Contracting (HVAC etc): Licensed "Qualified Individual" incentives?
March 03, 2021
by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Miami Beach, FL, USA
Question
In home services, if you're buying a company that requires a "qualified individual" (or some variation of the term depending on jurisdiction), but you don't have license yourself, how do you incentivize that licensed contractor who becomes your qualified individual?
Background
I'm looking primarily at HVAC in Florida but also exploring plumbing and electrical contracting. As I understand it, in HVAC, an appropriately licensed contractor can qualify up to three businesses here so long as they can prove to a state board that he/she is able to actually "supervise." I know it's not unusual for a non-licensed individual to own a license-required business (I've heard anecdotally that three quarters of HVAC acquirers have no industry experience) so I figure a few other folks here have some insight.
My Current Incentive Plan (highly speculative though)
My current hypothetical plan is to only engage with sellers who plan to qualify the business. I like the idea of giving the seller equity that vests over time - I'm thinking at least over the same number of years it would take me personally to gain the requisite work experience to license myself (in FL, it looks like 4 years/2,000 hours but it might be possible to do it with 1 year and a college degree... although I don't know if that degree has to be in something somehow related to HVAC). Of course, I'd still have to do academic work, pass a test, and pass a personal financial check, but I'm confident I could do that. My one big worry is: even if I get the incentives right, the qualified individual/seller could die, get sick, etc. I'd like to at least have a plan for how to quickly find a new qualified individual if I didn't get my own license.
from University of Pennsylvania in Miami, FL, USA
couple of thoughts here in random order:
1) If this is an SBA deal, I do not think you can give equity to the seller, as that defeats the purpose of what the SBA is trying to accomplish....SBA Lenders can comment further.
2) Instead of equity, I would recommend a seller note that is meaningful in length or triggers when you get someone else licensed. the challenge (at least in california) is the seller would need to remain engaged in the business...not just "lend" his name and licensing ability. not sure how it works elsewhere.
3) find a couple employees who are qualified to get licensed and get them licensed as quick as possible
4) are you sure you want to pursue a company where you need a contractor's license?
in Phoenix, AZ, USA
In addition to the seller, consider the existing employees as well for the license holder. They may be the best option for the future license holder as one of them will likely need to step into a field supervisory role if the seller was filling that spot.