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How do you value and sell our type of business.

Harvey RamerHarvey Ramer Posts: 2,186Member
I don't plan on selling anytime soon, but I would like to do so while the business is still operating at peak performance and before my body is to broken to enjoy retirement. Either that or pass it along to the next generation.

So how does one go about it?
Ramer Mechanical
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  • STEVEusaPASTEVEusaPA Posts: 2,914Member
    edited April 2
    I'll tell you most companies won't give you nearly anything for your customer base. They buy tangible things (at a huge discount), good tools, good vehicles, and service contracts.
    Best to not figure on getting the mother lode payout and heading off happily into the sunset.

    I've been kicking this idea around and talking to people who sold their oil companies. No one ever said they got a great deal. Most of them still have to work due to poor planning on their part, and especially anyone who did 'retained customers' or 'retained gallons' (in my case) deals.

    Plan now, make money, save money, invest, pay off everything.

    If you check the trade magazines, there are a few companies who offer to value and sell your business, of course they take a chunk.

    Hey Harvey, you heading out to Hershey again next month?
  • Harvey RamerHarvey Ramer Posts: 2,186Member
    I'm still on the fence, but I'll probably end up going at least one day.
    Are you going?
    Ramer Mechanical
    To learn more about this professional, click here to visit their ad in Find A Contractor.
  • Robert O'BrienRobert O'Brien Posts: 3,113Member
    Looking forward to seeing you both in Hershey!
    To learn more about this professional, click here to visit their ad in Find A Contractor.
  • I think it depends on what kind of customer list you have. A plumbing customer list is a dime a dozen. It's not that hard to set up shop, get a few trucks, start advertising and get to work. Buying a customer list will give you a head start, but a headstrong contractor will think he can succeed without one.

    Hydronics is a different story. Not many shops will touch a boiler because they've tried before and failed or they're just not interested. Customers may not remember the last plumber in their house, but they sure will remember someone that feels comfortable with their system and can fix it without multiple visits.

    And from the contractor side, a new contractor will have a hard time getting their foot in the door if they want to specialize in hydronics. Out West here, homes with hydronics are few and far between. That's on the service side and I think you have to start building a reputation and a skill set in hydronics before you get into new construction.

    I was thinking how much a customer list is worth. If you can get 10 boiler replacement jobs a year that you wouldn't have without the list, it might be very valuable.

    The hard part as the seller is that you have to find the right person to take over your hard-earned customer base. They've got to be interested and also trained and qualified to take on the responsibility of serving your customers.
    Often wrong, never in doubt.

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  • EBEBRATT-EdEBEBRATT-Ed Posts: 5,795Member
    This isn't for everyone but if you find the right guy and bring him in say 3 years before you want to get out he buys in a small pc of the business so he has some skin in the game and he buys you out when you leave
  • hot_rodhot_rod Posts: 11,449Member
    If you quit the business, your competitors will get all your customers, without needing to pay a dime :) Pennies on the dollar for used equipment.

    What you CAN sell is your phone number, prove you have a loyal customer base and your phone number ringing to their company is probably the best $$ value, and a negotiable cash value..

    The best, least expensive way for a company to grow is by acquisitions, so bigger fish will swallow smaller.

    If you plan on selling in the future keep meticulous books, P&L statements, tax returns, anything that proves you have a viable, profitable company, including proof that you have taken a wage:), not run it as a charity.

    In some cases you may get paid to stay on through the transition
    or hire on as an employee.

    The toughest deal is when a dad tries to sell his company to the siblings and expects a big salary and benefits for the rest of his life, those rarely work out for the best and can unfortunaltly split families.
    Bob "hot rod" Rohr
    trainer for Caleffi NA
    The magic is in hydronics, and hydronics is in me
  • STEVEusaPASTEVEusaPA Posts: 2,914Member

    I'm still on the fence, but I'll probably end up going at least one day.

    Are you going?

    I’ll be there all day Tuesday. Signed up for 2 classes.

  • JellisJellis Posts: 116Member
    I knew a guy who sold his oil heating business, customer list, equipment and everything. I know he made enough money to take a few years off, set up trust funds for his 3 kids college and first homes to be paid in full and set the rest aside to retire. He had around 5000 customers if i recall.
    I would have to agree with others in the thread, the $$$ would be in your name and phone number.
  • Htg_AirHtg_Air Posts: 1Member
    I had three companies value my business since I didn't trust my own valuation. (We all think our companies are worth more than they actually are don't we?)
    After reviewing the evaluations, I turned them and my financials over to my accountant. Him and his team came up with a buyout proposal for my technician. It was a three part proposal. Business- $x @ 4% interest for 10 years, equipment- $x @ 6% interest for 5 years, and real estate (buildings & property)- $x @ 6% interest for 20 years. I realize selling on contract is risky but it was next to impossible for the young man to obtain a loan of that size, and I still am naive enough to trust most people.
    What made the sale fairly easy was our established service agreement list, our 10+ year contract with the gas company for service, and finally our 20%+ net profit for many years. My lovely wife and I are now enjoying retirement and traveling. Good luck to all of you out there and thanks for all the good advice through the years.
  • Steve MinnichSteve Minnich Posts: 2,422Member
    I, too, have heard that service contracts are the key.
    Steve Minnich
    Tell me I can't, and I'll show you I can.
  • John LeveyJohn Levey Posts: 33Member
    It all depends on the business. Oil company values are much higher for "full service" businesses than COD or "oil only ones".

    A business with a 75 cent per gallon margin sells for much more than one with a 50 cent margin.

    I often help sell oil & propane business and advice & telephone conversations are free. You can pick my brain any time.
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