2nd-Generation Residential HVAC, 46-Year Oakland County Michigan Contractor

$3.0M

Revenue

$1.6M

SDE

4.6x

Multiple

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Full Editorial Writeup

Founded in 1980 and now run by its second generation, this residential HVAC company operates in an affluent suburban Oakland County, Michigan market that ranks in the 94th percentile nationally for household income ($144,059 average, $443,600 median home value). The core of the business is high-ticket system replacement and installation, backed by full-service repair and maintenance. On $3.01M in revenue it produces a 64.1% gross margin and $1.55M in SDE, which is exceptional profitability for a residential trades shop and a signal of premium pricing power in a market where homeowners buy on reputation rather than lowest bid.

What stands out most is how the business was built. It has never spent a dollar on paid advertising. Four decades of referrals and word of mouth generated a 4.9-star Google rating from 415-plus reviews and a QuickBooks database of roughly 5,000 past customers, none of whom have ever been formally marketed to. The company runs lean with three full-time employees.

The listing is SBA prequalified with seller financing available and a retiring owner willing to provide extended transition support. The asking price of $7.2M at 4.63x SDE is rich for a three-person residential HVAC shop, and a buyer is effectively paying up for brand, market demographics, and untapped growth levers rather than for existing systems or recurring contracts.

Why we like it

Earnings quality is genuinely strong: $1.55M SDE on $3.01M revenue is a 51% owner-earnings margin with a 64.1% gross margin, well above typical residential HVAC shops. That level of profitability in a premium demographic suggests real pricing power rather than volume-chasing.
The moat is a 46-year reputation compounded into a 4.9-star, 415-plus review profile and a 5,000-customer database, all built without a cent of paid advertising. In home services, referral density and review dominance are the durable advantages, and this business has both in a tight, wealthy service radius.
HVAC replacement and repair is about as recession-resistant as home services gets. When a furnace fails in a Michigan winter, homeowners in the 94th income percentile replace it regardless of the economic cycle, which protects the core revenue line.
The operator advantage here is that every stated growth lever is unpulled: no paid leads, no maintenance plans, no CRM, and lapsed commercial licensing. A competent operator inherits a proven demand engine and simply has to turn on marketing that has never been tried.

How to improve it

Launch a maintenance agreement program immediately, targeting the existing 5,000-customer database. Even converting 15-20% into annual service plans creates predictable recurring revenue, smooths seasonal cash flow, and materially raises the resale multiple of the business.
Deploy a CRM and run database reactivation campaigns segmented by equipment age. With roughly 5,000 past customers and typical 12-18 year system lifespans, a large share are due for replacement, and targeted equipment-age reminders should surface high-ticket install jobs at near-zero acquisition cost.
Turn on Google Local Services Ads and paid search. A 4.9-star, 415-review profile with a strong close rate is exactly the asset that makes paid lead gen convert, and the business has literally never spent a dollar here, so the incremental jobs should be highly accretive.
Re-enter commercial HVAC, since the company holds the licensing and has done the work before. Commercial maintenance contracts add recurring revenue and diversify away from residential replacement seasonality, but staff up capacity first to avoid diluting the residential service quality.
Address key-person risk before it becomes a problem. The three-person team and owner-driven customer relationships must be documented and cross-trained during the extended transition the seller offers, so the brand survives the ownership handoff intact.
Systematize field operations with dispatch software, mobile invoicing, and financing offers at the point of sale. High-ticket replacements convert better when consumer financing is presented, and a financing partner can lift both close rate and average ticket in this premium market.

Diligence notes

Scrutinize the $7.2M ask at 4.63x SDE against comps. Three-person residential HVAC shops typically trade at 2.5-3.5x SDE, so confirm what justifies the premium and stress-test whether the SBA loan will actually appraise and cash flow at this price after debt service.
Validate the SDE and 64.1% gross margin with three years of tax returns and the QuickBooks file. Confirm the add-backs, verify that owner labor is fully captured, and understand whether current margins reflect deferred spending on marketing, staff, or equipment.
Assess key-person dependency closely. With only three full-time employees and a business built entirely on the second-generation owner's relationships and reputation, quantify how much revenue and referral flow leaves when he exits, and structure earnout or extended involvement accordingly.
Verify the customer database claim. Confirm the 5,000 records are usable, deduplicated, and have contact information, since the entire growth thesis rests on marketing to a list that has never been touched.
Check licensing, permits, and technician certifications, including the dormant commercial license and whether it can be reactivated. Also confirm supplier and distributor relationships transfer, as favorable equipment pricing supports the margin profile.

Source

Originally listed on BizBuySell. View original listing →