Why January Is When HVAC Owners Start Putting a Number On It

The DecisionThe decision usually gets made in the last week of December

From the conversations I have with owners, the decision to sell a heating or air conditioning business is almost never made in January. It gets made in the last week of December, somewhere between the on-call rota and a quiet house, and January is simply the month it gets said out loud. The call that follows is rarely urgent. It is usually a version of the same question: what would it be worth, and what would I have to do first.

Christmas does this because it is the only fortnight in the year when a plumbing and heating business either runs without you or visibly does not. Boilers fail over the holiday, the out of hours phone still rings, and whoever answers it tells you something useful about how the business would trade if you stopped. Owners who spend the break fielding those calls themselves usually come back with a clearer view of the problem than any adviser could hand them.

January adds one practical thing, which is figures. The year just closed is near enough final to be worth looking at, so the conversation can be about real numbers rather than an estimate. If you are thinking about an exit in the next two or three years, the January after your busiest quarter is the most honest moment in the calendar to look at what the business earns and where those earnings come from.

The BaselineWhat a baseline valuation of an HVAC business actually involves

A baseline valuation is mostly an exercise in separating two kinds of income. Contracted service and planned maintenance work, which renews with or without you, sits in one column. Installation and project work, which has to be won again every year, sits in the other. Two businesses with identical turnover and identical profit routinely attract very different offers because of how that split falls.

The profit figure a buyer works from is adjusted EBITDA, not the profit in your accounts. Your own salary and dividends are normalised to what it would cost to employ somebody to do your job, vehicles and personal costs come out, and genuinely one-off items are stripped. That adjustment is usually the difference between the number an owner carries in their head and the number that appears in an offer letter, and it moves in both directions.

The discounts are predictable and they are mostly about concentration. One customer providing a third of turnover, one engineer holding the only F-Gas category the business trades on, one owner holding every commercial relationship: each of those is a reason for a buyer to hold money back rather than pay it at completion. None of them is fatal, and all of them take longer than a quarter to fix, which is why January matters more than March.

Two businesses with identical turnover and identical profit routinely attract very different offers, and the reason is usually the split between contracted and project income.

The Year AheadA number is a planning tool, not a decision

Knowing the number commits you to nothing. It is a planning input, in the same way that knowing what your van is worth does not mean you are selling it this week. Most owners who ask the question in January are two to three years away from doing anything about it, and that is the useful distance, because it is long enough to change what the answer will be.

Tax belongs in that planning rather than at the front of it. Business Asset Disposal Relief applies a reduced rate of Capital Gains Tax to qualifying gains up to a £1m lifetime limit, and it is 10% today. The Autumn Budget on 30 October 2024 set it to rise to 14% on 6 April 2025 and to 18% on 6 April 2026, and the completion date is what fixes which rate applies to a disposal. Your own accountant is the right person to model that against your figures.

What a year of preparation actually buys is fewer discounts. Contracts written down with their renewal dates and values, certifications current and filed, a second person who can quote and price work, three years of management accounts somebody else can read. None of it is interesting and all of it shows up in the offer, which is the honest reason to start the year with the question rather than end it with one.