Summary 

In this eye-opening interview, Jon Stoddard talks with Patrick Lange, a top-tier business broker who has mastered the art of selling HVAC companies. Patrick shares his journey from owning an HVAC business to becoming the industry’s go-to expert for buying and selling HVAC companies.

This conversation dives deep into:

• The critical importance of understanding seller motivations and how it impacts deal success.
• Why clean financial records and efficient systems are essential for maximizing business value.
• The biggest challenges HVAC owners face, including staffing, licensing, and adapting to market changes—and how these affect the sales process.
• The risks of over-leveraging in acquisitions and how to avoid costly mistakes.

Patrick’s insights reveal the untold dynamics of the HVAC market, from professional buyer tactics to strategies for achieving life-changing exits. Whether you’re a buyer, seller, or just curious about the mechanics of major business deals, this discussion is packed with practical advice and proven strategies to help you navigate the complexities of business transactions with confidence.

This is more than just an interview—it’s a masterclass in what it takes to succeed in the HVAC business world.

Takeaways

Patrick Lange has sold over 136 HVAC businesses in 12 years.
The HVAC market is currently fragmented and evolving.
COVID-19 opened up nationwide opportunities for HVAC business sales.
Licensing is a critical factor in HVAC business acquisitions.
Sellers often have misconceptions about the value of their businesses.
Fair dealings are essential for successful business transitions.
Valuation multiples vary significantly based on business size and market.
Professional buyers are increasingly active in the HVAC space.
Understanding seller motivations is key to successful transactions.
Networking and industry presence are crucial for finding HVAC businesses. Understanding buyer perspectives is crucial in business transactions.
New owners should learn the business before making changes.
Many companies waste money on ineffective CRM systems.
Private equity can offer opportunities but also challenges for sellers.
Buyers look for consistency in income and clean financial records.
Running a business for sale requires different strategies than tax savings.
Less debt is preferable for managing cash flow in acquisitions.
Market changes can significantly impact customer retention and business viability.
Growth rates vary widely in the HVAC industry based on business models.
Staffing challenges are a major concern in the HVAC sector.
Patrick has 25,000 HVAC buyer list

Watch the interview:

 

Chapters:

00:00 Introduction to Patrick Lange and HVAC Business Sales
03:01 Patrick's Journey into HVAC Brokerage
06:00 Market Dynamics in HVAC Business Sales
08:46 Navigating Licensing and Acquisition Challenges
12:01 Strategies for Finding HVAC Businesses
15:04 Understanding Seller Motivations and Business Valuation
18:11 The Importance of Fair Dealings in Business Sales
21:07 Valuation Insights for HVAC Businesses
23:55 The Role of Professional Buyers in HVAC Acquisitions
26:44 Understanding Buyer Perspectives in Business Transactions
29:24 The Importance of Learning the Business
30:48 Evaluating CRM Systems and Their Effectiveness
32:33 The Role of Private Equity in Business Sales
34:12 What Buyers Look for in a Business
36:31 The Value of Clean Books and Records
39:01 Running a Business for Sale vs. Tax Savings
41:07 Navigating Debt and Cash Flow in Acquisitions
44:51 Adapting to Market Changes and Customer Loss
48:03 Growth Rates and Business Models in HVAC
51:28 Challenges in the HVAC Industry: Staffing Issues

Transcript:

Jon Stoddard (00:01.304)
Welcome to Top &A Entrepreneurs. Today my guest is Patrick Lang from Business Modification Group in Florida. He's a broker that sold over 136 heating and cooling HVAC businesses in the last 12 years or so. So fantastic. Welcome to the show, Patrick.

Patrick Lange (00:21.135)
Thank you so much for having me on, John. I'm excited to be here.

Jon Stoddard (00:24.088)
So let me ask you a question how you got started in this and then how you migrated to just selling just HVAC businesses. Just very curious, yeah.

Patrick Lange (00:33.365)
Absolutely. Yeah, kind of a mixed background. I've owned other businesses in the past. I've been a broker for years, and I bought a heating and air company that I had listed for sale. So I had a listing. I love businesses with barriers to entry, businesses where people need things. I live in Florida. I don't know a husband dumb enough in the state of Florida to tell his wife he's not fixing the air conditioner. I figured – that's it. So I thought

Jon Stoddard (00:56.078)
I live in Arizona. I know what you mean. Yeah, that happens. It's fixed. It's fixed within 24 hours. Yeah.

Patrick Lange (01:02.491)
So I thought it was a good business to get into so I bought it I ran it for two years and then I missed the brokerage world I love feeling back to curtain looking at different businesses putting deals together and I went to go sell it and when I went to go sell it I Couldn't find any information about it We were a small company and I realized if you were doing 20 million dollars They'd line up to help you if you were doing two million dollars You couldn't find anybody who either wanted to help you or knew anything about So a little over six years ago, I made the switch and I said I'm gonna sell this

And then i'm just going see if I can focus on heating and air my son My oldest son actually him and his wife bought the company from me a little over six years ago They run it today up until three months ago. My office was in their office. So for the last six years he's gotten my unsolicited advice and and so we I I switched To just selling heating and air and i'm based in florida as you mentioned and it started in florida then georgia then kind of southeast Covid was incredible for my business

I could fly from Gainesville, Florida to LA round trip for 250 bucks. I was the only guy on the airplane. And I'm not the only guy, there wasn't many of us. Every rental car was available. Every hotel was wide open. So I all of a sudden went from Southeast to nationwide. And as you mentioned, I've sold 136, seven cents.

Jon Stoddard (02:20.014)
Wow. And we talking about SMB size, you know, from 500,000 to 5 million, sort of like that.

Patrick Lange (02:26.523)
Yeah, so I average 20 to 25 a year, so last year I think I did 24, and I think three of them were over $10 million in sales. The bulk of what I do is a million and a half dollars in sales to probably $5 million in sales. And when you look at the market, that's the bulk of it. There's so many small heating and air tradespeople in general out there, and that's kind where I focus for a couple reasons. One…

Jon Stoddard (02:36.61)
Yeah, yeah.

Jon Stoddard (02:42.435)
Yeah.

Patrick Lange (02:55.323)
I love those people that blue collar, supported Little League team for the last 30 years, long-term employees, great customer relationship. That's it. And so – and most of my clients have never sold a business, and for most of them it's the biggest sale of their life. And the reality is they need the help of somebody like me, so it's kind of worked out once again. I'll do three or four a year over $10 million, but the bulk of what I do is going to be a million and half in sales to around $5 million.

Jon Stoddard (03:01.762)
You always see the banner on the football stadium or the baseball stadium. That's right. Yeah.

Jon Stoddard (03:25.282)
Yeah. So I'm going to start with this business modification group. Where does that name come from? Cause that doesn't really translate to selling HVAC companies. Yeah.

