Arkansas HVACR NewsMagazine May 2025 Issue

HVACR NewsMagazine May 2025

Business & Marketing Tips

Oh no! A contractor we are familiar with has been in business for over thirty-five years. His buildings and real property alone were paid for and worth more than five million dollars. He was met with a legal challenge and courts assessed his net worth at a little over two hundred fifty thousand dollars. He had racked up business and personal debt that washed out almost five million in paid assets. For over thirty years his business was paying for a lifestyle on a credit card. Two hundred fifty thousand dollars after thirty-five years? That is an extreme example for a small business, but similar instances happen thousands of times a year across the nation. Planning and insurance needs The next issue that causes a brand and its value to disappear, is a sudden accident, illness or death that forces the business to close. You must have a successions plan in place. Even if it simply is a process for closing shop with limited damage to the family, by identifying someone to manage the shutdown. Early on, risks are inevitable, and tools (insurance) must be utilized to ease the pain. Build, sell, repeat In the past we have dealt with many contractors and various business models. In the end, the most successful were those that learned the secret of developing a valuable brand and customer base. Once they cracked the code, the business was brokered, and a new brand was born, sold and repeated. Be sure you understand your agreement, and do not overlook non-compete clauses with implications. The past owner could retire or continue developing. The new owners hire additional staff, inject cash

Value is Where You Create it There are many ways to end your business in the HVACR industry. Hopefully, your business is tied to a model that displays value when it is time to retire or move to another venture. Annually a substantial number of businesses in the U.S. will face a rapid deconstruction in SpaceX terms. The owner is locked out of the bank account and credit lines are closed. Leased facilities are padlocked with no access to equipment, vehicles, or other assets. Liens are put in place by vendors, and a long nightmarish process has begun. While we want to discuss business valuations, it is important to answer some basic questions before you call a broker. How am I doing? Where are you today? Sit down tonight and see if you had to close your doors tomorrow, would you owe money, or take money. You should already know this number at the beginning of each month. Please do not laugh. Many business owners pay little attention to this fact until tax time rolls around. The business will access a line of credit to pay the tax, and the business cycle begins again. If you have been in business for over five years and owe more than cash on hand and paid assets, you need serious help. If you are not sure how to calculate assets and liabilities, you need serious help.