Heating, venting and air conditioning make our modern society work. Every building must have a HVAC system in order for the interior to be tolerable to human beings. That HVAC system must be maintained constantly by an HVAC company. Those HVAC companies are owned by small to large business people who have complicated person lives like anyone else. When the owner of an HVAC company gets divorced in Illinois, the value of that company must be determined in order to award all of the assets fairly to both spouses. This article helps explain how HVAC companies are valued and divided in an Illinois divorce.
An HVAC Company Is More Than Trucks And Equipment
An HVAC company may own service vehicles, tools, equipment, computers, and related physical property. However, those assets may represent only part of what makes the business valuable.
HVAC is a service industry that is not capital-intensive; further, a substantial portion of its value may be intangible. What It’s Worth: Valuing HVAC Companies 19 (2017). An established HVAC company may benefit from an established name, recurring service agreements, customer relationships, an experienced workforce, licenses and certifications, and systems that allow it to continue generating business.
Thus, valuing an HVAC company cannot begin and end with an inventory of its trucks and equipment. The company also cannot just be valued by applying an industry multiple to its annual revenue. The appraiser must determine what economic benefits truly belong to the business, how reliably those benefits are expected to continue, and what risks would affect a hypothetical purchaser.
There’s another important requirement in Illinois. When property is valued for purposes of division in a divorce, “the court shall employ a fair market value standard.” 750 ILCS 5/503(k). The valuation date is typically the date of trial unless the parties agree to another date or the court selects another date within its discretion. Id.
Determining fair market value for an HVAC company requires looking beyond its current revenue. HVAC businesses can differ in their sources of revenue, customer bases, geographic markets, reliance on the owner, workforce, service agreements, and exposure to construction activity. BVR identifies recurring revenue, licensing and certifications, employee training, inventory, receivable collectability, seasonal revenue, and capital expenditures as special considerations in an HVAC valuation as well. What It’s Worth: Valuing HVAC Companies at 19-21.
The first question is not: How much money did the HVAC company make?
Rather, it should be: What business does the spouse actually own, and what makes that business capable of continuing to generate earnings?
What Does The HVAC Company Owner Actually Own?
The first step in an appraisal is to identify the property that makes up the HVAC business.
Some of that property is easy to identify, including tangible HVAC-business assets like service vehicles, equipment, sheet-metal equipment, computers, buildings, warehouses, land, and inventory. What It’s Worth: Valuing HVAC Companies at 80.
However, there are intangibles that are not as easy to spot, such as customer lists, trademarks, goodwill, brand recognition, service-agreement programs, advertising slogans, and operating history. Id. A company may also have inventory, receivables, specialized employees, licenses or certifications, and related resources necessary to keep operating.
Those assets must be examined individually. For instance, used HVAC equipment may have minimal value but reported inventory amounts may reflect tax planning, not the true economic value. Id. at 20. Additionally, the company’s fleet requires separate attention since the size and age of its trucks can affect required capital expenditures. Id. at 21.
Importantly, the intangible parts of the business often are even more significant than the tangible parts. An HVAC company that has developed an established name, repeat customers, and trained technicians may be capable of generating revenue well beyond the value of its physical equipment. Id.
An appraisal should not assume that the company’s value equals the resale value of its trucks, tools, and inventory. Further, the appraisal should not assume that every claimed intangible automatically possesses transferable economic value. Rather, it must identify the assets and economic benefits that truly belong to the HVAC company. From there, it can determine whether those benefits would remain with the business after a change in ownership.
Not All HVAC Companies Have The Same Economic Model
Once the company’s assets have been identified, the appraiser must understand how it actually makes its money.
An HVAC business may perform commercial or residential work. It may perform repairs, provide ongoing maintenance, install systems in new construction, replace equipment in existing buildings, or provide some combination of those services. HVAC pricing is dependent upon the company’s “business mix,” which includes whether the company performs service or contracting work and whether its customers are commercial or residential. Id. at 81.
Why does this matter? It matters because equal revenue does not necessarily mean equal value.
Imagine there are two HVAC companies. Each generates $2 million in annual revenue. The first company earns most of that revenue installing systems for new-home builders. The second earns a substantial portion through repairs and renewable maintenance agreements with an established customer base. These companies may report the same top-line revenue; however, the predictability and risk of those revenues can be quite different.