Patrick Lange (03:32.667)
has nothing to do with it for marketing and branding. prior to doing business brokerage, was a consultant on how people grow their businesses. And so that was the company that I had. I had a corporation set up and put it kind of on pause. So when I became a broker, I thought, well, I've got a corporation here. Let me just use that one. And that was the way it became. And I've just never rebranded it. So it's a...

I spent a ridiculous amount of money on SEO and other things now, and so I hate to go back and change my website and change everything. So, Absolutely. So I've left it. So no correlation whatsoever, horrible branding, and I appreciate you pointing that out.

Jon Stoddard (04:04.524)
Yeah, now you got juice with a tit 12 years. ticked that long. Yeah.

Jon Stoddard (04:15.182)
So what's going on with the market? Cause everybody on X and LinkedIn and search funder is looking for HVAC businesses. Is it just a seller's market with this deal or what?

Patrick Lange (04:27.195)
So no, it's kind of crazy. So as I mentioned, six years ago I started selling Heating and Air. And the first two years I sold mob and pop businesses to other mob and pops, right? And that was – it was other companies in the next town over that wanted to expand. That kind of thing is what I did. The next two years it was almost 100 % private equity, every private equity firm in the world. I think they get the same playbook in January of this is what's the cool thing to invest in now and they all go chasing it.

And now we're seeing a little slowdown at the upper end of the market, bigger companies, partially because they bought the bulk of them. They bought all the $10, $20, $30, $50 million companies, and now they've been moving down market. And I think other people that I've sold to now – so let's go to the final last two years. It's been probably half and half. Probably half of the sales have been private equity, and half of it is mom and pops buying other mom and pops or…

somebody who worked for a private equity firm at one point and saw what they were doing and decided to go do it on their own or a banker whose mom and dad were in the heating and airspace and they want to go back to their roots. It's a little bit of everything, but also it's back to what you and I talked about. You're in Arizona. If it's summertime, you're fixing the air condition when it breaks. And so I think it's a real it's a fragmented business. It's typically been run by technicians turned business owners. The ultimate emeth is really what plays out there.

And so there's a lot of opportunities for somebody with some business knowledge to step in and do very well.

Jon Stoddard (06:00.16)
Yeah, and business knowledge, but also technician knowledge, being able to service the accounts too. Or are you just talking about being able to go out and get customers, customer acquisition costs, turning those leads into sales to people paying bills, people paying their, yeah.

Patrick Lange (06:20.299)
So obviously I owned a company for two years. If you called me to your house to fix your air conditioner when I left, it would still be broken. I can't fix an air conditioner, but I could understand marketing and advertising and dollars and cents and how the technician should look when he showed up to your house and all those types of things. so oftentimes I see great companies, but their ceiling is there because the owner is in the van. They're great technicians and probably not great business owners.

Jon Stoddard (06:34.691)
Yeah.

Patrick Lange (06:49.337)
and they love fixing air conditioners, and so they won't get out of their own way, and as a result of that they cap the amount of earnings. So now somebody comes in with outside industry knowledge. They can't fix an air condition, but they can manage people, and they understand training, and they understand insurance, and they understand CRM systems and why they're important, and they understand all these other things that they can apply to the trades, and they do extremely well.

Jon Stoddard (07:12.674)
Yeah. And do these trade people, are they coming from the trade schools? Are they learning the apprenticeship from other HVAC companies? Yeah.

Patrick Lange (07:23.931)
So it's a combination really. mean I would see all sorts. A lot of times the trade schools, when somebody leaves, although they've spent a bunch of money in school and they've got some training, they're not – they haven't fixed a lot of old equipment. They haven't been out there and dealt with a customer. They haven't had that, so there's still somewhat of a learning curve when they get out of school. Where we typically see the owners that own companies is they work somewhere else, either didn't like it, thought they could do a better job, and went and got licensed. And every state is unique, so some states don't have a state getting their license. Others…

You have to have three or four years of experience before you can even sit for the exam. Some require an apprenticeship program. So everywhere is a little bit different. So it really depends on where they're located.

Jon Stoddard (08:03.522)
Yeah, I got to ask you a question about that. if a buyer comes in and goes, I want to buy an HVAC business and they don't have that contractor's license, it's different in Arizona requirements than it is in Florida. Yeah. What's the process? How does somebody buy one without a contractor's license?

Patrick Lange (08:15.919)
Right.

Patrick Lange (08:21.819)
Well, it really depends on how they're doing it, right? So when I bought my company as a small company and I was able to be a cash buyer, and the seller held the license, and he agreed to stay on staff and be my license holder for me. SBA, if you're using SBA financing, up until probably two weeks ago, it was extremely challenging to make that happen. SBA just announced a rule change where as an asset sell, the owner selling, who's a license holder oftentimes…

Can can hold a minority share 5 ownership in the company 2 10 whatever you guys work out and they could remain on as the license holder were up until two weeks ago They couldn't they had to be gone in 11 months or 12 months actually and so now there's a there's actually a path to somebody coming in if the owners the seller is willing to remain on as a license holder and qualify him or you can hire a Technician who has the license? There's a risk there though. John. I mean

If they say, I'm going to do it for $1,000 a month, I take on a $2 million SBA loan. Two months into it, they say, you know what? Instead of $1,000, I want $10,000. Absolutely. So I stress to people. A lot of people call me and say, why do want to buy a company and don't ever want to get licensed? My thing is, it's foolish. Get licensed because they can get run over by a truck tomorrow. That could be…

Jon Stoddard (09:27.692)
You're you're you hate they have the leverage

Patrick Lange (09:43.515)
The license holder for your business could be driving to work and get hit by a train and now you're out of business. So having a backup and having other alternative ways to do that and the ultimate answer is to get your own license, but sometimes it could take three or four years.

Jon Stoddard (09:57.026)
Yeah, depending on what state you're in. So your recommendation is a broker sold 136, the leg. Okay. If you don't have a license, you want to buy an HVAC company, keep the other seller on for with 5%. Doesn't mean they have to, and I'm just kind of gray area. They have to actually be in the business. They just put their license up. And then in the meantime, interim, you're out there. You got to go get qualified for that and take the test. Yeah.

Patrick Lange (10:22.779)
Exactly. 100%. And that – it is a gray area. Like the state of Florida, the state of Florida, you can qualify three licensed – three companies with one license. So you can't be supervising all three companies, but the rule states that you're supervising them. So it's absolutely a gray area, but you're 100 % accurate. And my belief is have a backup. Always have a backup there that if something happens with this guy or girl…

that I've got somebody else I can call. Once you're in the space, it's much easier. You're around the industry all day every day. You'll start meeting more licensed people, so then it becomes easier to find somebody else to qualify. But when you're coming from banking, insurance, police work, whatever it is to get in, you're probably not going to have those connections to start, and using the sellers is going to be the most optimal way to get it done.

Jon Stoddard (11:09.122)
Yeah. Okay. Interesting. So let's go back to how this start. How do you find these HVAC businesses? You you're selling 20 to 25 a year. Where do you find them? I mean, do you direct mail them or is it just combination of years of networking? What is it?

