HVAC and Plumbing Due Diligence Checklist for Buyers
A service contractor can look healthy from the outside: trucks on the road, phones ringing, a strong online reputation. Due diligence is how a buyer confirms what is underneath. It is where you learn whether the maintenance agreements are real, whether the seller’s license is the only thing keeping the company legal, whether the best technician plans to leave, whether the trucks are paid for and whether last year’s installations are about to generate a wave of warranty callbacks.
This HVAC and plumbing due diligence checklist organizes what buyers, their advisors and their lenders typically review before acquiring a heating, air conditioning or plumbing company. It is meant to be used alongside legal and accounting advice. For the overall purchase process, see our guide on how to buy an HVAC company or our companion guide on buying a plumbing business.
How to Use This Checklist
Request documents in stages, compare them with what the seller has told you and keep a running list of issues that affect price, terms or your decision to proceed. Items that affect financing, such as tax returns, the debt schedule and licensing, should be addressed first because your lender will need them.
1. Financial Records
- Business tax returns for several years.
- Annual and monthly profit and loss statements, plus year-to-date results.
- Balance sheets, including all loans and equipment financing.
- Bank statements, to compare deposits with reported revenue.
- Accounts receivable aging, particularly for commercial customers.
- A schedule of proposed add-backs with support.
Reconcile tax returns, internal reports and bank deposits, and review monthly results for seasonal patterns.
2. Revenue Detail
- Revenue by service type: repair, replacement, maintenance, drain and sewer, water heaters, commercial service, new construction.
- Revenue by customer, identifying any that represent a large share.
- Job counts and average ticket trends.
- Lead sources and marketing spend.
- Pricing method and any recent price changes.
3. Maintenance Agreements and Recurring Customers
- A list of active agreements with start dates, renewal dates and pricing.
- Renewal and cancellation history.
- Agreement terms, including promised visits, discounts and priority service.
- Prepaid agreements and visits still owed.
- Completion records showing visits were actually performed.
- For plumbing, repeat accounts such as property managers, restaurants and facilities.
Our article on HVAC service agreements explains how to evaluate this revenue.
4. Customer Data and Contracts
- Ownership and transferability of the customer database, phone numbers and website.
- Commercial service contracts, their terms and assignment provisions.
- Builder and general contractor agreements.
- Home warranty or third-party program relationships and their payment terms.
5. Licensing, Permits and Certifications
- State and local contractor licenses held by the business and by individuals.
- Who serves as the qualifying license holder and their plans after closing.
- Technician license levels and required certifications, including refrigerant-handling certification for HVAC technicians.
- Open permits and pending inspections.
- Any disciplinary actions or complaints with licensing boards.
See our guide to HVAC and plumbing license transfer.
6. Technicians, Plumbers and Staff
- Staff list with roles, license levels, pay structure, tenure and on-call duties.
- Commission or spiff programs for technicians and sales staff.
- Employment agreements, non-solicitation terms and handbooks.
- Revenue or job volume by technician.
- Key employees likely to stay or leave after the sale.
- Worker classification, payroll tax filings and benefit plans.
7. Vehicles, Equipment and Inventory
- Vehicle list with year, mileage, condition, title status and liens.
- Specialized equipment, such as recovery machines, sewer cameras, jetters and excavation equipment.
- Leases and financing agreements with payoff amounts.
- Inventory counts on trucks and in the warehouse, and how obsolete stock is handled.
Our guide to service fleet in an acquisition explains how to evaluate these assets.
8. Warranties, Callbacks and Open Jobs
- Workmanship warranties the company offers and their terms.
- Callback history on recent installations.
- Manufacturer warranty registration practices.
- Open jobs, deposits received and work in progress at closing.
- Commercial retainage owed to or by the company.
How these obligations transfer depends heavily on deal structure. See asset vs. stock purchases for HVAC and plumbing companies.
9. Facility and Lease
- The shop, office and yard lease, including term, renewal options and assignment provisions.
- Storage, parking and zoning for vehicles and materials.
- Environmental considerations, such as refrigerant storage and disposal practices.
10. Insurance, Legal and Compliance
- General liability, auto, workers’ compensation and other coverage, with claims history.
- Pending or past lawsuits, including property damage claims.
- Bonding arrangements for commercial or municipal work.
- Lien searches and entity documents.
- Sales, payroll and income tax filings.
11. Systems and Operations
- Dispatch, scheduling and customer management systems and whether accounts transfer.
- Supplier accounts, pricing arrangements and any dealer program obligations.
- Documented processes for pricing, dispatch, sales and quality control.
Questions to Ask the Seller
- What do you personally do each week, and who could take it over?
- Which customers call you directly instead of the office?
- Which technicians are essential, and how will they react to a sale?
- What equipment or vehicle replacements have you postponed?
- Have any installations generated repeated callbacks?
Common Red Flags
- revenue that does not reconcile with bank deposits
- agreement counts that include expired or unpaid agreements
- a seller who is the only qualifying license holder with no transition plan
- heavy reliance on one builder, contractor or property manager
- undisclosed vehicle or equipment liens
- a pattern of warranty callbacks on recent installations
Frequently Asked Questions
What is the most important part of HVAC or plumbing due diligence?
Confirming that revenue is real and will stay after closing, together with licensing, key employees and inherited obligations.
Should I talk to technicians before buying?
Only with the seller’s agreement and at the appropriate stage, since early announcements can prompt departures.
How long does due diligence take?
It depends on the size of the company, the quality of its records and any licensing or legal issues that need resolution.
Financing Your Acquisition
US Professional Funding helps qualified buyers finance established HVAC and plumbing companies, including goodwill, vehicles and equipment within the transaction and working capital. Learn more about our HVAC and plumbing acquisition financing.