Residential service companies with lists of annual preventative-maintenance agreements may command higher multiples, whereas residential new-construction companies may present higher risk. Commercial contractors with ongoing service agreements can also be more valuable than businesses that complete installations and move on to the next project. Id. at 83-84.
The point is that “mix drives value.” Id. at 84. HVAC-company pricing can vary considerably depending upon the particular business mix, controls, recurring nature of the revenue, and margins. Id.
An appraiser should break the company’s revenue into meaningful categories. The analysis may need to distinguish installation from service and repair, residential from commercial work, new construction from work on existing systems, and recurring revenue from one-time projects.
Service Agreements And Recurring Revenue Can Drive HVAC Company Value
Recurring service agreements are often one of the more important sources of value. Goodwill in an HVAC business is “largely tied to recurring revenue,” so a company with a large number of service contracts typically has more recurring revenue and therefore more goodwill. Id. at 11.
Recent research comes to a similar conclusion. A 2026 study of U.S. HVAC businesses reports that practitioner sources usually associate businesses deriving at least 30% of revenue from maintenance-agreement programs with an additional 0.5 to 1.0 times EBITDA valuation premium compared with similarly sized businesses more dependent on installations and replacements. Christoph Totter, Valuation Multiples in U.S. HVAC Service Businesses 13-14 (2026). Importantly, because these figures are based on aggregated practitioner reporting, they are directional rather than precise.
The reason is fairly straightforward. Maintenance agreements can create predictable cash flow, repeat customers, and future opportunities for repairs and replacement equipment. Cash-flow predictability and the connection between maintenance relationships and later replacement work are drivers of the recurring-revenue premium. Id. at 14.
The appraiser should still determine whether those customer relationships actually belong to the business and whether they are likely to continue after a change in ownership. Illinois courts emphasize this principle in many business-valuation contexts. For example, in In re Marriage of Cutler, the appellate court rejected a market-approach valuation of an insurance agency where it failed to account for contractual restrictions on renewals and transferability; the court explained those restrictions had a “significant negative impact on the fair market value of the agency.” 334 Ill. App. 3d 731, 737 (2002).
For an HVAC company, the analysis should consider the profitability, historical renewal rates, customer retention, number of active maintenance agreements, and whether customers are tied to the company or mainly to the individual owner. Doing so helps determine whether recurring revenue reflects transferable enterprise value or just the owner’s personal future earning capacity.
Dependence On New Construction Can Increase Risk
An HVAC company’s value can also depend on how much it relies on new construction.
HVAC companies connected to the construction trade often have a higher risk profile, as construction activity is sensitive to changes in the economy. What It’s Worth: Valuing HVAC Companies at 9. So, commercial construction, housing starts, interest rates, and specialization in particular construction markets can affect the company’s expected earnings. Specialization can increase risk when an HVAC company mostly depends on one market, such as new-home builders. Id. at 10.
Totter’s 2026 synthesis of practitioner valuation reports associates new-construction revenue above 30% with increased cyclical risk and resulting pressure on valuation multiples. Valuation Multiples in U.S. HVAC Service Businesses at 16. The reported thresholds are practitioner-derived, not hard valuation rules; however, they demonstrate why the source of an HVAC company’s revenue is important.
Additionally, construction activity can change quickly. For instance, the U.S. Census Bureau reported that privately owned housing starts in September 2026 were 7.4% below the September 2025 rate. U.S. Census Bureau & U.S. Department of Housing and Urban Development, Monthly New Residential Construction, September 2026. So, an HVAC company that depends on new-home installations may face risks that a company with an established repair and maintenance business does not face to the same degree.
The appraiser should identify how much revenue comes from new construction, which builders or developers generate the work, whether the company possesses a reliable backlog, and how its earnings have performed during previous construction slowdowns.
The Customer Base Should Be Evaluated, Not Just Counted
Some individuals may mistakenly believe that a large customer base automatically means that an HVAC company has a valuable customer base, but this is not always the case.
The appraiser should therefore determine how active a company’s customers actually are, how often they return, and whether the company depends disproportionately on a small number of accounts. An HVAC buyer or valuator should “[r]eview [the] list of active customers over [the] previous three years” and examine recurring customers and service agreements. What It’s Worth: Valuing HVAC Companies at 83.
