Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.
So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?
Not saying this happened to SYTE. Just clarifying.
When I was in high school my dad considered buying an HVAC dealer. He worked in sales at a distributor and knew one of his best clients was considering selling. He went fairly far with the transaction, audited the books, made some offers, hired an accountant to advise on M&A. The thing stopped dead in its tracks for a single reason. The seller had accumulated $50k of old inventory that they wanted sticker price for, while my dad recognized it was worthless. They were $50k off on the price and they couldn't make a deal. The seller wanted $300k, my dad would pay $250k.
I mention this because it's common. You have someone who isn't a business person running a business. They over spend on inventory, or trucks, or tools, or whatever and they want to "get their money out." It isn't a bad thing, it's the nature of the business, and it's common.
I've talked to my dad about this extensively. He was going to buy in not because it was a good deal, but because he was familiar with the industry. He said this company had about a 5% net margin, and he felt he could double it by changing how they approached their selling, how they managed inventory, and how they scheduled repairs. There are a lot of costs for HVAC repair. This is off the top of my head, but I believe to get a person to your house costs about $150. That's the truck, the tools, the labor, the benefits, and the time to drive. If they can't make $150 right away they're losing money on the visit. That's why a lot of places have a $70 service charge, they're trying to recoup half of that cost before they arrive.
My dad went into training HVAC techs. He was a teacher before sales and recognized he loved to teach. The biggest issue is there are not enough HVAC techs, or people who want to do this. He said companies are struggling to hire, and they're willing to pay for classroom training to bring them up to speed. Some of these classes are $15-20k. But a good tech can make upwards of $40/hr.
The problem with HVAC is two fold. The first is EVERYTHING is depreciating, the equipment, the tools, even the skills as new models are replaced. The second is as your labor becomes more skilled there is incentive for them to go off on their own.
My dad said the most common situation was a guy is making $35/hr and sees that his company bills him at $150/hr. He thinks "geez, I have a truck, I have these tools, why don't I go off on my own?" And they do, and they charge $125/hr for labor, their wife does the books and the phone and they do ok. Sometimes they recognize that it's better to be an employee, but some make it. But it's REALLY hard to scale that thing.
