You've accepted a letter of intent. Congratulations — that's a major milestone. Now the real work begins. The 30–90 day due diligence period that follows an LOI is the most stressful phase of any HVAC business sale, and the most dangerous for unprepared sellers.
Buyers use due diligence to verify everything you've told them about your business — and to look for things you didn't mention. Every surprise they find is either a deal-killer or a re-trade (renegotiating price downward). Surprises the seller finds in their own business during due diligence are just as dangerous — they signal disorganization and erode buyer confidence.
The best protection: have everything on this list ready before you accept an LOI. Walk into due diligence with a fully populated data room and you project confidence, competence, and a well-run business.
Financial Due Diligence Documents
This is where buyers and their accountants spend the most time. Clean, organized financial records close deals. Missing or inconsistent records kill them.
- 3 years of federal tax returns (business + personal if sole prop or single-member LLC)
- 3 years of monthly P&Ls — accrual basis; must reconcile to tax returns
- Balance sheets — current and prior 2 years
- Accounts receivable aging report — current, showing 30/60/90/120+ buckets
- Bank statements — 24 months for all business accounts
- Revenue by service type — maintenance, installs, service calls, commercial vs. residential breakdown
- Top 20 customer revenue breakdown — last 12 months
- Payroll records and W-2s — 2 years; all employees including owner
- Add-back schedule — documented explanation of every normalization with backup
Operational Due Diligence Documents
| Document | What Buyers Are Looking For |
|---|---|
| Technician roster with licenses | Licensing current? Any expiring soon? Tenure and compensation |
| Fleet schedule | Age, mileage, owned vs. leased, maintenance history, deferred repairs |
| Maintenance agreement roster | Total count, revenue per agreement, renewal rates, term lengths |
| Org chart | Who runs what; key person dependencies; whether you can be replaced |
| Job scheduling / dispatch software | System maturity; data integrity; can buyer access without transition? |
| Employee handbook / policies | Professionalism signal; key policies on safety, conduct, termination |
| Subcontractor agreements | Key subs; exclusivity; what happens if they leave post-acquisition |
| Supplier agreements | Equipment pricing; rebates; any preferred status that could be lost |
Legal Due Diligence Documents
- Business formation documents — articles of incorporation/organization, operating agreement, bylaws
- All licenses and permits — state contractor license, local permits, EPA certifications, technician certs (must all be current)
- Insurance certificates — GL, workers comp, commercial auto, umbrella; no open claims
- Outstanding litigation or legal disputes — any past or pending lawsuits must be disclosed
- Real estate leases — shop, office, yard; terms, renewal options, assignment clauses (critical: can the lease be assigned to buyer?)
- Equipment loans and financing — all outstanding balances, payment schedules
- Non-disclosure agreements — any NDAs with employees or key partners that could be problematic
- Customer contracts — commercial service contracts; assignment of contracts to buyer
The Most Common Due Diligence Surprises (and How to Prevent Them)
| Common Surprise | Buyer Reaction | How to Prevent It |
|---|---|---|
| Lease can't be assigned to buyer | Deal may be restructured; price reduction; delay | Review lease assignment clause before going to market |
| Key technician plans to leave post-sale | Price reduction; earnout structure tied to retention | Lock in key employees with stay bonuses before the sale |
| Equipment loans not disclosed | Working capital adjustment; potential deal retrading | List all liabilities upfront in your disclosure statement |
| Tax returns don't match P&Ls | Red flag that triggers deeper forensic accounting | Reconcile before the sale; have CPA explain any differences |
| Customer concentration above 20% | Price reduction or earnout tied to customer retention | Diversify before selling; disclose and be prepared to address |
| Expired licenses or certifications | Potential deal delay or price reduction | Audit all licenses 6 months before going to market |
Also in the Lightning Path Guide Series
Own a plumbing business? See our companion guide: Plumbing Business Due Diligence Checklist
DISCLAIMER: The information on this page is provided for general informational and educational purposes only. It does not constitute — and should not be construed as — financial advice, investment advice, legal advice, tax advice, or any other form of professional advice. Nothing on this site creates a professional advisory relationship between you and Lightning Path Partners. Business valuations, transaction structures, and market conditions discussed herein are general in nature and may not apply to your specific situation. Always consult a qualified financial advisor, M&A attorney, business broker, or CPA before making any business or financial decisions. Full Terms of Use →
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