Customer concentration particularly matters. Totter’s 2026 synthesis reports that practitioner sources associate a single customer representing more than 15% of revenue with downward pressure on valuation multiples and increased efforts by purchasers to shift some of that risk back to the seller. Valuation Multiples in U.S. HVAC Service Businesses at 16. Once again, that percentage cannot be treated as an automatic valuation rule. The concern is the risk that losing one relationship could substantially alter the company’s earnings.
Imagine an HVAC contractor that receives 45% of its annual revenue from one property-management company. Even if the relationship has existed for years, the appraiser still needs to evaluate the contract, renewal history, pricing, and likelihood that the work would remain after a change in ownership.
The valuation should consider not simply how many customers appear in the company’s records, but also the durability, concentration, and economic quality of those relationships.
An Experienced HVAC Workforce Can Be A Valuable Asset
To generate revenue, an HVAC company needs people capable of installing, maintaining, diagnosing, and repairing complicated systems.
It can be difficult to replace that workforce. The U.S. Bureau of Labor Statistics states that HVAC mechanics and installers typically undergo a “lengthy period of on-the-job training” and sometimes also need licenses or certifications. BLS projects around 40,600 openings for HVAC mechanics and installers each year from 2025 through 2035. U.S. Bureau of Labor Statistics, Occupational Outlook Handbook: Heating, Air Conditioning, and Refrigeration Mechanics and Installers (last modified Sept. 9, 2026).
These workforce conditions can impact business value. BVR recommends examining employee descriptions and longevity; a valuator should identify the company’s key employees and why they are important. What It’s Worth: Valuing HVAC Companies at 83.
The appraiser should consider technician tenure, compensation, certifications, specialized skills, training systems, and employee turnover. A company with experienced technicians and managers who are expected to stay after a sale may be better positioned to continue its historical earnings than a company whose technical knowledge resides with one or two people. This analysis especially matters when the most indispensable employee is the spouse who owns the company.
Owner Dependence Can Reduce Transferable Value
Some HVAC companies operate independently of their owners, while others revolve around them.
The owner may possess the required licenses, maintain major customer relationships, manage employees, supervise installations, and handle service calls. If those functions cannot continue without the owner, historical earnings may not actually represent what a hypothetical purchaser could expect to receive from the business.
Owner dependence is therefore a major valuation consideration. Totter’s 2026 synthesis describes owner dependence as “the single most common factor” identified in one practitioner source as producing multiple compression in HVAC transactions. Valuation Multiples in U.S. HVAC Service Businesses at 16. On the other hand, management depth can support a higher valuation. Id.
Illinois law makes the distinction between business value and the owner’s future labor particularly important. In In re Marriage of Frazier, the trial court valued an insurance agency using a capitalization-of-earnings method based on the discounted present value of the owner’s expected future earnings. 125 Ill. App. 3d 473, 477 (1984). However, the appellate court rejected that approach, as those earnings would be “due in large part to the respondent’s activity following dissolution.” Id. It explained that the valuation essentially treated the results of the husband’s future efforts as marital property. Id.
This concern can arise with an owner-operated HVAC company. Historical earnings may reflect not only the value of the business but also the value of the owner’s continuing labor. The appraisal should determine what the owner truly does, what it would cost to replace those services, and whether the company could keep its customers and earnings if the owner departed.
Seasonality And Working Capital Can Affect HVAC Company Value
HVAC revenue can fluctuate substantially throughout the year because of geography, weather, construction schedules, and customer demand. These factors can cause periods of stronger or weaker cash flow.
Seasonal revenue is a specific valuation consideration. For example, construction may occur year-round in warmer climates, while colder climates can experience more downtime. What It’s Worth: Valuing HVAC Companies at 20. Fluctuating commodity prices, backlog, receivable collectability, and fleet expenditures are also factors that can affect value.
These fluctuations make working capital particularly important. As BVR explains, “[t]he ability to weather cycles is going to be particularly important with an HVAC company.” Id. at 15. However, even apparently excess working capital should be considered “with a jaundiced eye” because the company may be retaining assets specifically to survive a downturn. Id.
Cash should not automatically be treated as an excess asset available for distribution just because it exceeds the company’s immediate expenses. The appraiser must determine how much working capital the HVAC company reasonably needs to fund payroll, inventory, equipment, receivables, and other expenses through normal fluctuations in demand.
