A lender, investor or buyer putting money into a company is relying on what the business will do next, not only on what it has done. What they look at, and the price or terms they offer, can depend on how much of that future they can see evidence for.
For a heating, ventilation and air conditioning (HVAC) company, three areas carry evidence of that future: the quality of its revenue, the leadership team that runs it, and the systems it runs on. The same three apply to the electrical and renewables work HVAC companies may also take on, from periodic inspection and testing to heat pump, solar PV and battery storage installs. Being ready to raise capital, sell or bring in an investor draws on the same three areas rather than adding a fourth.
What do investors look at when they price a business?
Where a valuation is based on earnings, it can start from a measure of earnings adjusted to show what the business earns on its own. The owner’s personal costs and one-off items are taken out or added back, and costs a new owner would carry, such as the market cost of replacing the owner’s role, can be deducted. Other approaches start from forecast cash flows or from the value of the assets. How adjusted EBITDA differs from the profit in the accounts is covered in the guide to valuing an electrical contracting company.
The adjusted figure says what the business earned. The harder question is how far an investor can rely on it continuing, and that is where the three areas come in:
- Revenue quality: what kind of revenue the business has, how much of it turns into profit and cash, and how much of it can be relied on next year.
- Leadership: who runs the business, and whether they can keep running it without the founder at the centre.
- Systems: how the business runs, and whether its numbers, records and ways of working would stand up to an outside check.
A simple test brings all three together: if demand doubled tomorrow, what would break first? The answer shows which area is under most strain.
What does revenue quality show that a busy pipeline does not?
A full pipeline shows demand. Revenue quality shows how much of that demand turns into profit, and how much of the profit turns into cash. An investor can look past the order book to what sits behind it:
- Margin by job and customer. Job costing shows where margin has been made and lost, by type of work and by customer.
- Conversion to cash. Retentions, slow applications for payment and stage payments can leave a profitable contractor short of cash. The working capital a business needs to keep running is part of what an investor takes on.
- Concentration. A large share of revenue from one main contractor, one housebuilder or one framework is a risk an investor can price in.
- Terms in writing. Signed contracts, agreed rates and clear variation procedures turn expected revenue into something an investor can check.
Where the gap between winning work and being paid comes from is covered in closing the quote to cash flow gap.
How does service and maintenance revenue differ from project revenue?
Installation projects and service work can both be profitable, but they give an investor different kinds of evidence. A project is won, delivered and invoiced, and then the next one has to be won. Planned maintenance and service contracts can renew, are scheduled in advance and keep the company in regular contact with the customer between projects.
In an HVAC company, recurring work can come from planned maintenance of heating, ventilation and air conditioning plant, from servicing heat pumps and chillers, and from leak checks. Stationary refrigeration, air conditioning and heat pump equipment containing F gas equivalent to 5 tonnes or more of carbon dioxide must be checked for leaks at intervals set by the amount of gas, with responsibility shared between the equipment’s users and the technicians who service it, as GOV.UK sets out. Electrical contractors can have recurring periodic inspection and testing work for commercial clients.
Heat pump installs funded through the Boiler Upgrade Scheme depend on that scheme’s rules, and the installing business must be certified under the Microgeneration Certification Scheme (MCS) for the relevant technology to apply for the grant on the property owner’s behalf, as Ofgem sets out. Revenue that relies on a grant scheme carries the risk that the scheme changes.
None of this makes project work less valuable in itself. The point for an investor is the mix: how much of next year’s revenue is already contracted, and how much depends on winning work that has not yet been tendered. How buyers weigh that mix in this sector is covered in how buyers value an HVAC company.
Check your business: Service and project revenue
- Do you know what share of last year’s revenue came from service and maintenance work rather than installation?
- Do you know how much of next year’s revenue is already under signed maintenance or service contracts?
- Do you know which maintenance contracts come up for renewal in the next twelve months?
Why does the leadership team need to be visible before a deal?
Where the management team stays after a deal, an investor is relying on those people to run the business. In an owner-managed company, the owner is the visible one. Customers, suppliers and the bank know who they are. The rest of the team can be just as capable, but if their names are not on the decisions, an investor has no way to see it.
