Nathan Lenahan·March 28, 2022

What to Love About HVAC Acquisitions

Nathan Lenahan, an ex-military entrepreneur with a background in property management and high-growth real estate startups (including WeWork), acquired Bart's Heating and Air — an HVAC business in Fort Worth, Texas — for $400k alongside two longtime business partners in November 2021. The business was doing approximately $1m in true revenue (understated on tax returns) with ~20% net margins, giving a favorable effective multiple. The three-partner team put in $53k to close plus additional working capital, financing the rest via SBA loan and a $100k line of credit. Within 45 days, they had grown from 2 to 3 technicians and were targeting $2.72m in organic revenue for year one, driven primarily by improved phone responsiveness and customer service. The acquisition is explicitly step one of a larger venture called Homework — a home-data platform that aims to use data collected from HVAC service visits and home inspections to power instant quotes, filter subscriptions, and eventually a full home-services marketplace. The episode covers the thesis for HVAC as an acquisition target, the mechanics of a small SBA deal with three co-buyers, and the team's philosophy on treating technicians and recruits as well as customers.

Deal facts

purchase price: $400k
multiple: ~2x SDE (implied)
sde ebitda: SDE ~$200-250k (20% net margins on ~$1m revenue, pro forma)
revenue: ~$1m (stated; believed to be $1.25-1.3m true revenue)
financing structure: SBA acquisition loan + $100k line of credit; ~$53k equity to close (split 3 ways); ~$55k each additional working capital contributed by partners
notes: Three co-buyers (Nathan Lenahan, Scott Titan, and a third partner). Seller had optimized for low taxes rather than sale, leading to understated financials and favorable purchase price. Business: Bart's Heating and Air, Fort Worth, TX. Closed November 2021.

Why this business

Nathan loved home ownership and residential services broadly, and chose HVAC specifically because it is critical infrastructure — in Texas it can be life or death in summer — so customers always pay. He also valued HVAC's finite set of recurring failure modes (10-12 common problems), the asset-heavy recurring-revenue opportunity via service/maintenance contracts, and the fact that the skilled trades are behind on technology, creating room to apply a tech-forward approach. The acquisition was also step one of a larger startup called Homework, a home-data platform.

What's working

Answering phones and being responsive immediately improved revenue — described as the single biggest driver of a record December in the business's 20-year history
Seller (Richard) was high-character, had strong recurring customer relationships, and the transition was nearly seamless with no major skeletons
Favorable purchase price due to seller optimizing for low taxes rather than for sale — got a business with ~$1m+ true revenue for $400k
Hiring quickly by treating recruiting like sales — human job descriptions, fast follow-up, emphasizing company culture and care for technicians
Growing from 2 to 3 technicians within 45 days of close, with 2 more ready to hire; targeting $2.72m revenue in year one organically
Network effects from treating the seller well — a neighboring business owner (friend of the seller) proactively approached them about an acquisition
Service Titan implementation underway to replace HouseCall Pro and build operational infrastructure

What's hard

Phone number porting/transfer took four weeks and 15-17 hours of effort — the single biggest operational headache post-close
Bought smaller than they wanted (would have preferred to max out SBA loan at ~$5m business); market multiples on larger deals had gotten out of hand
Revenue base is small so growth hires (e.g., senior CSR/ops manager) strain working capital and push the business close to breakeven until summer ramp
One technician lost during the under-contract period due to COVID-related issues, requiring the seller to hire and train a replacement as a closing condition
Seller had some customer-service habits that made Nathan cringe — texting customers for info rather than entering it in a CRM, being somewhat curt — reflecting an owner who had reached a comfortable level of success

Notable quotes

I love HVAC specifically because it's absolutely critical. In Texas specifically it could be life or death during the summer and people know they have to pay for it and they're not willing to go without it.

The Wilson companies on Twitter talks about go buy a business that's like four or five hundred k and as inefficient as possible and I think that we found inefficiencies everywhere.

I treat recruiting just like sales. If I get a lead on the HVAC side you better believe I'm calling back within a minute.

53k to get a little over a million in revenue — I'll take that all day long.