Backlog can provide additional evidence of expected future activity. A lower backlog at the valuation date compared with the prior year may require the appraiser to reconsider assumptions about future growth. Id. at 21.
Regulation And Changing HVAC Technology Can Affect Future Earnings
HVAC companies operate in an industry subject to federal regulation and changing technical requirements.
For instance, Section 608 regulations under the Clean Air Act require technicians who maintain, service, repair, or dispose of equipment that could release refrigerants into the atmosphere to be certified. 40 C.F.R. pt. 82, subpt. F. Under the Environmental Protection Agency requirements, technicians must pass an EPA-approved test to obtain Section 608 certification. U.S. Environmental Protection Agency, Section 608 Technician Certification Requirements.
Energy-efficiency requirements impact the equipment HVAC companies install and service. The Department of Energy creates federal energy-conservation standards for residential central air conditioners and heat pumps. U.S. Department of Energy, Consumer Central Air Conditioners and Heat Pumps.
Why do these requirements matter in valuation? They matter because regulatory and technological changes may require additional training, certifications, equipment, or changes in the types of systems a company services; BVR thus cautions that “[t]he effect of regulations on a company must be factored in.” What It’s Worth: Valuing HVAC Companies at 21.
An appraiser should examine whether the company has the employees, certifications, and training available to adapt to changing HVAC technology and regulatory requirements without substantially disrupting its earnings.
An HVAC Company’s Financial Statements May Need To Be Normalized
The income reported on an HVAC company’s financial statements may not represent the earnings a hypothetical purchaser could expect from the business.
Closely held business owners may compensate themselves or family members above or below market rates, pay personal or discretionary expenses through the company, or incur expenses that are not going to continue under new ownership. When these expenses exist, the company’s profit should be “recast” or normalized so that it is “representative of the earnings that a new owner could expect from the business.” What It’s Worth: Valuing HVAC Companies at 65-66.
Totter’s 2026 analysis lists personal expenses, family payroll, owner compensation, owner-leased real estate, one-time professional fees, deferred capital expenditures, and working capital as common quality-of-earnings adjustments encountered in HVAC transactions. Valuation Multiples in U.S. HVAC Service Businesses app. B.
Imagine a company that pays above-market rent to a building owned separately by the HVAC-company owner. In that case, reported earnings may understate the economic benefit of the business. By contrast, if the owner has delayed replacing an aging fleet of service vehicles, current earnings may seem stronger than the earnings a purchaser could realistically maintain after necessary capital expenditures.
Normalization is not merely an effort to increase reported earnings. Adjustments may increase or decrease the benefit stream depending on what expenses a hypothetical purchaser would actually incur. The point is to come up with a financial picture that accurately reflects the company’s ongoing economic performance.
Reasonable Owner Compensation Can Have A Major Impact On Value
Normalizing an HVAC company’s financial statements requires determining whether the owner is being paid reasonable compensation for the work he or she performs.
This is particularly important for an owner-operated HVAC company. The owner may hold many roles. The owner may be the company’s supervisor, manager, salesperson, estimator, or technician in addition to owning the business.
If the company pays the owner substantially more or less than it would have to pay someone else to perform those services, reported earnings may not accurately demonstrate the economic return attributable to ownership. Owner compensation is a common normalization adjustment. EBITDA is calculated after making a “market-rate management-replacement compensation adjustment.” Valuation Multiples in U.S. HVAC Service Businesses at 10.
Imagine an HVAC company reports $600,000 in earnings while paying its owner only $70,000 to manage the entire operation. If hiring a replacement manager would cost substantially more, a purchaser could not reasonably expect to retain the full reported earnings without accounting for that expense. Reasonable compensation helps separate the return generated by the business from the compensation generated by the owner’s labor.
How Should An HVAC Company Be Valued?
There is no single formula that determines what every HVAC company is worth.
Illinois courts recognize the difficulty in valuing closely held businesses. In In re Marriage of Grunsten, the appellate court explained that valuing a closely held business is “inherently subjective” and that “[p]lacing a fair market value on the professional corporation is an art, not a science.” 304 Ill. App. 3d 12, 17 (1999) (quoting In re Marriage of Gunn, 233 Ill. App. 3d 165, 183 (1992)). It noted that there is “no exact formula” and that valuation experts may “differ significantly in both methodology and valuation.” Id.