Patrick Lange (11:26.297)
A little bit of everything. So I write articles for all the industry publications. I've got a YouTube channel.

Jon Stoddard (11:31.338)
wait a minute, you write articles for industries? Okay, okay, yeah.

Patrick Lange (11:34.735)
So there's a few magazines, HVAC Insider, ACHR News, different publications that are specific to the trades. And I'll write articles about buying and selling for those. So I get seen that way. I speak at any event they'll let me come to. I'm a member of all the coaching and training organizations, so I go to all the trade shows. I live on an airplane. Unfortunately, I travel around from show to show.

Jon Stoddard (12:01.518)
Do you own an airplane or do you rent those? No.

Patrick Lange (12:03.703)
Unfortunately, I don't but I'm Delta's diamond medallion whatever it is when you spend a ridiculous amount of money with Delta I'm that and and so I fly a ton and Next like last week. I was in Pittsburgh speaking at a train getting in air event next week. I'm in Colorado Springs and I'm in Virginia and so and trade show seasons just kind of started to get ramped up now, so there'll be six or seven main trade shows and I'll

I have a booth at all them. I'll speak at most of them. Once again, I have a YouTube channel that talks about it. I'm extremely active in all the Facebook groups and people just try to be. It's been a ridiculous amount of money to do it.

Jon Stoddard (12:44.248)
You're just at Omnichannel, everywhere. Yeah.

Jon Stoddard (12:50.274)
Do ya? Is that from traveling mostly? I mean not the social media posting but...

Patrick Lange (12:54.093)
Yeah, traveling SEO. I I try to rank high on SEO and so I spend a lot of money on search engine optimization. We write – once again, I write four articles a month and I've got assistance in doing that.

Jon Stoddard (13:06.156)
Are you writing those yourself or somebody else assisting you or is that AI now?

Patrick Lange (13:10.043)
We don't do AI because I was told that'll kill my SEO. So every Monday morning, a marketing guy, he interviews me and we talk about the article for the week. And then I explained to him what I wanted to say, what about he's a lot smarter than I am in types of. Yep. He sends it to me to preview and then I'll go through it and make my edits. And then that's our article for the week.

Jon Stoddard (13:26.126)
Yeah, he's a ghostwriter.

Jon Stoddard (13:33.446)
What about the YouTube channel? How is that doing? What do you do? Like long form or long videos or?

Patrick Lange (13:39.235)
Talkingly, I stand at my farm. We've got a small farm here in North Florida and I started a couple years ago, just set up a camera and I stand in the yard and talk about different things and I think we just passed 400,000 views last week. So and once again, I'm just talking about buying and selling heating and air. So to me, it kind of blows me away. There's that many people who would actually watch it and I probably have 70 or 80 videos up I would think.

Jon Stoddard (13:54.574)
Well that's fantastic.

Patrick Lange (14:07.791)
When we were slower before business took off, I would be able to do more and I just don't find as much time. I work from home a lot and now I don't. I have an office and so I'm in the office and so I have to go home, set up the, I use my phone, but set up it on the tripod and do a video and I don't do it as often as I should. But I've been very pleased with YouTube and it's ranking, right? If you search, my heating and air company or any of those kinds of things.

Typically on YouTube, I'm the number one person that comes up because there's not a lot of people doing YouTube videos on buying and selling heating and air.

Jon Stoddard (14:41.186)
No, no, not in that specific niche, but you know, Mr. Beast can have 321 million, billion, what is it, million subscribers? There's room for HVAC, yeah.

Patrick Lange (14:49.094)
Some ridiculous. Yeah, absolutely. And so a lot of people will come up to me at a trade show and say, hey, I've watched every one of your videos and I have a question about this. Or when a seller will call me and want to sell, I'll say, do you have any questions? They're like, no, I've watched all your videos. I don't know how the process works.

Jon Stoddard (15:04.581)
They're all pre-sold, preconceived opinion about you. Yeah. Yeah. And so what happens next? They say, I want to sell my business. What are the kind of series of questions that you ask them to make sure they're right? Cause I've, you know, I've talked to other people who are just like, you just want to make sure when they're signing, they actually do want to sell and they have another plan for the future, right? After they sell.

Patrick Lange (15:07.001)
Yeah, yeah, I think so.

Patrick Lange (15:26.745)
Yeah, that's one of the things why, know, age plays a part in, you know, if I'm talking to seven, somebody 70 years old, obviously I don't have to say, why are you wanting to sell? You know, I'm talking to somebody who's 30, then I want a clear understanding of what you're doing because the reality is with selling now comes a non-compete agreement, right? So many of these people, the only way they know how to make money is fixing air conditioners. And now they're going to have a non-compete if they sell their business. So they're not going to be fixing air conditioners in that area. So I try to stress to make sure they understand what they're getting in.

Because of all the interest in the space, they get phone calls all the time from potential buyers, private equity groups. So many people think they're sitting on a gold mine. They think they're going to cash this wonderful check and run off in the sunset, and they forget that they potentially have some debt there. They've got to pay taxes. They've got to pay me. There's a lot of hands out when they go to do it. And so making sure they have a clear understanding. And then for me, getting an understanding about the business, who does what? Is it all family members or?

Is the owner in the truck still or what's going on? Oftentimes we'll see a husband running the business still in the field, wife runs the office and potentially a child or two working in the business. So mom and dad sell, now potentially three people could walk out of the business. So there's an impact there. It makes it harder to sell. so we go through kind of a questionnaire about that. Make sure it's a good fit for them and me.

Jon Stoddard (16:41.068)
Yeah.

Patrick Lange (16:47.161)
And then we'll typically do evaluation on numbers. They'll send me tax returns, P &Ls, that kind of stuff. We'll do evaluation. And then we'll jump back on another phone call and say, okay, here's what you sent me. Here's the numbers you're showing. Here's where I think it's going to sell. Once again, I'm fortunate if you sell 136 heating and air companies, you look at lot of deals so you have an understanding on where something's typically going to sell. And so from a pricing standpoint, so…

Jon Stoddard (17:08.216)
Yeah.

Patrick Lange (17:15.225)
So we're able to get pretty close when we list a business and I'm not the broker that says, hey, it's a million dollar company. Let's see if we can get 5 million. I'm the broker that says, hey, it's a million dollar company. Let's find a quality buyer. Let's have this be a good deal for everybody involved. Let's sell it for a million. So you get paid what it's worth. They buy it for what it's worth. And it's a marriage, not a divorce. And too often, I think people come into the business acquisition side and they think somebody's got to lose.

And I don't share that feeling. think you're taking over somebody's legacy. And specifically if you don't have industry experience, you're going to want them six months after the sale when you call them to answer the phone. Mrs. Smith may say something that you've got a question about. And if you can't reach the former owner, you could have egg on your face. Well, if you beat them up in negotiations and ripped them off every way you could to get a better deal, when you call them, they're going look at the phone and say, piss on him. I'm not going to help him or whoever it is.

