The following is a fictional case study created for illustrative purposes. Florida’s climate makes HVAC one of the most in-demand trades in the state, but not all HVAC companies are valued the same way by buyers. The mix of recurring maintenance contracts versus one-off repair and installation jobs can dramatically affect a company’s valuation. This builds on the themes covered in our HVAC recurring revenue case study and our broader opinion of value process.
We compare two similarly sized Florida HVAC companies with very different revenue mixes and the sale prices that resulted.
Company A, an HVAC company based in Sarasota, spent years building a maintenance contract base alongside its installation work. By the time it went to market, the recurring revenue gave buyers strong confidence in future cash flow.
Company B, a comparable HVAC company in Polk County, had similar total revenue but relied almost entirely on one-off jobs. Buyers viewed this as a less predictable, more competitive business model, which was reflected in a lower offer.
| Factor | Company A (Contracts) | Company B (One-Off Jobs) |
|---|---|---|
| Recurring Revenue | 60% of total | Minimal |
| Cash Flow Predictability | High | Low |
| Time to Sell | 3 months | 8 months |
| Valuation Range | High end | Low end |
Buyers consistently pay more for predictable, recurring revenue than for one-time transactional revenue, even when total revenue is similar. Maintenance contracts reduce the risk that next year’s revenue will look nothing like this year’s, which lowers the perceived risk of the investment. Businesses built primarily on one-off jobs face more competition per transaction and offer less visibility into future performance, both of which buyers factor into their offers.
If you own a service business, consider building a recurring revenue component, such as maintenance agreements or service plans, well before you plan to sell. Even a modest base of contract revenue can meaningfully improve buyer confidence and valuation. Our team at Truforte Business Group has helped many Florida service business owners understand how their revenue mix affects value. Learn more in our HVAC business sale case study or request a complimentary opinion of value today.
For more real-world (fictional) examples of how deal factors affect outcomes, see: Case Study: Two Roofing Companies and the Value of Recurring Maintenance Contracts, Case Study: Two Plumbing Companies and the Power of Service Agreements, Case Study: Two Pool Companies and the Value of Recurring Service Accounts.