Welcome Back!

As we close the chapter on the first month of 2024 and step into the shortest and sweetest month of the year, it’s time to leave behind the old and bring in the new with open arms (and maybe a few extra layers cause its still cold here in Canada…).

No rest for the weary though, as we're already gearing up to tackle a topic that never cools down: the bustling world of the HVAC industry. 🌬️❄️🔥 So, whether you're still scribbling down those belated New Year's resolutions or just here for the ride, grab a coffee and let’s warm up to some fiery insights and cool facts that promise to keep your interest well-ventilated.

Ready to take the temperature of the industry? Let's dive in!

INDUSTRY BREAKDOWN

The HVAC Hustle - Is It Hot or Just Full of Hot Air? 🌬️

If you're eyeing the HVAC sector in Canada, whether you're a veteran in the industry or just warming up to the idea, let's dive into what's heating up in the realm of heating, ventilation, and air conditioning (more commonly known as HVAC - who knew that's what HVAC stood for? 🤷).

Industry Trends

Back in 2010, the HVAC industry in Canada might have seemed like just another utility service. Fast forward to today, and it's clear that the industry has transformed dramatically. The shift towards energy-efficient systems, smart home integration, and the growing awareness of indoor air quality have turned up the thermostat on this market's growth. 🌡️  

The Canadian HVAC market is buzzing with innovation. From ultra-efficient heat pumps to IoT-enabled climate control systems, these advancements aren't just blowing hot air - they're reshaping how Canadians heat and cool their homes and businesses. With over 70% of Canadian households relying on HVAC systems, the potential for growth in this sector seems more like a steady rise in temperature than a flash in the pan.

The sustainability wave is pushing the HVAC industry to new heights too. Green initiatives and stringent regulations are prompting companies to invest in eco-friendly solutions. So, it's not just about keeping rooms cozy anymore; it's about doing it sustainably. 🍃😌

Let’s take a look at the stats:

Unlike the industry revenue in the last edition, this is the type of stability we like to see! 😎

The Finances 

Time for the numbers. The HVAC industry in Canada isn't just growing in terms of technology and reach - it's also heating up financially. The push for modern, efficient systems has opened up a lucrative market for new players and established ones alike. 💰

However, diving into the HVAC market isn't a breeze. There is a substantial initial investment in technology, training, and certification. But remember, with Canadians facing extreme temperatures, both hot and cold, the demand for reliable HVAC solutions isn't going to cool down anytime soon.

As you can see, the HVAC industry is vital to various sectors in Canada. Although it feels like a “nice to have” when looking for apartments on Zillow, the impact of managing indoor climates transcends the boundaries of residential comfort and ventures into essential services. HVAC affects mostly every industry, such as healthcare and education, which depend on precise temperature control for their daily operations, to the retail and office spaces where comfort is synonymous with productivity, it's clear that HVAC services are the silent yet vital backbone of Canadian business infrastructure.

From the hum of air conditioners in bustling summer marketplaces to the warmth of heaters in the quiet study halls of winter, the HVAC industry is, without a doubt, an integral player in the symphony of Canadian industry — a lucrative market that's as essential as the very air we breathe.

Buy or Bust?

Have you ever noticed that HVAC company owners are always retiring, rarely moving onto new business ventures when they decide sell? This isn’t a coincidence. The HVAC industry allows an owner to transition from full-throttle to cruise control, once a reliable team is in place. It's an industry where, with the right setup, the numbers stack up like seasoned firewood — steadily, surely, and ready to fuel a comfortable future. In a sector where over 70% of Canadian homes depend on HVAC services, owners can indeed 'chill' until retirement beckons, basking in the glow of a business that warms their pockets as surely as their furnaces warm Canadian living rooms. 🏡🔥

The HVAC industry in Canada is as hot as it gets, with technological advancements and a solid customer base. However, like any industry, it comes with its challenges. From navigating complex regulations to keeping up with the latest tech, it's not just about installing a thermostat - it's about setting the temperature for your business success.

So, are you ready to jump into the HVAC hustle, or will you insulate yourself from the heat of this industry? The market is ripe, but it takes more than just hot air to make it in the world of HVAC. Remember, a smart investor knows when to turn up the heat and when to keep things cool. ❄️

Check out these HVAC deals:

1. Licensed and ESCO Insured HVAC Company in Massachusetts - $975,000

2. Extremely Profitable HVAC Contractor in Florida - $620,000

3. Profitable HVAC Service Business in British Columbia - $215,000

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

DEAL REVIEW

Reliable HVAC Business with Growing Revenues

This week’s deal is a HVAC/R business located in British Columbia.