A visible leadership team is one where named people are responsible for operations, finance and winning work, where they own the numbers for their part of the business, and where they have a record of running it. Due diligence can include meetings with the team, so an investor can ask them, not the founder, how the business runs, and see whether that record exists.
Depth matters as well. An investor can ask what would happen if one manager left, how the business keeps its engineers, and whether certifications such as MCS or F-gas company certification rely on qualified people beyond the founder. What a management team needs in place for its own deal is covered in how a management buyout works.
What makes reporting and systems investable?
Five areas show whether a business runs on systems or on the founder’s memory:
- Numbers an investor can trust. Monthly management accounts produced on time, with margin by job and type of work, and a cash forecast.
- One record of the work. Quotes, jobs, work in progress and applications for payment held in one job management system, rather than spread across spreadsheets and inboxes.
- Written ways of working. Pricing, purchasing, health and safety and compliance set out in written procedures the team follows, the day-to-day layer of a business management system. Where the company holds a quality certificate, what an ISO 9001 certificate tells a buyer explains what it does and does not show.
- Controls that do not depend on one person. Approval limits, credit control and clear rules on who can commit the company to spending.
- Compliance records ready to show. Certifications, health and safety files and F-gas records kept current, so that due diligence finds them rather than waits for them. Anyone who operates or services equipment containing F gas equivalent to 5 tonnes or more of carbon dioxide must keep records for five years, including the gas added and the dates and results of mandatory leak checks, as GOV.UK sets out.
Check your business: Systems
- Are the monthly management accounts produced on a set date each month, with margin by job?
- Are quotes, jobs and applications for payment held in one system the whole team uses?
- Could someone other than the founder find the certifications, health and safety files and F-gas records?
How do these drivers affect a business’s ability to raise capital?
Different sources of capital weigh the evidence differently. A lender can focus on whether the business generates enough cash to repay, and on any security it can offer. An equity investor can focus on growth, the management team and how they might eventually get their money back. A buyer can focus on whether the profit will continue without the founder, and how the business would fit with their own.
Each of them can draw on the same records to answer their questions: the margin and cash figures, the contracts, the people responsible for each part of the business and the compliance files. A business that can produce those records quickly gives each of them less to estimate.
When should work on value drivers start?
Each area takes time to show up as evidence. A year of maintenance renewals, a manager’s record of running the business through a busy season, and monthly accounts that have been produced on time for long enough to be trusted cannot be created in the months before a deal. That is why the work overlaps so much with exit planning, even for an owner with no plans to sell.
The same work also makes the business easier to run. Revenue that is understood, a team that makes decisions and systems that hold the information all help the business whether or not an investor ever looks at it.
Frequently asked questions
An investable business is one whose future profit a lender, investor or buyer can rely on without depending on the founder. It has revenue that is understood and partly contracted, a leadership team that runs it, and systems that produce reliable numbers and records. Those areas can shape the price and terms an investor offers.
EBITDA is earnings before interest, tax, depreciation and amortisation. Adjusted EBITDA takes out or adds back items that do not reflect the business’s ongoing earnings, such as one-off costs or personal costs run through the company, and deducts costs a new owner would carry, such as replacing the owner’s role. Where a valuation is based on earnings, it can be the starting point.
Recurring revenue is income that repeats without having to be won from scratch each time, such as planned maintenance contracts, service agreements and regular inspection or leak-check work. Project and installation revenue has to be won again for each job. The mix between the two is one of the things an investor can look at.
Financial due diligence tests the numbers a business has presented. It can look at the accounts and management accounts, the adjustments made to earnings, working capital, debt and cash, and the quality of the financial records. What it finds can change the price, the terms or the protections an investor asks for.
A management presentation is a meeting during a sale or investment process at which the leadership team presents the business to a prospective investor or buyer and answers their questions. It gives an investor a direct view of whether the team knows the numbers and the operation without relying on the founder.
Sources
- GOV.UK: Checking F gas equipment for leaks
- GOV.UK: Record F gas in equipment you own or service
- Ofgem: Boiler Upgrade Scheme: installers
Sources last checked: October 2026.
