Collaborate on Hvac Invoice PDF for Purchasing with Ease Using airSlate SignNow

Hvac invoice pdf for Purchasing

been watching my videos for any length of time you know that I love trade businesses like HVAC Electrical uh roofing Home remediation and the like I also like Mission critical business like accounting uh Engineering Services things that people need so but in today's video I'm going to do something different I'm going to talk about one specific industry which is HVAC which is really uh popular and I want to tell you how we go about the whole process from a through z how you can actually acquire a profitable HVAC business let's get to it [Music] hey everyone welcome to my channel I am your host leanda Verde business broker and Commercial lender helping you buy and scale a profitable business small business and want to increase your wealth by buying a profitable business or a W2 employee looking to get out of the Rat Race by buying a profitable business in either case you're in the right place please subscribe to my channel don't forget to eat the bell and you'll be notified every Thursday when new content comes out I'm going to try to make as quick as I can this at eight steps that you need to buy a profitable business number one you need to understand the edge industry a lot of people coming into the industry are try just think that can just walk in talk to a seller talk to a broker you're going to know the lingo and they're going to accept your offer whatever that may be that's the farthest thing from the true you need to understand the key statistics and the market size the current trends and the future projections the types of businesses that are hbac for instance I have a business right now for sale is a specialty hbac business doing about6 million in Revenue about $600,000 worth of s De um it's it's a very specific type of Industry that caters to commercial clients you need to understand that so either going to go into residential you're going to do commercial what you what do you want what is your expertise how can you bridge the gap in the management experience is it going to be service based product based you know I like retainer type models in which you have you know year-over year month over month recurring Revenue whatever the mix in the model is you need to understand that you need understand what the how the game is played in the hbac industry because if you don't if you know the KP eyes if you know the rules of thumbs you're going to be able to compete but at the very least you're going to be able to have eloquent and smart conversations with both sellers on off Market situations and business brokers if they're representing the listings number two finding the right HVAC business now this is U deal sourcing so deal sourcing is it's a matter of understanding if you really narrow it down to the whether you're going to be residential or hedback well the the owners of those businesses hang out at different places now you you to understand what industry trade groups they hang out to who are the vendors what conferences they go to what trade uh associations they belong to so you want to go where they hang out now I particularly like going into off-market situations because I want to make sure that I'm having those early conversations long before they engage a broker because once they engage a broker you're out of the loop you have no conversation they become the gatekeeper you they get it under contract then you have to go through the broker to get to the seller so but if you are hanging out with them at the right right place as they begin to think about buying a business then you're having yourself a conversation so um it's about I what I recommend is a bifurcated approach when it comes to deal sourcing number one you want to be on Market because you want to know what's going on in the market yeah you can start with bis by sell but there are hundreds of websites there are websites catered into online businesses there are websites catered into lower Middle Market there are web SC to Main Street there are webs SC to fulfill by Amazon there is there are each and every one the franchisers the murphies the transort the business teams all of the major players have their own websites with their own uh inventory with their own version of the MLS so if if you're trying to go to market and trying to find anything that walks is with the the SD that you want you're wasting your time you're going to come out you're going to get burned and you're going to be the statistic of the 90% of buyers who don't buy a business so you know me I like to shoot a straight number three now number three and number four I'm going to do over overview with you uh online okay so step three evaluating the deal now to evaluate the deal you need to really look at financial statements and tax returns understand the seasonality of the cash flow operation you need to understand what's going on with the service agreements on an edge right quality and condition of the equipment in the vehicles the market and competition analyzing the market size and share and competitive landscape evaluate evaluating customers reputations reviews and reputation so particularly on the number side I don't really begin to analyze anything until I have tax returns now these numbers are predicated on me having tax returns and I come up with an SD factor and an iida Factor so we do is we calculate the trending three-year average and and then I go figure out what the multiples are on a sample I have to have a large enough sample on same like you know like Revenue uh and SD and iida to compare what I sold in the past so I have 82 transactions that have traded for iida as a multiple of four which means half the businesses that sold sold for four times that's a conservative valuation 75% I'll sold for 5.6 times adjusted divida the average SD was 3.2 across 90 business so half the businesses the medium was four 3.2 4.1 on the high side so if I want to make a conservative valuation of the business then I want to say what is the medium is 3.2 and four times now could I go higher than that yes so I then I take the average three-year SD and the average average threee evida times the multiple that I get from industry specific software that we use that gives you a ballpark There's real estate involved then we have to factor that in so there is a you know there there are common valuation method you know I'm surprised that a lot of Brokers actually use um uh uh basically asset-based valuations now if you are practicing m&a broker or m&a advisor um there's only one way that you value a business and that is the multiple of the cash flow that it produces the assets are irrelevant soone as they produce the kind of capsure that