Deal Facts 🔥

Green Flags 🟢

• Asking Price Multiple: the first thing that pops out is the asking price multiple. Listed at a 1.3x multiple of 2022 SDE - this presents a great opportunity for a buyer looking to further grow the business with a (possible) quick payback period.  

• Compounding Growth: The second thing that pops out - the business is currently compounding revenue by an average of 34% over the last 4 years and 68% over the last 2 years.  

• Exit Potential: its no secret that the HVAC industry is very popular industry for acquisition amongst Private Equity (PE) firms - if the company is large enough. This deal is a little too small for PE, however, continuing to grow the company for the next 5 years will dramatically increase the company’s selling price. 

• Reason for Selling: while the sellers are not retiring, they are looking to re-locate to another city, providing a reasonable explanation for seling. 

• Industry Tailwinds: installation of heat pumps in Canada have strong regulatory tailwinds due to a Canadian Government subsidy that was approved in 2023 to cover up to $15,000 of the costs of installing a heat pump. Caution: this subsidy may not last forever (see red flags).   

Red Flags 🔴

• Regulatory Risk: while we listed this as a green flag, this subsidy won’t last forever, so a buyer will need to forecast future growth based on the historical growth rate of heat pump installation pre-subsidy. 

• 2020 financials: buyers will want to further explore why a 4% dip in 2020 revenue resulted in over a 50% decrease in earnings and what caused the business to bounce back.   

• No existing management: this is true for a majority of main-street deals but it doesn’t appear the business has an active management team in-place. Better understanding of the owner’s role (are they technical or a manager) would be one of our first questions when assessing a buyer’s ability to takeover operation of this business.

Watch Our Video Breakdown 

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Possible Deal Structure: A standard offer cash-offer (this still means you can get external bank financing) with a 20% seller financing provision to leave some ‘skin in the game’ for the current owners. 

Depending on the dependency of the owner’s involvement in the business, we may also recommend asking for a longer transition period from the current owners (potentially up to 3-6 months) to facilitate client hand-offs and/or hiring a new technician to replace owner’s work in the business. 

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

Last time 37% of you gave our brewery deal a score of 🌶️🌶️🌶️!

It’s clear that for many this brewery has sparked more than just a drip of attention.

BROKERAGE FEATURE

Chinook Business Advisory is a full-service business brokerage dedicated to assisting clients across Western Canada. With a focus on businesses valued between $1-10 million, the team collectively brings over 40 years of experience offering tailored services that include comprehensive valuations, strategic marketing, and expert negotiation.

Whether you are looking to buy or sell your next dream business, get in touch with Chinook here!

Check out all of Chinook’s active businesses for sale.

Want to see your brokerage featured in the next Mainstreet Memo? 😎 Reply to this email and we can discuss opportunities!

SMB TWEET HIGHLIGHT

Imagine if every month of 2024 was a carbon copy of January. Yeah, let that sink in. If January was the pilot episode of your 2024 series, would you binge-watch the rest or cancel your subscription? 📺

If your January was all fireworks and resolutions, bravo! But if it was more like firing blanks and dissolutions, then it's time for a little heart-to-heart with yours truly. And by yours truly, I mean that earnest voice in your head that's been nagging you to floss more. (Seriously, though, flossing's important.)

Picture this: It’s December 2024. Your business—did it soar like an eagle or did it kind of... flop? Let’s not kid ourselves, sticking to goals isn’t always a cakewalk. Sometimes it's more like a trek through the Sahara - without a camel. 🐪

One year ago (almost exactly) we wrote a blog with tips on sticking to your 2023 business goals. Here we are one year later and those tips might help you actually achieve that, “wow, I really did that” feeling by the end of the year. Don’t let your January dictate your 2024. Grab those goals by the horns and show 'em who’s boss. And if you ever need a pep talk, well, you know where to find us.

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Looking for business is a pain - trust us, we know… using this secret tool can help you find businesses that aren’t even on the market yet! 

2. Have the entrepreneurial spirit but aren’t sure what type of business to buy? This article talks about what some of the most popular businesses that they saw be purchased in 2023.