Key things to look for when reviewing an HVAC CIM?

November 30, 2025

by a searcher from Texas A&M University - Mays Business School in Houston, TX, USA

I recently launched a self-funded search focused on acquiring an HVAC business. Are there any key qualitative or quantitative factors I should pay attention to when reviewing an HVAC CIM? Any input would be appreciated

2 Likes

3 Replies

117 Views

Replies

Reply by a searcher
from The University of Texas at Austin in Dallas, TX, USA

Nathan, congrats on the launch! I am by no means an expert in the space, but I know enough to be dangerous. Here are a few things I would look at: 1) Market & Segment Positioning ------ Key questions - Is it residential, commercial, or mixed? If residential, is it service/replacement or heavy in new construction? - What’s the local market structure – fragmented mom-and-pops vs PE-backed platforms? - How attractive are the fundamentals: climate, housing stock age, population growth, income? ------ Metrics / what “good” looks like - Market growing at least GDP+ (~3–5%+) long term, backed by non-discretionary repair/replacement demand and aging housing stock. - Limited new-build exposure (ideally <10–15% of revenue), with focus on repair, replacement, and maintenance. - Strong local share (e.g., #1 or #2 in core MSAs, 30%+ share is excellent). - Clear tailwinds: regulatory (SEER upgrades, R-22 phase-out, IRA rebates), climate, electrification. 2) Revenue Mix & Quality ------ Key questions - How much is service/maintenance/replacement vs new install / new construction? - How much revenue is covered by maintenance agreements / memberships? - How concentrated is revenue by customer, channel, OEM, or builder? ------ Metrics / what “good” looks like - Service / replacement-heavy mix (e.g., 70–90%+ of revenue) with minimal cyclical construction exposure. - Large base of maintenance agreements (e.g., thousands of plans, growing over time) – leading platforms out there with tens of thousands of agreements. - Ticket sizes in line with market (e.g., residential HVAC replacement tickets ~$6k–15k; service tickets a few hundred dollars) so they’re not just discounting to win work. - No single customer >5–10% of revenue; not overly dependent on one homebuilder or aggregator. 3) Profitability, Unit Economics & Cash Conversion ------ Key questions - What do gross margin and EBITDA margin look like vs peers? - Is margin driven by real operational leverage (pricing, mix, purchasing, routing) or under-investment (e.g., low tech/marketing, underpaying techs)? - How capital-light is the model? What does FCF / EBITDA look like? ------ Metrics / what “good” looks like - Gross margin typically 45–55%+ for scaled residential platforms. - EBITDA margin mid-teens to 20%+ for good platforms; top deals sit ~15–25%. - Strong cash conversion (low capex, modest working capital swings) – many HVAC service businesses are structurally cash-generative. - Clear levers for margin expansion: purchasing savings (5–10%+ equipment discounts at scale), consumer financing economics, routing/tech productivity. 4) Growth Profile (Organic + M&A) ------ Key questions - What has organic growth been over the last 3–5 years vs market growth? - Is growth price-led, volume-led, or driven by acquisitions? - Is there a credible pipeline of add-ons or greenfield branches? ------ Metrics / what “good” looks like - Organic growth ≥ high single digits; premium platforms show 10–30%+ 3-yr organic growth. - Demonstrated M&A record (even small tuck-ins) with proof that acquired EBITDA sticks and grows post-close. - Clear whitespace: new MSAs, cross-sell plumbing/electrical, add-on services (IAQ, generators, controls). 5) Operations, Labor & Systems ------ Key questions - How tight is the field operation: dispatch, routing, job scheduling, inventory, safety? - What’s technician turnover and quality of recruiting/training? - Which software stack is in place (ServiceTitan/Housecall/etc.), and is data used to manage KPIs? ------ Metrics / what “good” looks like - Technician turnover materially better than industry (laggards at ~70% turnover; best-in-class closer to 20–30%). - Systems in place for modern dispatching, CRM, and field tech (tablets, mobile apps). Tech and training materially improve performance and retention. - Route density and branch footprint that support good fixed-cost absorption (multiple techs in a tight radius vs scattered coverage). - Formal training programs / “university” for techs and sales, not just tribal knowledge. 6) Customer, Brand & Go-to-Market ------ Key questions - How strong is the brand locally – Google reviews, BBB, referral base? - Is there a disciplined marketing engine (digital, TV, mailers, home warranty, aggregators)? What’s the CAC and ROI? - Is there structured membership / club selling and cross-sell of adjacent services? ------ Metrics / what “good” looks like - Google rating ~4.7–4.9+ with meaningful volume of reviews. - Advertising spend ~8%+ of revenue with clear attribution and returns (top residential platforms operate at this level). - Strong NPS (examples of strong platforms at NPS ~80). - Membership penetration trending up and driving recurring tune-ups and cross-sell. 7) “Platformability” & M&A Angle ------ Key questions - Is there management depth beyond the founder? Who can run day-to-day post-close? - Are systems, processes, and culture scalable to bolt-ons? - Is the geographic footprint logical as a hub for a region (e.g., Sun Belt, high-growth MSAs)? ------ Metrics / what “good” looks like - Multiple leaders (Ops, Sales, Finance) already in place, not just a single key person. - Documented playbook for integration (pricing, branding, systems migration, HR, procurement). - Evidence from comparables that platforms at similar scale can trade up to mid-teens / low-20s EBITDA multiples once they reach ~$30–50M+ EBITDA and have a real M&A story. 8) Risk Factors & Downside Protection ------ Key questions - How cyclical is this specific mix (e.g., reliance on discretionary upgrades vs must-fix work)? - Any regulatory, OEM, or key-man risks? - What could structurally impair margins (labor inflation, OEM changes, new competitors, heavy PE roll-up presence)? ------ Things to focus on - % of work that is truly non-discretionary vs elective upgrades; most high-quality platforms emphasize break/fix and mandatory replacements backed by regulatory pushes (new SEER standards, refrigerant rules, IRA subsidies). - Competitive dynamics: density of PE-backed platforms already in the geography (Solomon landscape slides) and where this business sits relative to them. - Key-man risk around founder-owner and top installers / sales leaders; what retention and rollover look like.

Reply by a lender
from Cornell University in Los Angeles, CA, USA

Hi ^redacted‌ - nice to meet you. Here are the basics lenders and buyers focus on for HVAC. Look at revenue mix between maintenance, installs, and changeouts. Maintenance contracts matter because they stabilize cash flow. Check customer concentration, technician tenure, licensing, and seasonality. Also compare SDE on tax returns versus the CIM since lenders underwrite off tax returns only. Check your state and local county laws about their requirements for licenses. Licensing is critical in SBA deals. If you don’t personally hold the required license to keep the business operating, the lender will require one of three solutions: the seller must guarantee the loan for at least two years (via partial buyout), or a licensed employee must commit to a multi-year employment agreement (sometimes with a small equity stake), or you must hire a new licensed employee. We have a lot of experience financing HVAC and home-service companies via the SBA. If you ever need help talking through a deal, I am happy to help. We work with all the major SBA lenders. The bank pays us after your loan closes, so this is a 100% free service for you. You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!

+1 more reply.

Join the discussion