Determine seller’s discretionary earnings (SDE) or EBITDA
Normalize financial statements by removing owner-specific and one-time expenses
Review revenue trends by service, replacement, maintenance, and commercial work
Analyze gross margin by job type and customer segment
Evaluate recurring maintenance contract revenue and renewal rates
Assess customer concentration and dependence on key accounts
Review technician retention, payroll structure, and labor availability
Examine fleet condition, tools, equipment, and capital expenditure needs
Verify licensing, permits, insurance, and regulatory compliance
Assess market reputation, online reviews, and referral sources
Review service area, market growth, and local competition
Evaluate seasonality and weather-related revenue fluctuations
Check backlog, booked work, and pipeline quality
Review warranty claims, callbacks, and service quality metrics
Analyze inventory levels and obsolescence risk
Identify owner involvement and transition risk
Compare valuation multiples for similar HVAC businesses
Apply an earnings multiple to SDE or EBITDA
Consider asset-based value for equipment-heavy or underperforming businesses
Adjust valuation for debt, working capital, and cash on hand
Factor in growth prospects, risk, and transferability
Use discounted cash flow for businesses with stable, predictable earnings
Obtain a quality-of-earnings review or professional valuation
Cross-check value using multiple methods
Negotiate based on financing terms, earnouts, and seller notes