How do I tell what an HVAC company owner actually takes home?
Start from the financial statements, then rebuild the owner’s earnings: what the owner is paid, what labour they do for free, seasonal draws, warranty callbacks, equipment-financing arrangements and van costs. Have an accountant confirm each adjustment against the books so the result is something you can support, not a number you hope for.
The owner’s stated profit and the owner’s real take-home are rarely the same thing. An HVAC owner may also be the lead installer, the on-call technician and the person who answers late calls, with a wage that does not match any of those jobs. To see what you would inherit, rebuild the picture from the statements, line by line, with your accountant beside you.
Account for the owner’s own labour
If the owner installs systems and covers emergency calls, the company is partly paying for that labour through profit rather than wages. Ask your accountant whether and how to account for the owner’s own labour. If you would do the work yourself, you are buying a job as well as a business, and that is worth saying plainly.
Smooth out the seasons
Heating and cooling income moves with the weather, and owners often draw money unevenly to match. A single month, or a single strong year, can mislead. Ask for several periods and look at how the owner funded the quiet months. A draw taken in spring may be covering a winter shortfall, and the statements may show it as something other than wages.
Costs that hide in plain sight
- Warranty callbacks on past installs, and who pays the technician’s time.
- Equipment-financing or supplier partner arrangements, and what happens to them on a sale.
- Vans: purchase, lease, fuel, insurance and whether the owner’s personal vehicle sits in the company.
- Personal expenses run through the business.
Each of these changes the picture. Ask the seller to explain them and ask your accountant whether the books support the explanation. A tidy set of records, as described in how to clean up financial records, makes this far easier.
Keep the result honest
Keep notes on every adjustment, and have your accountant confirm the figure. If an adjustment depends on the seller’s say-so and nothing in the statements, mark it as unproven. A cautious rebuild protects you far more than an optimistic one, and it gives a lender or advisor something firm to review.
Related reading
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- Expert answerWho handles callbacks on past installs after you buy an HVAC company?
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are financial statements?
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 03Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI)IndustryAbout | HRAI
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