Jon Stoddard (18:11.82)
Yeah.

Patrick Lange (18:13.871)
So to me, having everybody feel that it's a good deal, I joke with my buyers and sellers. say at the closing table, I want a buyer to think, well, I could have got a good deal, a better deal, but I think it's fair. want the seller to think I could have gotten more money, but it's fair. And both of them think I made too much money. And if that's the case, yeah.

Jon Stoddard (18:30.136)
Yeah, I'll tell you, I thought that too, because I sold my e-commerce company and within 72 hours after I put it up and go, man, should I have asked for more money?

Patrick Lange (18:41.403)
But understanding we use comp data, right? So I'm able to show you as a seller. Hey, here's the last 25 that have sold. This is why we're saying this. It's not we're not just picking a number out of thin air. We're trying to maximize value. But at the same point in time, I don't think somebody has to lose. I I want them to be successful when they take it over. And really, most of my sellers talking about the people that I get to deal with, you know, they want the business to succeed. They want their customers to be taken care of. They want their employees to be taken care of.

Jon Stoddard (18:47.682)
Yeah.

Patrick Lange (19:10.807)
And so ripping somebody off and having them start off in a bad spot doesn't make a lot of

Jon Stoddard (19:15.694)
Yeah. Can we talk about valuations? What is it? I mean, you've got a lot of data there, 163, 136. Like what's the valuation for an SMB, you know, doing, you know, net 100,000, net 250, net 500,000.

Patrick Lange (19:33.241)
Yeah, so there's certainly a range. You know, something at $100,000 is typically going to be a million sales or less is where we'd anticipate it being. It's often going to be an owner and a truck and probably a helper. So it's not really much of a business. It's more of a job. What we'll see on that small, you're looking at one and a half to maybe two times net depending on what their gross revenue is. You start getting to say $300,000.

Jon Stoddard (19:43.02)
Right, right.

Jon Stoddard (19:48.844)
Yeah, it's yeah.

Patrick Lange (20:01.538)
Now they're probably doing $2 million in sales. Now they've got some staff. They've got some marketing. They've got some things taking place, some systems in place to get there. And so that three, depending on where it is, know, in California is moving to Arizona and Texas. So that's a hot market. You know, I'm listing it in New Jersey. There's not a lot of people moving to New Jersey to buy a business. so, so, you know, areas you're in has an impact on it, but you know, somewhere three times would be real. Three to potentially three and a half times if it's in Florida.

Jon Stoddard (20:28.776)
So about $600,000 for a 300,000 net as long as the net's approvable. 900,000, excuse me. I did my math wrong. Math's not about that, yeah.

Patrick Lange (20:32.428)
No, three times would be 900,000.

Yeah, so 900,000 potentially up to a million too. And then as it goes up, you get to 500,000. And I'm assuming, as I'm saying this, I'm assuming it's all residential, service, repair, replacement, no new construction, not commercial, no outliers, just the same thing over and over in residential neighborhoods. 500,000 could be five to six times. And then you get up to a million, which is typically going to be 10 million in sales or so.

Jon Stoddard (20:51.766)
Not commercial. It's more residential. OK.

Patrick Lange (21:07.285)
Depending on where you are, you're probably eight to ten times Yeah

Jon Stoddard (21:10.658)
Yeah, it keeps moving up. Yeah. So let me ask you about the valuation with that scenario you said where it's, you know, then the smaller size in the truck and the guy leaves and the wife's doing the books and the admin and the son's in the business and everybody goes. What, how do you value that and like the risk to the buyer?

Patrick Lange (21:33.967)
The hardest business for me to sell, really, at the end of the day, hardest business for me to sell, and they take a long time because – and I did a we're connected on LinkedIn I think is where we actually made the connection. I did a post about it today. Nobody calls me and says, I'd love to buy a business where I can work 14 hours in the field and then go home and do paperwork for five hours. I don't get that phone call, and that's the business you're describing, and so it's hard to do.

Jon Stoddard (21:35.948)
Is it? No.

Jon Stoddard (21:45.741)
Yeah, yeah.

Jon Stoddard (21:54.702)
Nobody had that.

Patrick Lange (22:02.671)
The hardest part with that is identifying who's the buyer because if it's somebody just starting out, they don't have any money, and they're not going to be able to get an SBA loan. If they're a bigger company, they're going to put somebody new in each of those three seats that we were talking about – son, dad, mom. And so now they're going to take those wages off of the net income because they've got to pay them. So now this business that was making $100,000 is now making like $40,000.

When they adjust it, make their offer based on that adjustment, it's super hard. The ideal buyer in that scenario is somebody who's already in the town, already has staff, already has everything, and they're able to buy that business.

Jon Stoddard (22:34.701)
Yeah.

Jon Stoddard (22:46.712)
So you do that, you make sure like, it's not just some brand new financial buyer with an SBA loan because now the multiple or the cashflow can't handle the debt from that SBA loans too, yeah. And you're be working 14 hours a day, so yeah.

Patrick Lange (23:01.443)
Yeah, and so we vet sellers and buyers, right? And our first move I think a lot of brokers, they don't like buyers and sellers talking. I do it right away. If you request some information, you look over our summary if you like it. Let's jump on a phone call, buyer and seller. Let's see if it's a good fit. Right at the end of the day, as I mentioned before, I want it to be a marriage, not a divorce. And so I want to make sure that you guys get along with one another.

And what I typically do is we'll do a phone call the buyer ask much questions seller ask much questions We'll hang up and I'll call the buyer and say what do you think and you'll say wow Patrick That guy was an idiot. I never thought that business that isn't what it's supposed to be or you'll say Wow, he seemed like a good guy and they've got a nice business I'd be interested in learning more and I'm gonna call the sellers and say what do you think? They'll say man that John guy was weird. There's no way he do our clients would never like him or they'd say

I think you'd do a great job here. think our employees would like him or customers, whoever it is, would like him. And then we typically set up a face-to-face meeting because the reality in a sale, and I'm kind of biased in this by getting to look at a lot of them, but the easy part's the money. The numbers are the easy part. It even makes mathematical sense or it doesn't. At the end of the day, as a buyer, you're willing to pay X amount. As a seller, you're willing to pay X amount. Can we make it happen if it's no great?

Everybody go their separate ways. There's no hard feelings. It's just not a good deal for everybody. The hard part is everything else. The transition, the licensing, the how's it going to work, how are we going to tell our staff, how are we going tell the customers, how long are you going to stick around for, what are you going to do, what kind of training are you offering. There's all these other things that go into it. And the financial part of the deal, are they asking for a seller note? Are they asking for an earn out? Are they using SBA and the bank wants you to hold 10 %?

