Originally published as a featured column in the September/October 2025 Issue of Indoor Comfort Marketing.

Those of us who have logged many years in the fuel distribution and HVAC industries have seen our share of volatility in one form or another. I suspect that, just like many business owners and managers in our space, you can regale your friends and family with a story or two of a near (or actual) disaster from unprecedented commodity cost spikes and abnormal temperature fluctuations. In today’s market, the turbulence looks different. Tariff-driven cost increases and persistent inflationary pressures present new challenges. If you are planning to finance new equipment, fund an acquisition, position your business for a sale or just increase your credit line, the key is knowing how to present your business in the strongest possible light.

Many sectors around our economy are in “wait-and-see” mode regarding the impact of tariffs and the next interest rate move by the Federal Reserve, but home services sector deal activity continues – though at a slower pace than early year forecasts. At Notch Capital, our investment team and our advisory clients remain actively engaged in the pursuit of acquisitions and providing capital support. What remains true – and is very good news for the leaders running strong businesses –is that both traditional banks and private credit providers are eager to deploy capital to both acquire and to support lower middle market companies. However, they are only chasing the highest-quality opportunities.

The Pieces are in Place for Success
Interest rates have held steady through the year but there is a strong possibility of a cut by year-end. In fact, the prognosticators on Wall Street have priced in a 90% chance of at least a quarter-point rate cut in the Fall. Current rates remain above those in recent years, but the financing environment has generally supported well-structured requests in recent months. A drop in rates is likely to further fuel interest and activity from capital providers.

Rising costs for equipment and tanks, and higher consumer credit risk are certainly challenges from an outside perspective, but these affect the entire fuels and HVAC sector, so your business is not in a particularly negative position. These higher costs will not be an anchor around your business given the unrelenting demand for your services and so long as you are properly pricing your offerings. And potential disruption threats from factors like AI will remain muted in the fuels and HVAC industry until that artificial technology can deliver fuel, repair a burner, or install a new air conditioning unit. As a result, the prospect of consistent profitability remains high.

And because steady profitability through challenging times remains a cornerstone of well-run fuel delivery and HVAC businesses, cross-town rivals, financial buyers and, to a lesser extent, large strategics continue to actively pursue the highest quality assets. Whether you are a buyer, a seller or just simply looking for growth capital, you want to show your business in the best light. So, what are the typical characteristics financing partners seek?

Shining a Spotlight on the Right Stuff
In an environment like today’s, recurring revenue is king. There is no better way to attract capital – or to prepare for uncertain conditions if the market goes south – than to have a business with multiple streams of repeatable earnings. In our industry, that means high rates of automatic delivery, service contracts, tank control and fee income as the foundation of an attractive capital pitch. It is incumbent upon managers to actively tailor a revenue profile accentuating the recurring revenue while limiting the more cyclical – or “one-time” – revenue as a percentage of your earnings mix. This is a long-term process, but the goal of stable revenue must be communicated to staff consistently. The ultimate reward will be a business that has greater perceived and greater real value, which will in turn give you more options when it comes time to refinance, sell your business or buy one.

As tariffs are expected to impact costs more than demand in our industry, proactive cost management is critical. Monitoring wholesale cost movement constantly and pricing your services based on true replacement cost is paramount. Demonstrating to capital partners that you have a firm handle on the rapidly-changing cost environment will enhance your credit risk profile. Likewise, operational discipline also matters. Keeping working capital lines clear of long-term debt, matching financing terms to asset life, and managing inventory to boost turnover all signal strong stewardship in a tighter credit market.

Only Realistic Valuations Need Apply
Finally, for those pursuing a sale or acquisition, inflated valuations are a deal killer in the current market. Lenders and capital providers are shying away from “reach” multiples, and due diligence is taking longer as buyers and financial firms scrutinize both financial statements and qualitative factors. Both buyers and sellers are advised to consult with an industry specialist or broker to gain an understanding of current deal multiples and structure expectations in order to avoid surprises that derail negotiations. For buyers, an experienced advisor can ensure cash flow projections align with likely financing terms.

Additionally, staffing and management capabilities can meaningfully support valuations. In a market where qualified service talent is scarce, a strong operational team adds tangible value alongside earnings. Be sure to highlight such additions to your capital partners. It’s one of the surest ways to firm up your valuation and convince a buyer or capital provider that their capital will be well-invested in your business.

Final Thoughts
Despite some economic headwinds, debt and equity capital is still available for well- positioned and well-run companies in our industry. By building a recurring revenue base, tightly managing costs, and maintaining realistic expectations on value, owners can secure the financing needed to grow, invest or exit on favorable terms. In this market, preparation and discipline are not just best practices that should be engaged in when your leadership has the time. They are must-do’s to maximize profitability today and value tomorrow.


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.