businesses. One may earn most of it from large replacement installs that have to be won one job at a time. Another may rely on repair calls and plans that renew each year. A buyer reading the books should look for the mix, because the mix shows how steady the work is and what it takes to keep it.

Separate the three kinds of work

Ask the seller to split revenue into replacement installs, repair and service calls, and maintenance-plan fees. Each has different customers, different margins and different effort. If the accounting software lumps them together, ask your accountant what can be rebuilt from invoices and job tags. Do not accept a verbal estimate as a substitute.

Heating, cooling and the calendar

Most HVAC work moves with the weather. Look at the books month by month and see how the company covers slow periods, whether through plans, tune-ups or a second line of work. Ask how technicians are kept busy and paid when calls dip, since that affects whether they stay.

Renewals, builders and retrofit work

For maintenance plans, ask how many customers renew, how plans are billed and what happens when someone cancels. Then ask how much work comes from builders or new construction compared with homeowners replacing old equipment. Builder work can be large but tied to a few relationships. Review the due diligence guide for the records to request.

• Revenue by type of work, by month, for several years.
• A list of plan customers with start dates and renewal dates.
• Job records showing which work came from builders or contractors.