Introduction
In this Q&A session, we talk with Nathan Lenahan about his recent HVAC business acquisition of Bart’s Heating and Air in Fort Worth, Texas. Nathan shares the journey of acquiring the business, the numbers behind the deal, and how this acquisition fits into a larger multi-year startup plan called Homework.
Founder Success Story QnA
Can you share your background that led to the decision to buy an HVAC business?
I came from a military background; I went to college right when 9/11 happened and joined the Army right after that. There’s no better place to learn leadership. I found it to be incredibly empowering and entrepreneurial. I love real estate, so I got my bachelor’s degree in facility and property management. I joined Lockheed Martin but it was a poor fit for me. I moved to a night shift and worked on my company during the day with my partner. We started a property management company, built it up, grew considerably over 12-18 months, sold it, and then I went to work for WeWork, growing a region from $5 million to over $200 million in just a few years.
Tell us about your property management company that you built and sold.
We started with just single family homes and grew up to a little over right around 150 doors by the time we left. We knew how to grow really fast and build systems quickly to handle the growth. We didn’t bring in enough money though, so we grew faster than our capital should have led us. We got a couple of offers when we thought about selling, played them off each other, and it was like the most amazing tuition ever. We sold it for a good profit, made some lunch money but learned even more.
Why buy an HVAC company? Why is that the next step in your career?
I love home ownership and residential and helping people enjoy the home life of their dreams. With fewer skilled trades out there, it’s become more competitive and challenging. HVAC specifically is absolutely critical, especially in Texas where it could be life or death during the summer. People know they have to pay for it and they’re not willing to go without it. I love making it easier, so we’re going to try and apply some technology. HVAC is complex but simple – the number of things that usually go wrong is the same 10 or 12 things over and over again. I love the finite number of things to manage from an inventory and supply chain standpoint.
What percentage of your revenue is subscription revenue versus one-off repair?
Very small for our business specifically. Bart’s, we came in with like 70 service contracts. Those are usually between $150 to $250 a year. You get two visits for that price, and there’s usually some kind of discount like you get five or ten percent off service up to a certain amount, and you get priority booking. We try to create it like an actual membership that creates value for people because it creates value for us as well.
Did you specifically look for HVAC or were you considering different types of home services businesses?
Our thesis has evolved over time. We had a very wide aperture and then we narrowed it and then opened it up a little bit more. HVAC was certainly our number one target. After that, because we are geo-constrained, focusing on just DFW, that made us kind of open the aperture a little bit more. We’d be okay with a plumbing business, electrical. Plumbing and HVAC are top two, but we looked at appliance companies, multi-family turn companies, hundreds of businesses. HVAC was our ideal one and it worked out wonderfully.
Why not get back into property management?
We’re kind of open to it, but it’s not as much passion. We’re going after something a little more technical that requires skilled labor. I’m fascinated with this idea of how do you make the trades sexy again. A new report came out recently and skilled trades have one of the highest happiness in their profession of any profession out there. 90% of skilled trades are actually either satisfied or extremely satisfied with their work. Having that purpose behind it is really valuable, so we want to get a little more niche and jump into HVAC.
What does passive searching for businesses look like?
Definitely the filters and alerts, building relationships with brokers, talking to owners. We did some cold outreach on our own, mostly just friends of friends. You see a van drive by, you call in and see who you talk to, see if you can get a hold of the owner. A lot of it was through brokers and just seeing who we could find, what we enjoyed learning about, and who we connected with. Brokers ended up being the best source for us overall.
What did you like about Bart’s? What were the numbers?
We love that it’s in the growth corridor of DFW, on the north side of Fort Worth. Solid revenue numbers. The owner had optimized for lower taxes and had not optimized for selling the business. We got an incredible multiple on the company because the revenue and profit was much higher than he claimed on his taxes. We bought it for $400k and a little over a million in revenue, which turns out was probably even understated. We think it’s truly about $1.25-$1.3 million in revenue overall, with 20% net margins.
How is the team structured post-acquisition?
Our partner Scott Titanis stepped in as the general manager for Bart’s. He’s running the day-to-day, working full-time in the business and getting paid a salary based on that role. I’m full-time as well, but I’m more helping with growth, systems, implementing Service Titan, marketing, and everything like that. We weren’t anticipating me joining as soon as we did. I was laid off from my previous role sooner than I was planning on joining the business. Our third person is still working his job full-time but helps with the finance side and technology side.
