HVAC/Home services Searchers - questions about financials
March 19, 2024
by a searcher in New York, NY, USA
Has anyone else who's searching in HVAC/home services come across business owners that take large amounts of cash payments for services? Does that affect your decision to acquire them?
How do you weigh the amount of cash income in the valuation and offer on the company?
Its not unusual that many home service businesses take cash and the books don't reflect that and some of the information that these owners are saying about taxes, cash and paying people off the books is a liability. Has anyone acquired a service company that was paying people off the books and then acquired it and put people on payroll?
from University of Pennsylvania in Portland, OR, USA
On the general topic of collecting cash there can be benefits if done with a documented process.
Our plumbing company takes cash or checks as payment in addition to cards and financing. Many businesses won't do that and there are good reasons for their decisions. It works for us, though. ~22% of our revenue is collected this way (19% check / 3% cash). There's better margin on those sales due to the absence of credit card fees. There is some cost of inefficiency, but I'm convinced we come out ahead and we have a segment of customers who want to pay this way. Some are the Dave Ramsey enthusiast homeowners who avoid credit cards. Some are cash-heavy businesses (We do a strange amount of work for marijuana shops. I'm not sure what they're flushing.) We have documented processes with receipts for cash, once-a-week deposit runs to the bank (which is close by), and daily deposits of checks using a high-speed check scanner in our office that can take a whole stack of checks at once and is linked directly to our bank.
from University of Maryland at College Park in New York, NY, USA