Business valuation typically involves three approaches: the income approach, the market approach, and the asset approach. What It’s Worth: Valuing HVAC Companies at 13-14. For a profitable operating HVAC company, BVR explains that the market and income approaches are the preferred methods because they can capture the combined value of the tangible and intangible assets.
This is not to say that both methods will always produce the same answer or that either can be mechanically applied. The appropriate method will depend on the company’s historical performance, expected earnings, business mix, available comparable transactions, risk, growth, and the quality of its financial information.
The Income Approach
The income approach’s main focus is on the economic benefits the HVAC company is expected to generate in the future.
One way to think of this approach is as one based on the principle of “anticipation.” A company’s value is determined by converting its expected future economic income into a present value. What It’s Worth: Valuing HVAC Companies at 14. It may include capitalization of earnings, discounted future earnings, or discounted cash-flow methods.
The question is not just what the company earned last year. Historical results are used to understand what level of economic benefit is reasonably expected to continue. Would-be buyers are interested in future returns, but past financial performance is useful because it helps predict those returns. However, a purchaser “does not expect to pay for unrealized potential.” Id. at 17.
For an HVAC company, the analysis may require considering normalized earnings, recurring service revenue, customer retention, construction exposure, backlog, working-capital needs, owner dependence, and expected growth. The riskier or less predictable those future benefits are, the less a purchaser would likely pay for them today.
The income approach must be applied carefully in an Illinois divorce. The appraiser must distinguish earnings generated by the existing HVAC enterprise from income that will exist only because the owner continues working after the divorce.
The Market Approach
The market approach looks at what comparable businesses have sold for. It estimates value “by comparing the subject business interest to comparative business interests that have been sold in an established market place.” Id. at 14. Comparable evidence may include sales of privately held businesses, publicly traded companies, or prior transactions involving the business.
The market approach aligns with Illinois’s fair-market-value standard. Grunsten discusses how fair market value is generally measured by what a willing buyer would pay a willing seller in a voluntary transaction. 304 Ill. App. 3d at 18.
The hard part is determining whether another HVAC company is truly comparable. Two businesses may have identical revenue. However, they may differ in profitability, service agreements, customer concentration, construction exposure, geographic market, owner dependence, workforce, and size.
Cutler is an example involving the danger of overlooking these differences. In that case, an expert relied on a rule of thumb derived from multiline insurance agencies, even though the business being valued was a captive agency subject to materially different restrictions; the appellate court concluded that the valuation lacked a proper foundation because the rule of thumb was “clearly inapplicable to this situation.” 334 Ill. App. 3d 731, 737 (2002).
This principle applies to HVAC companies as well. Transaction multiples can provide helpful evidence. Yet they are only helpful after the appraiser determines whether the companies being compared are actually economically similar.
An HVAC Company Is Not Automatically Worth A Multiple Of Revenue Or EBITDA
Industry multiples are useful benchmarks, but they are not substitutes for a complete valuation.
For example, BVR’s 2017 pricing data identified rules of thumb ranging from 25% to 40% of annual sales plus inventory, two to three times seller’s discretionary earnings plus inventory, and 2.75 to three times EBITDA. What It’s Worth: Valuing HVAC Companies at 79. Yet those figures were historical industry benchmarks, not formulas that establish the fair market value of a certain HVAC company.
Recent research shows why a single multiple can be misleading. Totter’s 2026 synthesis explains that a single “HVAC multiple” is “empirically misleading,” as the appropriate multiple varies with business size, buyer type, recurring-revenue intensity, and other company-specific value drivers. Valuation Multiples in U.S. HVAC Service Businesses at 6.
Two HVAC businesses with identical EBITDA may still have significantly different values. A valuation multiple thus needs to be supported by evidence showing why it is proper for the specific HVAC company being valued.
When Does The Asset Approach Make Sense?
The asset approach examines what the company owns rather than only the earnings it is expected to generate. Under the asset approach, the company’s assets and liabilities are adjusted to their economic values. The value of the business is essentially the value of its tangible and intangible assets minus its recorded and contingent liabilities. What It’s Worth: Valuing HVAC Companies at 13.
An asset-based calculation can have issues capturing intangible value associated with the company’s name, reputation, trained workforce, customer relationships, and goodwill. Id. However, this approach may nevertheless become more important when a company has little or inconsistent profitability, is approaching liquidation, or derives much of its value from identifiable assets. It also can be useful as a check on values reached through other methods.
