Originally published as a featured column in the November/December 2025 Issue of Indoor Comfort Marketing.
We’ve all heard the old adage that “If you take care of the small things, the big things will take care of themselves.” There is wisdom in those words, but that’s not the whole story – especially if you’re a fuel dealer who is focused on long-term value as much as short-term profitability and success. The next heating season is upon us and with any luck, you’ll be dealing with a cold winter and the daily chaos that comes during peak season demand. Your challenge during these times will be to hold onto the long-term focus of your business as you’re dealing with your daily challenges. It will be easy to deprioritize financial and strategic decisions or to ignore the planning advice you may receive from your advisors and accountants. Don’t fall into the trap!
This is where KPIs, business intelligence software, receivables discipline and cash management are essential. But it’s not the systems that separate the best-in-class companies from building value even during the heating season – it’s the intention and alignment. You and your management have got to embrace the “big picture” value-building plan and commit to it completely, even on the toughest days. To help you strengthen both your long-term value while maintaining powerful short-term results through the winter, here are three critical areas I would encourage you to focus on.
Get the Right Margin
“Margin, margin, margin.” It’s been preached for years, but too many companies still set prices based on gut feel, competitor behavior, and outdated habits rather than their true cost structure. One maxim I’ve learned to live by is that the closer the margin decision maker is to the customer, the more likely it’s wrong. Owners and managers know costs are rising but often fail to capture the full impact when setting margin targets. While a comprehensive budgeting process remains the most effective way to avoid margin slippage, the variety of factors impacting costs in the current economy are proving tough to track.
Let’s start with inflation. As of August 2025, the Producer Price Index for HVAC and commercial refrigerant equipment rose by 3.7% over the past twelve months according to the Bureau of Labor Statistics, outpacing the 2.9% increase in the Consumer Price Index. Diesel costs are up roughly 6% since last September, and tariffs may further inflate vehicle and tank expenses. Meanwhile, compensation for managers, drivers, technicians and dispatchers continues to climb, and another overtime-heavy winter could take a bite out of profits again.
Insurance premiums, regulatory costs, and compliance burdens in some states add to the squeeze. Each may seem modest on its own, but together they erode margin fast.
In the end, your earnings – and ultimately your company’s valuation – are most tightly tethered to product and service margins. Consistent margin growth opens doors for financing, acquisitions, and business sales. Since actual costs almost always exceed expectations, assume higher expenses when budgeting and set margins accordingly. Overestimating costs and margin targets now is far safer than explaining missed targets later.
Expand Recurring & Repeating Revenues
When it comes time to make your next strategic move following the heating season, investing in the qualitative aspects of your business can be just as important as maximizing the quantitative markers. After all, a high-quality operation commands a higher valuation multiple. A healthy mix of both recurring and repeating revenue streams signals stability to financing partners and buyers. Recurring revenue is typically generated from contracts or subscriptions while repeating revenue is generated by loyal, reoccurring customers. Service contracts, propane tank leases and high tank control percentages are proven methods of producing recurring revenues. Delivery and hazmat fees (where permitted), automatic delivery customers, and robust equipment service offerings strengthen repeating revenue streams.
The development of these valuable revenue streams takes deliberate effort and they can be boosted each heating season as new customers are added. That means communicating your offerings effectively, and training and incentivizing your staff to promote programs that drive long-term relationships. In an industry notoriously impacted by weather, success in growing non-cyclical revenue shows managerial skill and serves to minimize roadblocks from financing partners and avoid weak offers from prospective buyers.
Know Your EBITDA Number
Unfortunately, a weak performance over the compressed earnings period in our seasonal industry can cast a long shadow. Having an overall earnings target derived from pre-season analysis is crucial. The most common earnings metric is Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and is what banks and buyers look to first. Yet surprisingly few business owners calculate this goal ahead of the season. Building upon the per-unit or per-job margin notion cited earlier, an EBITDA target specific to your company can reveal the minimum earnings required to cover debt service and meet ownership income goals.
Your EBITDA target is best produced via a budgeting exercise but should also be informed by conversations with others, including a financial advisor, accountant or a business broker. Without multiple reference points, it is difficult for owners to determine whether they are underperforming against their peers. Knowing the minimum earnings level required to meet your bank’s debt service coverage and cash-flow leverage requirements is an important first step in determining your earnings floor. But understanding the typical range of what other companies of similar size and product mix earn is just as important in determining a reasonable earnings ceiling.
It’s Not Too Late
The winter rush can make it tempting to focus only on the immediate. It takes an entire fiscal year and thousands of hours of your time to forge results which will ultimately be on full display for your finance partners to evaluate. Spending a bit of time and attention now to ensure you are thoughtfully preparing for, and acting to positively influence, these big picture value determinants will help you and your management team take control of the story no matter what the weather brings.
Jeff Simpson is the founder and managing member of Notch Capital, a private investment firm specializing in buyouts and recapitalizations of lower middle market businesses in the heating, cooling and home services industries. Notch Capital also provides advisory services to help these businesses strengthen their performance and analyze acquisitions.