Phoenix HVAC & Plumbing, Commercial-Heavy Arizona Contractor

$6.2M

Revenue

$974K

SDE

5.7x

Multiple

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Full Editorial Writeup

This is a Phoenix-based HVAC and plumbing contractor that skews heavily commercial, with roughly 70% of work coming from commercial clients and 30% from residential. The revenue mix is 70% plumbing and 30% HVAC, and importantly the company avoids two of the messiest, most capital-intensive corners of the trade: no refrigeration and no new construction. That means the book of business is service and repair work on existing structures, which tends to be steadier and less exposed to the boom-bust cycle of ground-up building.

Operationally the business is more built-out than most listings this size. It runs flat-rate pricing, has a CRM in place, and handles payroll in-house with a team of 13 full-time employees. On $6.19M of revenue it throws off $973,800 in cash flow, a roughly 16% owner-earnings margin, and includes $700K of FF&E in the $5.5M asking price. The seller is exiting to pursue other ventures, not retiring, which is a signal worth probing.

At 5.65x cash flow this is priced at the higher end of the range for a trades business of this size, so the buyer is paying up for scale, the commercial concentration, and the systems already in place. The commercial-heavy mix cuts both ways: fewer, larger customers means stickier relationships but also more concentration risk than a broad residential book. The Phoenix metro tailwind of sustained population and commercial-space growth supports the demand story.

Why we like it

Earnings quality is solid for a trades business: $973,800 of cash flow on $6.19M revenue is a ~16% margin, and the work is service and repair on existing buildings rather than new construction. That mix produces recurring demand from breakdowns and code-driven maintenance, which is far more durable than project-based construction revenue.
The moat here is operational maturity most sub-$7M contractors lack: flat-rate pricing, a CRM already deployed, and in-house payroll across 13 full-time employees. Flat-rate pricing in particular protects margins and removes the ad-hoc quoting that erodes profitability in undisciplined shops.
Phoenix is one of the strongest sustained-growth metros in the country, with continued commercial and residential expansion driving replacement and service work. HVAC in Arizona heat is non-discretionary, and plumbing failures do not wait for a better economy, so the demand floor is high.
The deliberate exclusion of refrigeration and new construction is a feature, not a gap. It keeps the business out of the lowest-margin, most cyclical, most warranty-heavy work and concentrates the team on higher-repeat service and repair jobs.

How to improve it

Launch a formal maintenance agreement program for the commercial base within the first 90 days. Converting even a third of commercial accounts to annual service contracts would build a recurring revenue base this business currently lacks and materially lift the exit multiple.
Push residential toward membership plans and financing options to grow the higher-margin 30% residential segment. Residential service calls often carry better gross margins than commercial and reduce dependence on a smaller number of large commercial accounts.
Audit and optimize flat-rate pricing against current labor and material costs, then implement quarterly price reviews. Trades businesses routinely leave 3 to 5 points of margin on the table by letting price books drift behind wage and parts inflation.
Invest in technician recruiting and a licensing/apprenticeship pipeline before growth stalls on headcount. With only 13 employees, revenue is capped by billable field capacity, so adding trained techs is the most direct lever on top-line growth.
Build out a digital lead engine: local SEO, Google Local Services ads, and review generation. Most contractors this size still rely on referrals and repeat calls, and a modest paid-acquisition system can smooth demand and reduce reliance on the biggest commercial accounts.
Implement job-level profitability reporting through the existing CRM. Knowing gross margin by job type and by customer lets the operator fire unprofitable accounts and steer the crew toward the highest-return service work.

Diligence notes

Scrutinize customer concentration in the 70% commercial book. If a handful of property managers or general contractors drive most of that revenue, the loss of one or two relationships could erase a large slice of cash flow, and that risk should be reflected in price or an earnout.
Reconcile the $973,800 cash flow figure to tax returns and bank statements, and confirm what owner add-backs are included. Verify the $700K FF&E valuation is real and that vehicles and equipment are owned free and clear versus financed.
Probe the real reason for sale. The seller cites pursuing other ventures rather than retirement, so confirm there is no looming loss of a key customer, a licensing issue, or margin pressure the owner is stepping away from.
Review the lease carefully: it expires 04/28/2027 at $10,000 per month, leaving limited runway. Negotiate a renewal or extension option as a closing condition so a buyer is not forced to relocate a 13-person shop shortly after acquisition.
Confirm the status of contractor licenses and whether they attach to the owner or a qualifying party who stays. In Arizona a licensed qualifying party is often required, so understand who holds the license and what happens to it at close.
Validate the seasonality and the claim of year-round demand by reviewing monthly revenue for at least 24 months. Phoenix HVAC can spike in summer, so understand how much cash flow depends on a few peak months versus steady plumbing service work.

Source

Originally listed on BizBuySell. View original listing →