So there's a lot that goes into that, but the numbers is easy. mean, at the end of the day, that's really easy. It either makes mathematical sense or it doesn't. I had a seller tell me one time, and we kept doing calls with buyers, never a good fit. And I kept apologizing and he's like, listen, it's like shoe shopping. Just because the shoe doesn't fit doesn't mean it's a bad shoe. It's the same thing with a business. Just because it's not a great fit doesn't mean it's a bad business or the buyer's bad. It's not a good fit. Move on to the next one, and that's what we do.

Patrick Lange (25:20.5)
and we get to sift and sort a lot.

Jon Stoddard (25:23.554)
Yeah, do you recommend the face-to-face to everybody? Has anybody bought a business just like never just doing zoom or phone call? Yeah.

Patrick Lange (25:29.571)
Yeah, lots. I've sold a ton of businesses where I've never met the sellers or buyers.

Jon Stoddard (25:35.15)
Yeah. And is that a situation scenario where owners retiring and it's a perfect situation where they may have systems in place and you're not buying a 14 hour day job?

Patrick Lange (25:46.791)
Yeah, and obviously buyer education has a lot to do with it too, right? It's a buyer experience. Does the buyer know what they're buying? They can pull the data and see how they're going to incorporate it into their system. There's a lot of professional buyers out there, right, with the consolidation that's taking place. There's a lot of buyers, Apex being one of the largest. I think they've bought 260 companies in last three or four years. I mean they understand integration.

Jon Stoddard (26:07.892)
Apex, wow.

Patrick Lange (26:10.963)
They know how to make it happen. And they're the behemoths, but there's a lot of other ones like them. So that transition doesn't need to be as much. It's not as warm and fuzzy. They know what they're buying and they know how to buy it. It's a good deal to move forward.

Jon Stoddard (26:25.742)
And what do they buy? When they buy the the customers and the scenario, I mean the machine that the individual already bought up and they some level, what is that? 300,000, 500,000 where there's systems in place or what?

Patrick Lange (26:41.627)
So they're buying the name, right? They're buying the brand. They're buying the phone number. They're buying the website. They're buying the customers and the database. They're buying the trucks, the vans, the equipment, the ladders, the vacuum pumps. They're buying the inventory in the warehouse. So it's an asset sales. They're buying all the assets of the corporation or the business that allow it to run and produce the revenue that it's producing.

Jon Stoddard (26:44.012)
Yeah.

Jon Stoddard (27:03.65)
Yeah. And do they change all the systems to their CRM and their name and everything else or? Yeah.

Patrick Lange (27:10.267)
really depends on who it is. So I have some who are not experienced buyers that are happy with what they're buying and they step right in and run it the way it's being run. They're buying cash flow. They're happy with 200, 300, 500, whatever the net income is. They're happy with that. Then there's others who, in Apex, they're on one operating system and they're on one payroll company and they're on one insurance benefits and they're on all these other things. So it really, really depends on who the buyer is.

And from a seller perspective, that's a different transaction. Some sellers hear about private equity and they're the devil and they're bad and they're going do all these things. And others say, hey, it's a better opportunity for my employees. They can go work for a company that's got 200 different branches. If they wanted to move someplace, they could and still have a job and they can make money and better insurance and better benefits. So it's all in perspective. Like anything else, if you're looking for it, you'll be able to find it. It's the same thing with the buyer.

So really depends on who it is. My advice for somebody with no experience is just buy the business and shut your mouth. Just get in and watch, right? I the business is running. I think six months is real, three to six months, depending on your, depending on your act. mean, when I bought a heating and air company, I climbed in the van with the installer the first day and I rode around and crawled underneath houses with them. And I still couldn't fix it, but I want to be able to speak the language and understand what they were talking about. Cause here's the reality. When I bought the business, if I went to hire somebody and he said,

Jon Stoddard (28:16.108)
Yeah, for how long? A year? Six months? A year? Yeah.

Patrick Lange (28:38.523)
Or she said they knew everything about it and I sent them on a service call and they were gone for six hours and came back and told me they changed the capacitor. At the beginning, I would have been like, great job, pat him on the back. Everything was great. Well, now I know a capacitor should take under 10 minutes to change. So if they were gone six hours, they're cheating me. So for me, I'm a control freak. And so I wanted to know those kinds of things. And so I didn't know anything about it. So the only way could do it is climb in the van with them and go do it.

I was a grunt. was dragging trash around and picking stuff up, but I at least got to see how things worked and what they did. Once again, I still can't fix an air conditioner, but I know if somebody is going to fix a capacitor, they shouldn't be gone six hours. And so there's a learning curve there, and shutting your mouth and paying attention allows you to learn.

Jon Stoddard (29:24.088)
Yeah. I want to ask you about CRM systems, because there's a lot of systems out there. When you start to sell a company, do you look for specific big name brands that, well, they got a great system in place of, you know, get, you know, from the initial phone call, 800 number to put into the system to dispatch. Yeah.

Patrick Lange (29:45.627)
So I ask that, but really a lot of people, wrongfully so, buy a huge CRM system, and they're bleeding, paying for it, and they don't use half of it. So there's a few behemoths in the industry, and it could be $300 a user, which you've got six employees. Six employees, you're probably doing a million and half in sales total. So you've got six employees at $300 a month.

You you're spending a lot of money tracking data and most of time they're paying for so it's recording the calls that come in. Well, I ask them who's listening to the recordings. Oh, we don't have any time. Why are you paying for a system to record calls for you to listen to when there's nobody listening to them? Well, I've been said that's what we needed. Okay. What about tracking? Are you doing any advertisements? No. Well, then why do you have six different numbers to track ads when you're not running any ads? A lot of the companies I sell do zero marketing.

The phone rings more than they can get to.

Jon Stoddard (30:48.312)
Wow, because that's in Florida where it's adding, you know, no.

Patrick Lange (30:53.755)
No, because they've had a business for 30 years taking care of people and they took care of the grandmothers and then the parents and now they're taking care of the kids. And they trust them. They've taken care of people and they've done a good job and so when something breaks they call them. And they have brand recognition, name recognition in their area. so that's – I have – I sell companies all over the country and I've sold companies in California with zero marketing budget, Florida, Alabama, Texas, New York.

Minnesota all over the place that they've just been doing it so long and a lot of those the reality is the phone rings more than they can get to and that's That's the business owner side of me when I meet with somebody the first time somebody said the phone rings more than we can get to it I thought you know, that's not possible. No, he would say And like no really and so at first the first few meetings I heard I thought well, maybe it's true. Most of these smaller companies

Jon Stoddard (31:39.342)
That's what everybody would like to have that problem, right?

Patrick Lange (31:48.463)
They don't want to go through the headache. They're looking at the end of their career and the end of their business. They don't want to go buy a new van, train a new technician, buy clothes and insurance and get them going, and he may work out. He may not. Just keep what we've got. We're making a couple hundred thousand dollars a year. Why are we going to have the headache of worrying about making more? that's – I see so many buyers come in and they're like, why aren't they growing? Because the guy makes $300,000 a year. He makes more than anybody's family ever has. He never graduated high school. He's doing incredibly well.