In sum, an appraiser should consider the asset approach, but the resale value of the company’s equipment, inventory, and other property should not automatically be mistaken for the value of a profitable operating HVAC business.
Does An HVAC Company Have Personal Or Enterprise Goodwill?
An HVAC company can be worth more than the combined value of its physical assets. Part of that extra value may be goodwill.
Goodwill is an important HVAC-company intangible. It is “largely tied to recurring revenue.” Id. at 11. A business with an established name, trained technicians, repeat customers, and renewable maintenance agreements may hold value that remains with the company even if ownership changes.
In Illinois, there is a difference between goodwill belonging to the business and goodwill attributable personally to the owner.
In In re Marriage of Schneider, the Illinois Supreme Court explained that “[t]he goodwill in a professional practice is generally personal in nature, while the goodwill in a corporation might include both personal and enterprise goodwill.” 214 Ill. 2d 152, 167-68 (2005). The court also noted that the duplication concern under section 503(d) is “limited to personal goodwill and does not extend to enterprise goodwill.” Id. at 168.
In the context of an HVAC company, personal goodwill may exist where customers mostly rely on the owner’s reputation, relationships, or continued involvement. Enterprise goodwill may be reflected in renewable service agreements, an established company name, trained technicians, management systems, and customer relationships that would remain after the owner leaves.
This is an important distinction because personal goodwill should not be included as a divisible marital asset, whereas enterprise goodwill may contribute to the value of the business itself. An appraiser should determine whether the company’s goodwill would remain with the business after a transfer of ownership or whether it depends on the continued personal involvement of the owner.
Is An HVAC Company Marital Or Nonmarital Property?
Before an HVAC company can be divided in a divorce, the court must determine whether the ownership interest is marital or nonmarital property.
Under Section 503(a), marital property generally includes property “acquired by either spouse subsequent to the marriage.” 750 ILCS 5/503(a). Property acquired before the marriage, by gift or inheritance, or excluded by a valid premarital or postnuptial agreement may instead be nonmarital. Id. § 503(a)(1), (4), (6).
Thus, an HVAC company started or purchased during the marriage will generally be marital property. An ownership interest acquired before the marriage may remain nonmarital. The analysis should focus on the particular ownership interest being valued and when and how that interest was acquired.
This can become more complicated when the owner acquires additional equity during the marriage. For example, a spouse may have started the HVAC company before marriage but later purchased another owner’s shares with marital funds. The original interest and the later-acquired interest may require separate classification.
Growth During The Marriage Does Not Automatically Make A Premarital HVAC Company Marital
A premarital HVAC company does not automatically become marital property just because it grows substantially during the marriage.
Section 503(a)(7) classifies “the increase in value of non-marital property” as nonmarital regardless of whether the increase results from marital property, nonmarital property, or a spouse’s personal efforts, subject to the statute’s reimbursement provisions. 750 ILCS 5/503(a)(7).
This rule is illustrated in In re Marriage of Werries. There, the husband’s 45% interest in a farm partnership had been acquired partly before the marriage and partly by gift; although the business experienced substantial growth during the marriage, the appellate court held that the partnership interest remained nonmarital. 247 Ill. App. 3d 639, 643-46 (1993). The court explained that “[t]he issue is not the business’ form,” but whether “there has been an actual segregation of the nonmarital estate from the marital” and whether adequate proof separates the business from personal assets. Id. at 646.
This principle can apply to an HVAC company. A premarital company may add technicians and expand into new markets. It may also acquire service agreements and increase revenue without automatically becoming marital property. Ownership records, loan documents, tax returns, and financial statements may be required to establish whether the original nonmarital interest retained its identity.
The Marital Estate May Still Have A Reimbursement Claim
Keeping an HVAC company nonmarital does not always end the analysis. The marital estate may nonetheless be entitled to reimbursement for contributions that increased the value of the nonmarital business.
When one estate contributes property to another, Section 503(c)(2)(A) provides that the contributing estate “shall be reimbursed,” but reimbursement is unavailable where the contribution cannot be traced by clear and convincing evidence or was intended as a gift. 750 ILCS 5/503(c)(2)(A).
Marital funds might be used to repay acquisition debt, acquire another HVAC company, purchase additional equity, or purchase major equipment. The party seeking reimbursement must be able to trace those contributions.