we want but when you're not buying the really assets otherwise you buy them at a fire cell you know if you buy them at the doorsteps or the corthouse when you buy assets the assets are irrelevant and maybe they even may be fully depreciated what you're really buying is a cash flow stream the assets are only helpful if they're producing the cash flow that we want we're going to measure the deal on cash flow the bank is gonna is going to Value this business on cash flow they're going to look to see what is in the balance sheet that is not fully depreciated so um for instance when the when when the lender going to Value the business they're going to be looking at things you know what is the age and condition of the equipment has it been fully depreciated how much useful life is on the equipment the stability of the quality of earnings is first and formost in the customer based and recurring Revenue you may have a business that is doing half a million dollars worth of SD with two customers so what is the if one of them goes away there goes 50% of the revenue in the cash flow so those are the things that we do when we're analyzing a business we look at hard data this is not a pie in the sky this is scientific calculations that we have to do in order to arrive at a point on a price that can be defensible it's all about having a defensible valuation that will test that will tend the test of time and it will not fall apart under Financial due diligence legal due diligence and the bank looking at it to finance this deal uh because remember the bank may give you up to 90% of the value of the transaction and you're coming up with 10% now who is at most risk the bank so the bank is want to make sure so what we do is we really look at any deal as through the lenses of an underwriter if it passes our sniff test as with with the way we do it with the analyzer 3.0 chances are it's going to pass the sniff test for the lender number uh five negotiating deal now you can't really negotiate a deal unless you have value the deal and you understand what makes moves the nle but in order to negotiate the deal you need to have key negotiating points you need to have an idea what the business is worth you need to have an idea of what the range is going to be on the low end you need to know exactly what you could offer what the medium is on the um on on the on the SD side or on the adjusted iida side is north of half a million dollars you need to understand what are you willing to give up right if you want the the seller to carry anywhere from 5 10 15 20% well they're not going to carry this the paper they're not going to do seller finances and give you the working capital let me ask you this are you stuck trying to figure out how to actually buy a business you looked and looked and you don't know how to actually make an offer talk to the lender what is the multiple what are the industry specifics what are the nuances of buying a business when do you open escrow do you have money ready or when do you give it Etc I'm sure you have questions I have the answers if you want to connect with me if you're in the process of buy a business in the next 90 days we need to talk drop me a comment below and shoot me an email the email address will be up here and at the description section of this video I would love to help you with your buying acquisition Journey so are you going to ask them for seller financing or you going to ask for working capital are you going to ask for a three-time multiple of SD if it ask the medium or you're going to ask for 3.25 because you know it's going to be a very competitive now a business has been around for 40 years has a has the top three in the whatever Market you're looking at you know that's going to be a bitting frenzy and most lower Middle Market businesses like that don't have a price when they come out so if you're looking for the broker to tell you what the business is worth you're wasting your time because the the beauty is in the eye of the beholder right you if you know what you're looking for you're going to know exactly what a range so I usually like to pinpoint uh negotiating Point okay this is where we're going for and we're going to fall back 200,000 and we're going to go up to 200,000 so the you know what are the things that you negotiate you negotiate the purchase price and the payment terms you can negotiate the transition period in the training you can negotiate non-compete agreements do you realize that non-compete agreements have a monetary value in the allocation of purchase price um you're going to structure the purchase agreement now uh is it going to be an asset sale it's going to be a stock sale now if it is a stock sale it's because there are multi-year agreements tied to the legal entity and you have no choice but to buy the stock so you buy the equity you don't buy the assets so so but in a stock sale um in a stock sale uh uh purchase actually favors the seller because the seller gets to capitalize a lot of the you know it benefits and taxwise stock sale doesn't give you the Step Up on the asset purchases that you do when you actually buy the assets because you're buying the assets you're taking from the from the seller's company into the newco the newco is your company so there's all of those things so if you're but if you're willing to compete and you want to play the play game you you want to appease the seller and the seller really stock on one in a stocks purchase agreement then you have to model that in your offer because when you're buying stock you're buying unknown liabilities those unknown liabilities are worth what to you right what is your range what are you willing to give up to get the deal done so once you have that and you have to understand a good idea of inside of our group we have the deal analyzer 3.0 which actually helps you spell out all the points which going to be seller financing no seller financing is it going to be standby no standby you're going to go 5 10% 15% what is it going to take to get you that service coverage ratio two to one or better right yeah most people want one and a half to one I want two or better sometimes we go three before we make an offer all of those points go into a in every deal that we look at as a pre-i questionnaire completely filled out with 25 questions that we have everybody present to our mins right so once you have all that figured out then you can begin to flesh in the the letter of intent the letter of intent is a working document basic is a handshake deal with the seller and we gain uh the mo the biggest thing that we gain is a non-binding agreement but you also get to take it off the market now some sellers are very shrewd and they're going to want to not sign off on an