Jon Stoddard (32:16.941)
I know as a trade, isn't it amazing? Right? I I can tell you, I saw a commercial before an NFL game. There's 300 so players in the NFL. There's four, you know, openings in the NFL. There's 400,000 openings in the trades. Yeah.

Patrick Lange (32:19.983)
you

Patrick Lange (32:33.209)
And can't tell you how many NFL players call me looking to buy heating and air cover. Lots. had a former NBA player call last week, he's looking at a company in Florida. No, lots that they are leaving and it's a short window. It's a short window what they're doing. They're only going to work eight or 10 years max typically.

Jon Stoddard (32:37.198)
Are you kidding me? Wow, that's cool.

Jon Stoddard (32:49.474)
You gotta put their money to work.

Jon Stoddard (32:57.646)
I'm just curious, you mentioned California now with the Pacific Palisades fire of $250 billion. There's going to need a ton of people, HVAC companies going out there. Are you seeing any of that supply demand? of too early?

Patrick Lange (33:13.531)
Not yet. I it's too early. Same thing happened like in Florida. I'm in Florida. The hurricane comes through and wipes out towns. Everybody needs a new air conditioner. mean that's it's wherever it happens to be, whatever the crisis. Tornadoes in parts of the area. That's typically new construction based. And so it's kind of a different market. I don't sell a lot of new construction companies because a lot of buyers are not interested in them because it's a risk. It ebbs and flows with the market, and you're at the mercy of a contractor who will

often slice his own mother's throat for 50 cents a square foot. So it's not always a great business model to be in on the new construction site.

Jon Stoddard (33:49.836)
Yeah. How do you look at a seller who goes like, I'm just worn out and I've been this position before because I was working too many hours. And then the broker told me, well, I got, I got a business here doing 400k net and they're only working five hours. Like, okay, you got to put systems in place. Do you coach on how to do that to get them ready to sell or?

Patrick Lange (34:12.377)
Now there's a lot of great coaches and organizations in the industry and I stay in my lane. Selling 24 companies in a year keeps me working beyond full time. So I'm not, I had a small company. So I'll tell them what a buyer's looking for. And a lot of the events I go to, most sellers don't know, right? They don't know who to ask. They don't know what it's worth.

Jon Stoddard (34:21.4)
keeps you really working, yeah.

Jon Stoddard (34:36.124)
What is the buyer looking for? Yeah, go ahead.

Patrick Lange (34:38.063)
They're looking for consistency and of income, so maintenance agreement, service, repair, replacement. They're looking for somebody who stays away from new construction because often it's a race to the bottom. They're looking for clean books and records. So many business owners treat their business like it's their personal checking account, and they're paying for their ex-girlfriend's condo at the beach, and they're paying for their farm, and they're paying for all these other things, and they're calling it cost of goods in the business. And so a buyer comes through and…

They're not going to pay you for money they couldn't prove. I just had a call five minutes before a call. Tell her, on the phone we're talking numbers. Tell me about your business. Doing a million, 1.7 in sales. Extremely profitable. Met in $350,000 a year. Fantastic. I'm going to send you an email once you send me your numbers. Well, just so you know, all business owners use a little cash. And I'm like, how much are we talking about? And what is the tax return going to show? Well, it'll probably show half.

Well, the buyer is not going to pay you for it. They can't prove it at bank if you're using SBA. He's not going to lend on it. I said to him and I said so many You've been cheating call it anything you want to but you've been cheating the federal government and Now you want a buyer to go into federal government and say hey I want you to ensure a loan for this company who's been cheating the federal government really is making another hundred thousand more than he's telling you can't do that so now you've eliminated half the buyers from the equation and maybe needs financing now into the equation and so

So clean books and records is so big. And then the final thing really is owners who are not the entire business. know, once again, technician turns owner often they're still in the truck. They're the best. Absolutely. And so, so when you look at their Google reviews and it's Jim's heating and cooling and every review is about Jim and what a great job he did at my house, the buyers can look at it and say, well, Jim Leeds, what do I have? Yeah. I'm a customer list.

Jon Stoddard (36:18.2)
That's the E-Myth, yeah.

Jon Stoddard (36:31.406)
Mm-hmm.

Patrick Lange (36:33.691)
and they're not willing to pay a lot for a customer list, they're willing to pay a lot for a system that operates without Jim being there, they're not willing to pay a lot for Jim's job.

Jon Stoddard (36:45.198)
When you go evaluate a business, do you start looking for these systems in place? mean, how do you score that? like, well, I'd score it at a 50 % or 70 % in systems in place, and you could do this.

Patrick Lange (36:59.099)
So the reality is the bank statement and the P &L scores it. Right? mean if you've got good systems in place and you're generating revenue, when I look at your employee tenure, they've been there a long time. They're making good money. You have long-term customers. You're spending minimal on advertising. Your net margins are very high because you're tracking things. So it's not like I can say, hey, you've got a great CRM. You're going to bump up to here.

I'm going to look at your numbers and your numbers are going to dictate that towards me.

Jon Stoddard (37:29.674)
If all the financial metrics are healthy, you're going, there's systems in place. Yeah.

Patrick Lange (37:34.651)
And I'm going to ask we're going have questions about it. Are you using the CRM? What CRM you using? How is it done? What are you tracking? And so I know to ask those in the weeds questions just because I've done so many, but the reality of it is give me a tax return and a P &L and I can tell you.

Jon Stoddard (37:50.252)
Yeah. I have to ask you about that because tax returns, can take a lot of expenses and not show actual total revenue. Do you guys also get into like, well, I need to see your bank statements, you know, going in and out. Yeah.

Patrick Lange (38:05.083)
I don't, so – we have them prove it to me, so I probably look at five sets of tax returns a week, I would think, and I only take on two listings a month. So we're pretty selective on who we're going to take on, but I couldn't go through 10 people's bank statements to verify that they're not lying. Most sellers, once again.

dealing with a smaller seller who's a blue collar, great person, great family, great everything. They're typically not three years ago feeding the numbers so the numbers look better for themselves. Normally, it looks worse. They're trying to save money on taxes, and that's what we're going to face our valuation on is going to be the tax return. And so I preach. Pay taxes. People look at – and I've been self-employed my entire adult life, so as I say this, don't think that I haven't been creative in my accounting as well.

but running a business to sell.

Jon Stoddard (39:02.787)
Those are, I, that's legitimate tax deductions. Yeah.

Patrick Lange (39:05.263)
Right. Yeah, so but running a business to sell and running a business to save taxes on are two different businesses. And so if you're running a business to sell to maximize sale price and sale value, the more taxes you pay, the better it is for you. And so we kind of preach that is if the ultimate answer is, I'm building this for my exit and I want to maximize the exit, then here's what you need to do. If you're saying I'm to run this for the next 20 years, I'm doing everything I can to save money for…

money in my pocket so I can invest in real estate, invest in other businesses, invest these other things, then that's a different metric as well. And here's the reality. And we've talked, and we've been talking bad about the guy who's in the industry, they call it a chuck in a truck. So one guy and a helper and his wife answers the phone. That guy's probably making 200 grand a year. So.

