Project Hearth, Residential HVAC Contractor, Upstate NY

$4.0M

Revenue

$1.2M

SDE

Subscribe Free

Read the full deal writeup

Get Free Access

Already a member? Sign in

Full Editorial Writeup

Project Hearth is a residential HVAC company operating across two adjacent counties in Upstate New York, serving a mid-to-upper-income homeowner base. The business runs three lines: whole-home system replacement and equipment upgrades, recurring service and maintenance under a membership base, and new-construction installation for regional builders. On $4M of revenue it throws off $1.2M in cash flow and $1M in EBITDA, which is a healthy 25% EBITDA margin for a residential HVAC operation of this size.

What makes the story credible is the mix shift. Over the past three years management deliberately moved the book toward higher-margin replacement and service work and away from lower-margin volume, which is exactly the lever a smart operator pulls in this trade. A structured in-house apprenticeship program feeds the 13-person technician team, which matters in a labor market where techs are the binding constraint on growth, and the growing membership base creates a layer of predictable, non-discretionary revenue underneath the lumpier install work.

The balance sheet is debt-free and the business is SBA pre-qualified, which lowers the entry hurdle for an owner-operator or a first-time acquirer using leverage. Established in 2013, the company is being sold because the owner wants to retire, relocate, and pursue other interests, a clean and common reason for exit. The stated upside is expanding service density and extending the geographic footprint into surrounding territory.

Why we like it

Earnings quality is strong for the category: $1.2M SDE and $1M EBITDA on $4M revenue is a 25% margin, well above the typical residential HVAC contractor that grinds at 10-15%. The deliberate three-year shift toward replacement and service work rather than chasing low-margin new-construction volume tells you the margin is engineered, not accidental.
The recurring membership base is the quiet asset here. Maintenance memberships generate non-discretionary, predictable revenue and, more importantly, seed future replacement and repair sales at low customer acquisition cost. That recurring layer smooths out the seasonality and install lumpiness that plague most HVAC books.
HVAC is about as recession-resistant as home services gets. Heating and cooling failures are not deferrable in Upstate New York winters, and a mid-to-upper-income homeowner base has the wallet to pay for replacement rather than limp along. Demand is driven by breakdowns and system age, not consumer confidence.
The in-house apprenticeship program is a genuine operator advantage. Skilled techs are the single biggest constraint on scaling any home-services business, and a company that manufactures its own labor pipeline can grow geographically without bidding against competitors for scarce talent. Combined with a debt-free balance sheet and SBA eligibility, the entry setup is clean.

How to improve it

Push membership penetration hard in the first 90 days. Audit what percentage of the active customer base is on a maintenance plan today, then set a target to convert every completed install and repair into a membership at the point of sale. Each incremental member compounds into future replacement revenue at near-zero acquisition cost.
Install a disciplined replacement-quoting motion tied to system age. Mine the service history and membership base for units past ten years old and proactively offer replacement quotes before failure. This converts the recurring service relationship into the highest-margin revenue line the business has.
Attack the geographic expansion the listing flags directly. The company already runs two counties; map adjacent zip codes with similar income demographics and expand the service radius using the existing apprenticeship pipeline to staff the growth rather than acquisitions. Density improves route efficiency and technician utilization.
Reassess the new-construction builder work on a true fully-loaded margin basis. Builder installs are typically the lowest-margin line and tie up crews; if the numbers confirm it, reallocate that technician capacity toward replacement and service where the margin lives, keeping only the builder relationships that pull through profitable follow-on service work.
Build a formal digital lead engine. Residential HVAC buyers search locally for repair and replacement, so a modest investment in local SEO, Google Local Services ads, and a booking flow can lower dependence on referrals and feed the replacement pipeline. Track cost per booked call and cost per install.
Standardize pricing and technician upsell scripting. Flat-rate pricing books and consistent good-better-best equipment options at the point of quote lift average ticket and gross margin without adding a single call. Tie technician comp to a mix of revenue and membership conversion to align behavior.
Solve the owner-dependency risk before close by promoting or hiring a general manager. The owner is retiring with no disclosed transition plan, so identifying a lead operator among the 13 employees or bringing one in early protects continuity and de-risks the SBA-financed transition.

Diligence notes

Break down the $4M revenue by line: replacement, recurring service and membership, and new-construction. The durability of the earnings hinges on how large and sticky the membership base actually is, so pull the exact member count, monthly recurring revenue, churn, and renewal rates rather than accepting the narrative of a growing base.
Bridge SDE to EBITDA and scrutinize the addbacks. The listing shows $1.2M cash flow and $1M EBITDA, a $200K gap that is presumably owner compensation; confirm what a market-rate general manager would cost to replace a retiring owner, since that hire comes straight out of buyer cash flow.
Quantify customer and builder concentration. New-construction work depends on regional builder relationships that can walk or slow down in a housing downturn, so identify the top builder accounts, their share of revenue, and whether they are contractual or handshake. Assess how tied those relationships are to the departing owner.
Diligence the technician team and apprenticeship pipeline. With only 13 employees, the loss of a few key techs would materially impair capacity; review tenure, licensing, comp, non-competes, and whether the apprenticeship program is documented and repeatable or dependent on the owner personally.
Verify margin sustainability of the replacement mix shift. Confirm the three-year margin improvement is structural rather than a temporary post-pandemic pricing window, and check gross margin per job over time, warranty and callback rates, and exposure to equipment cost inflation and supplier pricing.
Confirm the lease terms and location fit. The business operates from a leased 2,450 SF building, so review remaining lease term, renewal options, rent escalators, and whether the facility has capacity to support the planned geographic expansion or would require a costly relocation.

Source

Originally listed on BizBuySell. View original listing →