exclusivity provision on the LOI and they're going to want to accept other offers that's okay is what are you willing to negotiate now the financing and the purchase now you got traditional financing options you got bank loans and SBA Loans you can get alternative financing methods you're going to get you can actually get an 80 90% seller financing and that's only a available think about it if the seller is not going to walk away with cash at a close it's because they trust you there's something that you know you maybe an industry Insider an operator you already owner you know the more the the more risk that you uh present to the seller the more risk the more cash at close the less risk the less cash that the seller is willing to take so as you pre prep the deal you need to understand what are the gaping holes what is the SWAT analysis on the business that on you and on the business that you're trying to buy and how do you model that with the financing piece because if you bring in an SBA lender it ratches things up it's actually a good thing for for for um an insurance if you really want to Ure the deal and want to protect yourself you're going to have another set of eyeballs looking at this deal right they're going to really asset test they're going to stress test the the interest rate and the principal payments to make sure how it does under different variable market conditions now you also have you due diligence te doing their their work work and then to figure out you know you got more people looking at it takes more time to close and some sellers don't really like dealing with SBA lenders now if you're talking to if you're working with a broker on a deal on an HVAC deal that has not been pre-approved by an SB lender and the cash flow is there that's a red flag I would never take a business to Market as a business broker if I haven't gotten approved by at least two SBA lenders no less than two and I want to make sure that the lenders looked at all the The Source documentation all the tax because you know that you're not going to get an SBA loan unless you have tax returns now what we like to do is we to pre-flight underwriting when we're doing the due diligence we want to make sure that if we're looking at this deal and we have tax returns on hand wouldn't you just want to vet the deal with an SBA lender before you make the offer and you want to have the SBA lender say you know I really like this deal so long as everything comes through and I looking at the do terms it cash flows every year that I'm looking at and the debt service coverage isue it's fine and every year so all we have to do is prep you and bridge the gap on the management do a write up do the business plan do the projections and you know figure out the licensing situation whether you have it or not who's going to stay on who's going to go I mean you got yourself a deal but if you haven't done any of that what are the chances of you actually finding a lender lenders don't want to be com in at the 11th Hour you want to have those relationship with the lenders right away so uh what lenders are concerned about is only one thing risk how are you going to mitigate the risk by your solid business plan by your solid twoyear projections by putting your best foot forward by having good credit by having ample collateral by having presenting the best foot forward now there's going to be an element of Goodwill on the deal okay so I know it said a lot so step seven is legal and Regulatory considerations now this is a trade business and in Most states is is licensed and regulated by the state that you're buying if you're buying in California you're going to be a State licensed in California if you're going to be buying in Texas most HVAC is licensed everywhere and there's a reason that is to protect the consumer right to protect the consumer so the consumer feels comfortable that you're licensed you're not going to blow up their house by they kind of see if you you're not going to damage the work that you're doing it's going to be insured and you're going to be probably be insured in bonded so there you got dealing with you're dealing with licensing and certifications you're going to be required licenses and notifications for HB and if you have a specialty hbac like I do they're going to have multiple licenses uh there's going to be environmental and sa and safety regulations that are coming to play complies with EPA regulations OSHA requirements for HVAC operations and the like number eight is going to be your transition and in integration that comes towards the end how are you going to you know I'm assuming that you have you and your team you and your investors you and your partner coming in right and you're going to inherit you're going to buy the assets of this business and guess what human capital is an asset so you're going to integrate you're going to bring in those employees on into the fault into the newco right and how are you going to ensure a smooth transition communication is key over communicate if you're over communicating and really in charge of your timeline you're going to give assurances to the seller you're going to meet the employees make less ansy right if you're wobbling if you're if you know if you're not moving on Solid Ground if you if it appears like you don't know what you're doing that transition is going to be a pain so number one is you're going to want to retain key employees absolutely that do they have to stay with you no you want to incent them to stay with you and there are multiple ways to do that beyond the scope of this video you also want to communicate with customers and supplies properly now I would say once you have a fully executed APA on Spa when you know that you got you there's the Finish Line you're going to be able to close this deal you'd really want to keep everything confidential now operations operational integration now whatever technology piece you're burning if you're already own an H business you're integrated this one if you don't own one how are you going to be able to pick all the pieces and all the tools that and to roll them into into into your standard Opera procedure manual your sop manual are you going to be upgrading or maintaining existing equipment what is the plan is there any capex plan um Etc so there you have it so buying an hvbc business is a great business but you want want to know what to do and if you have in doubt reach out to me let me help you thank you for watching at a time I'm giving away my cash flow calculator call we call it the deal analyzer 2.0 in my business buyers checklist you need to have them both if you intend to buy a business right now they're my gift to you all you have to do is follow the links below to download them