Jon Stoddard (39:39.128)
That's a different type of business. That's a light. And that's great. That's, know, millionaire next door kind of millionaire next door stuff. Yeah.

Jon Stoddard (39:52.046)
Shocking a truck.

Patrick Lange (39:59.579)
So for me, I'm not saying that's a bad life by any stretch of the imagination. What I'm saying is if the goal is to maximize value at the time of sale, that's not the business model we go to. Absolutely. And so if you say, hey, I don't care about what I sell, I'm going to make all the money I can when I'm working and I'm going to buy other things that I'm going invest in and I'm do these things, then fantastic. Do good for you. When you're done, close it down and walk away. Who cares? But most don't. Most don't understand that. And they run it that way. And then they come to me at 65.

Jon Stoddard (40:10.553)
That's a much harder sale, yeah.

Patrick Lange (40:29.625)
I have a video on my YouTube channel. called Your Baby's Ugly, and it's a joke just for me dealing with – you sit across the table of enough 65- and 70-year-olds, and you tell them, listen, what you've spent your entire life building has zero value. It rip your heart out. It absolutely will. They didn't know who to ask. They didn't know anything about selling a business. They got up and went to work every day. So I do things like this. I speak at events. I write articles. So I can tell people, hey, this is what a buyer is looking for. And if your ultimate goal is to sell…

You need to work around these parameters. If your goal is to save taxes, own it, not have to worry about employees, then go the other way, but don't do it blind.

Jon Stoddard (41:07.906)
Yeah. I got a question about the buyers and then just cut off the private equity people, the financial buyers that come in and they go, I want to use 90%, 95 % debt and looking at the stress that the debt places on that cashflow. What do you advise around that? I'm going to just kind of open that up.

Patrick Lange (41:32.091)
So really depends on the size of the business, right? If you're buying something at a 3X multiple, you can probably do it. Probably not a big deal. You're buying something at an 8X multiple. You're going to be playing catch-up from day one. I believe in business ownership, specifically buying them, the money's made when you buy it. So if you're overpaying trying to compete with private equity because you need a million dollars of EBITDA…

Because that's what the playbook you read says you have to have, or the seminar you went to said you have to at least have a million dollars in EBITDA. Now is not the time to try to get them to the trades because you're going to be competing against $2 billion behemoths that are going to write a much bigger check than you're going to write, and so you're going to lose. I tell people in that scenario, buy a smaller company. You can buy a company.

$2 million in sales netting $300,000, you can buy it for three, potentially four-time multiple, and typically those smaller businesses have a lot of low-hanging fruit. That's the e-myth right there, 100 % technician-turned-owner. It probably doesn't have a CRM, doesn't believe in maintenance agreements, doesn't have a sales system in place, doesn't track their numbers. We do it this way because that's way we've been doing it for 30 years, that kind of stuff. And so there's so much opportunity in those smaller deals.

And SBA, right, if they're going to loan you $5 million, they'll loan you $5 million on three different deals or five different deals or one deal. They don't care. So you could go buy three different companies doing $2 million apiece and put them together if you wanted to to get to that rate, and you'll end up saving a tremendous amount of money. So people – when a buyer calls me and we're talking about the business, I'm going to say, here, you cash, SBA, what are you looking at doing? Well, SBA. Okay, let's talk through the numbers.

You need to take a paycheck out of this? Well, yeah, I need $300,000 a year. You're looking at a company that makes $500,000 and you need $300,000 and now you've got $4 million of debt service. And you're going to need new vans and you're going need to some capital improvements because I don't care what they say, but if a seller is looking to sell, they're not buying new equipment, buying new vans, and buying new stuff, right?

Jon Stoddard (43:37.014)
Over 10 years, yeah, yeah.

Jon Stoddard (43:48.194)
Not right off the bat, yeah.

Patrick Lange (43:49.411)
They're limping it along. And so, so now you go into it and what if, what if there's a slowdown? What if something happens in the economy? What if COVID happens? I mean, people bought a business two weeks before COVID and now they're sitting around a table looking at each other going, now what do we do? I'm in Florida. We got hit with a hurricane. So I lost my house in the hurricane. My son's business serves that area. The town I lived in had over 200 houses prior to the storm and there's there now.

So he lost 170 customers that don't exist anymore. So if he would have bought the business two weeks prior to that and now lost that cash flow and if he was strapped with a high SBA loan, potentially it could be a disaster. And that storm didn't just affect Florida, it tore up Georgia, it tore up the Carolinas. Think of the people in California right now that their customer base just got wiped out. So I'm much more conservative when I'm talking to buyers that make sure you've got...

the cash flow and the debt service under control to plan for bad days.

Jon Stoddard (44:51.822)
Do you have a, I want to add two questions about that. One is like, what did you advise after your son lost 170 customers to the, do you advise a debt service coverage ratio? Cause I, I know a lot of SBA lenders out there will go, ah, 1.25. That's fantastic. Like to me, that's a little tight. I, know, and I know some private equity guys like Adam coffee, you're like, well, shoot for two. You got to shoot for two. Yeah.

Patrick Lange (45:17.691)
So yes and no. I work with Live Oak Bank a lot, and Live Oak's got a heating and air division, and so they know the trade super well, and to me they're more conservative than other banks. And so I send it to them and let the lenders do what the lenders do. I'm not the coach, the consultant. I'm here to give you kind of my opinion and then people to go talk to the experts. So to me, less is always better. At the end of the day…

Jon Stoddard (45:38.392)
Yeah.

Jon Stoddard (45:42.498)
Yeah

Patrick Lange (45:45.241)
The less debt you have, the better it's going to be based on cash flow. And once again, I sell big companies. I'm not telling you not to write me a check for $10 million, but if you did write me a check for a million or two million or a million and a half and do it three times and be making more than that $10 million check would have, you're foolish not to. But at the end of the day, too, people – think a lot of people go to a seminar or a trade show or go to an event and somebody stands on stage and says you can buy this business and you can run it and staff's in place and…

leverage it to the hilt and you only make money when you're playing with other people's money and they're going to hold the seller note for everything and they sell these things and an uneducated buyer gets there and I'm having to educate them saying that's not real world. It's not going to happen in a way and what happens if you lose a technician? You're out of business potentially in the model you're looking at so you better have a better system in place.

Jon Stoddard (46:37.272)
Yeah. And what about that your, son losing if you're, know, what do you advise on that? Like if you lost 170 customers in a hurricane or a

Patrick Lange (46:41.078)
That's all.