Any surprises or skeletons after the acquisition?
No skeletons in the closet, which has been wonderful. The seller’s been incredible, a high character human being. The things that you’d expect, we found inefficiencies everywhere. He had just signed up for his first technology with Housecall Pro recently, and we found that to be not up to the standards or expectations that we want, so we’re moving to Service Titan. The worst part has literally been just transitioning phones, getting phones from his provider to our phone provider. It took us four weeks and about 15 to 17 hours just to get phones changed over.
How many employees and technicians do you have?
He had two technicians when we went under contract. He lost one technician during that time, so we made it contingent upon the close that he’d have a second employee back in and trained and ready to go. He found someone incredible, a more junior tech but a great human being. So we have two techs, we’ve already hired a third, and we’ve hired a CSR. His wife was kind of like the CSR originally, so we’ve hired someone to replace her, and Scott is the GM kind of replacing Richard, who was also a technician as well.
How were you able to hire a technician so quickly given the labor shortage in skilled trades?
I came from my last job where we probably hired about 800 people in two years, so I just came from a recruiting machine. There’s a huge gap between the job postings and how important you are to a company. I’m trying to put out more human-like job descriptions, how we’re going to care for you, how we’re going to take care of you, the role you get to play. We actually have three people ready to start with us as soon as we say we have the business for them. The person we hired was actually one of the technicians that had worked for Bart’s previously, so he came back and was interested in potentially working again.
What advice would you give to someone without experience looking to buy an HVAC company?
I think it’s very learnable, but you have to have someone that knows far more than you. If you’re going to buy an HVAC company and don’t have any experience, you can absolutely learn, but you have to have someone that you can lean on that you trust within the company, and you need to do everything to keep them. As long as you’re not too good to do anything, if you’re willing to be up in that attic and putting that coil up on your back, that’s where you start. You ask lots of questions, you empower the people, and when they say things, you listen. This is a people business all day long. Nobody cares how much you know until they know how much you care.
Are you expecting to learn the technical aspects of the HVAC business?
Between Scott and I, we could take care of simple things. I’ve changed plenty of capacitors, plenty of fan motors in my day. I don’t mess with freon much. I change filters, clean coils, lots of things that I’ve done. I’m relatively mechanically inclined, not too good to do anything, and Scott’s exactly the same way. More importantly, can he talk incredibly well on the phone to customers to give them confidence. He’s going to be teaching a lot of our customer service reps how to troubleshoot, how to ask questions. When there’s problems, he knows the three or four things you got to ask because he’s talking to the techs constantly, listening and talking to the customers.
Was buying a smaller business a philosophical decision?
Philosophically, we want bigger and would like to max out the SBA loan, but the market kind of kicked our ass and this is what we could get. We got laughed out on some of our offers trying to go after some of the bigger ones because the multiples they started using were just getting out of hand. We’re really happy with the size of this. It means we’re putting more of our own money in for growth. We’re going to hire a more senior CSR, ops manager, and that’s going to be a little risky because we’ll be called much closer to breaking even at that point until we start seeing the summer ramp. That comes out of the working capital that we brought into the business.
Can you share the financing details?
We paid $400,000. We did the acquisition loan and then got a $100,000 line of credit in addition to the acquisition loan. We put in about $53k to close the deal, split between the three of us. Then we each put in another $55k for working capital. So we have $100k working capital line plus $165-ish between the three of us. We’re hoping we don’t have to put more money in, but if we need to, it’ll be in the pursuit of growth.
What are your growth plans for the business?
Our plan is about $2.72 million for next year. If we get a second acquisition, then we’re probably looking closer to $5 million. That would be year two of ownership if we do get a second company. Bart’s is our platform company, and we’d add plumbing or electrical to this. There’s a ton to learn and really optimize on just the HVAC side, so lots of work to do.
What is the grand plan with “Homework”?
Homework is a platform to make home ownership easier. If you think about taking all the data that may involve a home and using it to basically put your home on autopilot. An example would be like a floor plan, but what do you do with it? Maybe people have taken down your HVAC equipment model numbers or serial numbers, collected the same thing for your appliances, or gotten window measurements. If you can bring all of those things into one place, every time we visit you service-wise, the service gets better because now we know what HVAC you have. If you want to quote on a replacement, we don’t need to come out there next time. We’ve already been there, we have pictures of the data plate, we know exactly what you are, here’s your quote in 60 seconds or less.
