Contractor's licenses for service business without requisite experience

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February 13, 2020

by a searcher from University of California, Los Angeles - UCLA Anderson School of Management in San Diego, CA, USA

I'm a self-funded searcher interested in acquiring a service business (HVAC, landscaping, plumbing, etc), but state licensing boards require that the owner of these types of businesses obtain an appropriate contractor's license. In CA, many of these require up to 4 years of practical experience in the given field (for many, a bachelor's degree will enable you to waive 3 of these experience years). I'm wondering if/how searchers acquiring service businesses have navigated these licensing issues?

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Reply by a searcher
from Pennsylvania State University in Atlanta, GA, USA
Bill- If you were able to get more details on this, it would be great to connect. I have heard a variety of stories from brokers/lenders: some suggest that you can acquire a business as long as a manager in the Company holds a license, while others have said that lenders won't lend under that scenario, as it presents a "key man" risk. These specific discussions were related to HVAC/Plumbing/Electrical, but I know that a variety of other services segments have their own licensing requirements, and it isn't clear to me which can be structured around vs. are deal breakers. If you have an opportunity to chat, let me know.
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Reply by a searcher
in New York, NY, USA
Unfortunately there isn’t a simple “general” answer to this challenge; it’s very case by case. Depending on what exactly the business is, the individual circumstances around your target, and what federal/state/county/city/township regulations or trade association oversight it might be subject to, the process can range from trivial rubber stamping to total deal killer. I’ve looked at a lot of these licensed service businesses and recently went through a similar process in NY. Happy to share my experiences and help you brainstorm.
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