He lost a lot more than 170 customers because there I mean it came through that whole area that he served I'm just talking about my little town that we lived in But there's a lot of people the water came up high enough where it washed out a lot of people's duck work So he was busy with duck work and other people who still didn't have houses left or the whose air conditioner got washed away And so so they've been fortunate to stay busy. I think you'll really he'll really start seeing the pain in the summer So when summer comes back around and there was normally all this service and repair on older equipment

Now it's not there and if there is equipment there, it's all brand new and all typically will have a 10-year warranty. And so if you have to go back out there, they're not happy with you. So it's a different model and you better make sure that you're diversifying and marketing. He historically had not been marketing. The phone rang more than he could and we're in a small rural area and I've told him to reach out outside that area and expand that because when summer gets here where before...

He was turning people away, potentially he's going have guys sitting around looking at themselves and that's when the technicians and the company makes money.

Jon Stoddard (47:50.06)
Yeah, yeah. I got a question about growth rates for HAAC businesses. What do you typically normally see for a million, two million dollar sales kind of business?

Patrick Lange (48:03.033)
So it's really skewed. COVID really had a – I mean they call it the COVID bump. mean it's like everybody got a new air conditioner during COVID. Everybody was at home. Everybody was using their air conditioners. They realized that it didn't work in the middle of the day often when they typically weren't at home. They also – absolutely. And everybody's at home. And now everybody's angry and at home, and now it's hot. And so there was a big bump then. And so now we've seen that slow down a little bit, leading up to then – know…

Jon Stoddard (48:18.117)
It's under a lot more stress.

Patrick Lange (48:32.699)
It really depends on the type of the business. So mom and pop have in business for 30 years. The growth rate is extremely slow, and they're just struggling to keep up with the work they've got. And so it may be 5 or 10 % growth. Others – I've seen companies grow 50 % in a year with good systems and people in place. 100%. I mean the numbers – and it depends what you buy, right? And that's back again once again to buying smaller. If you're buying a company doing $10 million…

and sales. To me, if you're a business owner and you're doing $10 million in sales, either you get super lucky, which isn't very common, or you're pretty good business person. You've got things dialed in that you've got enough people and systems and marketing and that to make it happen to $10 million in sales. So if you come in on the outside and buy that, you're hanging on. I you don't know what you're going to even know, and it was run by a well-tuned person before. You buy that company that's doing $2 million in sales. Every person you hire generates revenue.

Jon Stoddard (49:11.65)
Yeah, yeah.

Patrick Lange (49:32.099)
Right. mean at 10 million you're hiring service managers who don't generate net revenue and office managers who don't generate revenue and operations managers who don't generate revenue. They're designed to stop the bleeding. If you're doing a million dollars or two million dollars in sales, you're hiring technicians. And every time that van pulls out the driveway, they're bringing back more money than they left with. And so it's much, much easier to grow double, triple a smaller company than a bigger one because of the key people in the positions.

Jon Stoddard (49:57.325)
Yeah.

Yeah. Do you, you, is there like a revenue per employee in the HVC industry?

Patrick Lange (50:04.379)
There is, and I've heard all sorts of stuff and I don't – it's really persistent. There's a lot of heating and air companies out there that are sales organizations. They don't fix air conditioners. They sell people new ones. And their technician goes out and they can't even fix an air conditioner. They can sell them. So that model has skewed the numbers a lot where what's real – what do you count? Is you talking to service and repair or are you talking about new installations or are you talking about maintenance?

Jon Stoddard (50:24.024)
Gotcha.

Patrick Lange (50:33.572)
There's so much that goes into it that it's hard to really give an accurate number without a specific business model.

Jon Stoddard (50:40.024)
Yeah. Do you look at businesses and say, Hey, you're, you need to have some kind of maintenance agreement with all of these things in place. You don't want this one time sale going. You want some kind of maintenance deal and it's, it have to be a percentage of the revenue or you say, Hey, here's your goal. Yeah.

Patrick Lange (50:52.676)
Absolutely.

Patrick Lange (50:56.987)
A well-run company with a well-run maintenance system will typically do 500 maintenance agreements per million dollars of revenue.

Jon Stoddard (51:06.381)
500 per million, Okay.

Patrick Lange (51:09.179)
Five hundred to a thousand per million, I don't see many thousand per million. I see a lot of well-run companies that are five to six hundred per million.

Jon Stoddard (51:18.382)
Yeah.

That's interesting. Yeah. What's the biggest challenge that HVAC owners and sellers have in their business?

Patrick Lange (51:28.665)
people, butts in trucks.

Jon Stoddard (51:30.456)
Butts in trucks. What is it just, you can't keep them on board. You have to train them. They leave, they go start their own. What's the deal? Yeah. All of the above.

Patrick Lange (51:39.067)
Yes, yes, yes, yes. They're poaching. They're poaching each other. mean think of you know, COVID somehow seemed to make it worse. know where everybody went, but you go into restaurants and like, hey, please give us time. We don't have enough staff here to wait. Where did they go? And they were here two weeks ago and now they're not here all of sudden. But anyways, same thing in heating and air. You know, mean a lot of schools, right, depending on where you are, you know, are preaching college, college, college. They're not preaching trades, trades, trades.

Jon Stoddard (51:52.348)
that's horrible. It is horrible. Yeah, like...

Patrick Lange (52:07.291)
And the reality is until I owned a heating and air company, I didn't know the amount of money you could make. I didn't know there was millionaires fixing air conditioners. I was just completely ignorant to that. Didn't even know that existed. Didn't know there was millionaire plumbers. I sold a company in Alaska three months ago. Plumbing company in Alaska sold for $5 million, less than a five-year-old company in Alaska. Thinking if you can make $5 million in Alaska, you can make it anywhere.

Jon Stoddard (52:34.584)
There's not many people in Alaska.

Patrick Lange (52:36.303)
things I see, the numbers, and providing value. I'm not saying rip people off. I don't believe in that model. But they're helping people and they're taking care of people and they're doing a good job and the phone rings and they provide more service, and so it's pretty neat opportunity.

Jon Stoddard (52:53.186)
Yeah, we got a guy here in Tucson that sold his company to Rightway, to a private equity company. And he's very transparent about his troubles as a younger guy. Like he's spent time in jail and now he became a multimillionaire selling his HVAC company to Rightway.

Patrick Lange (53:13.465)
Lots of those stories.

Jon Stoddard (53:14.914)
Yeah. Well, Patrick Lane, thank you so much for joining Top &A Entrepreneurs.

Patrick Lange (53:20.611)
I had a great time. appreciate you having me on. Hopefully what we covered will add a little bit of value to your watchers or listeners.

Jon Stoddard (53:26.926)
I need it because I've talked to 160 business buyers, but they all buy in from business brokers. So I got to get their story too. Yeah.

Patrick Lange (53:35.739)
I appreciate you having me on and if I can help out in any way don't hesitate to reach out.

Jon Stoddard (53:41.144)
Thanks, Patrick.