How are you solving the data collection problem?
There are three pillars: the data, the tech, and the service. The data is the hardest piece. How do you get all the data of every house in the country? We believe that if you take the data and build incredible tech on it, and then use that tech to actually go to service, every time we service, we can build better data, and it’s like a flywheel that keeps building on itself. For instance, my HVAC team goes out to your house, and the first time all they do is take down your filter sizes and the equipment that you have. Now we have that information, and if you ever have problems or want a filter subscription, we could do that. HVAC is our first service, the second service we’re doing is home inspections, which is rich in data.
Is the HVAC acquisition also a revenue play to fund Homework?
Absolutely. At the rate we want to grow, we’ll be going out this summer probably to raise funding, a seed round for Homework overall. Skilled trades are profitable, value-driven businesses, and that will drive value for the whole company. If you could sell and fulfill anything in electrical, plumbing, and HVAC, that’s an incredible pillar for the company to be able to do. It’s funding us right now and funding us doing anything development-wise.
Nathan Lenahan Business Stats
Nathan acquired Bart’s Heating and Air with two business partners, growing the business from $1 million to a projected $2.72 million in revenue in just one year. The HVAC business acquisition has proven to be a strategic move that both generates immediate revenue and serves as the foundation for a larger platform called Homework.
- Acquisition price: $400,000 for a business with $1.25-1.3 million revenue
- Net profit margins: 20% after adjusting expenses
- Initial workforce: 2 technicians, expanded to 3 technicians plus CSR
- Growth plan: $2.72 million revenue in first year, targeting $5 million with second acquisition
- Financing: SBA loan with $53k initial investment from partners, $165k additional working capital
| Business Metric | At Acquisition | 1-Year Projection | |
|---|---|---|---|
| Annual Revenue | $1.3 million | $2.72 million | 109% |
| Net Profit | $260,000 | $544,000 | 109% |
| Technicians | 2 | 5 | 150% |
| Service Contracts | 70 | 200 | 186% |
Nathan Lenahan Method
Nathan’s approach to the HVAC business acquisition focuses on improving operational inefficiencies while maintaining the core strengths of the business. His method combines technology implementation with exceptional customer service and employee treatment.
- Acquired businesses with solid fundamentals but operational inefficiencies
- Implementing modern technology (Service Titan) to replace outdated systems
- Focusing on exceptional customer responsiveness and service quality
- Building a strong company culture to attract and retain skilled technicians
- Using the business as a data collection platform for the larger Homework vision
Nathan Lenahan Tools
Nathan leverages technology to streamline operations and improve customer experience in the HVAC business. The right tools are essential for scaling the business efficiently and collecting valuable data for the larger Homework platform.
- Service Titan – Comprehensive field service management software replacing Housecall Pro
- CRM System – For managing customer relationships and service history
- Digital Marketing Tools – For customer acquisition and retention
- Mobile Workforce Management – For technician scheduling and dispatch
- Data Analytics Platform – For business insights and Homework data collection
Key Notes
The HVAC business acquisition strategy implemented by Nathan Lenahan offers valuable insights for entrepreneurs looking to enter the home services industry. His approach demonstrates how buying an existing business with solid fundamentals but operational inefficiencies can create immediate value.
- HVAC businesses have recurring revenue potential through service contracts and maintenance plans
- Skilled trades businesses have high job satisfaction rates among employees
- Small acquisitions can serve as a platform for larger growth strategies
- Technology implementation can significantly improve operational efficiency
- Customer responsiveness is a key differentiator in the home services industry
Get Started in Just 5 Steps
Based on Nathan’s experience with HVAC business acquisition, here’s how you can get started with acquiring and growing your own home services business.
- Build relationships with business brokers and set up alerts for potential acquisitions
- Focus on businesses with solid fundamentals but operational inefficiencies
- Secure financing, including SBA loans and working capital for growth
- Retain key employees with technical knowledge while implementing improvements
- Implement modern technology and exceptional customer service to drive growth
Conclusion
Nathan Lenahan’s HVAC business acquisition of Bart’s Heating and Air demonstrates the potential of buying existing businesses with operational inefficiencies and implementing improvements to drive growth. His approach combines immediate revenue generation with a long-term vision for a home services platform called Homework. By focusing on technology implementation, exceptional customer service, and employee satisfaction, Nathan has positioned the business for significant growth in the competitive home services industry.