A spouse’s personal efforts can also create a reimbursement claim. Under Section 503(c)(2)(B), personal effort devoted to nonmarital property is a contribution from the marital estate when the efforts are significant and result in substantial appreciation. 750 ILCS 5/503(c)(2)(B). However, there is no reimbursement if the marital estate “reasonably has been compensated” for those efforts. Id.
To be clear, significant effort alone does not establish reimbursement. In Werries, the court found no reimbursement where the claimed contributions were not traced by clear and convincing evidence and the husband had been reasonably compensated for his personal efforts. 247 Ill. App. 3d at 646-49.
Accounts Receivable, Backlog, And Service Obligations Also Matter
An HVAC company may have value tied to work that has already been performed or contracted for but has not yet been fully reflected in its cash receipts. One example is accounts receivable. The collectability of receivables is an important valuation consideration. What It’s Worth: Valuing HVAC Companies at 20. An appraiser should examine not only the face amount of receivables, but also their age, collectability, and whether appropriate reserves should be applied.
Backlog presents a different issue. Backlog may provide a “snapshot” of how an HVAC company is performing, but a decline in backlog at the valuation date may require reconsidering assumptions about future growth. Id. at 21.
The appraiser should also account for obligations associated with prepaid or deferred maintenance agreements. Receiving payment in advance may improve current cash flow, but the company may still owe future service to the customer. Deferred maintenance contracts should be a valuation consideration since the associated liability can impact company value. Id.
In all, the appraiser should examine accounts-receivable aging, current backlog, deposits and prepayments, and outstanding obligations under service agreements. These items can have an effect on the company’s current balance sheet and the earnings a purchaser could reasonably expect after the valuation date.
The Valuation Date Matters
An HVAC company’s value can change substantially as time goes on. A service contract may be gained or lost, equipment may need replacement, backlog may increase or decline, and construction activity can shift.
Under Section 503(k), the valuation date for purposes of dividing property is the date of trial unless the parties agree to another date or the court selects another date within its discretion. 750 ILCS 5/503(k).
The valuation should use financial information that reflects the company as of the applicable valuation date. This is especially important for an HVAC business because the industry can be volatile. What It’s Worth: Valuing HVAC Companies at 15.
What Records Are Needed To Value An HVAC Company?
A reliable HVAC-company valuation needs more than tax returns and a current profit-and-loss statement. BVR recommends obtaining “no less than five years of tax returns or financials,” as well as proof of preventative-maintenance agreements, employee descriptions and longevity, recurring-customer information, service-agreement counts, and information about key employees. Id. at 83.
The appraiser should review balance sheets, bank and debt records, income statements, ownership and organizational documents, accounts-receivable and accounts-payable aging reports, compensation records, leases, and information about vehicles and equipment.
There are important HVAC-specific records to consider, too. Licensing and certification information, employee records, backlog reports, service agreements, customer-retention data, fleet schedules, and equipment inventories can help explain the risks and economic benefits underlying the company’s earnings. These records allow the appraiser to test the company’s reported financial performance rather than just accepting the numbers appearing on its tax returns.
How Is An HVAC Company Divided In An Illinois Divorce?
After the HVAC company has been classified and valued, the court must determine how its marital value fits into the overall property division.
Under Section 503(d), the court must “divide the marital property without regard to marital misconduct in just proportions.” 750 ILCS 5/503(d). The court considers, among other factors, each spouse’s contributions, the value of property assigned to each spouse, their economic circumstances, and their respective opportunities to acquire assets and income in the future. Id. § 503(d).
Dividing an HVAC company does not always mean dividing its ownership between the spouses. One approach is to award the company to the spouse who owns and operates it while compensating the other spouse through other marital property or an equalization payment.
For instance, the HVAC-company owner may keep the business while the other spouse receives a larger share of available cash, investments, or retirement accounts. If those assets are insufficient to account for the company’s marital value, an equalization payment may be required.
This approach is often sensible where the company depends on the owner’s licenses, technical knowledge, or customer relationships. Requiring former spouses to stay joint owners of an operating HVAC company can create problems that simply assigning a value to the business can avoid.
To be clear, the result does not have to be an equal division of each individual asset. The court’s task is to divide the marital estate in just proportions, which does not always mean equal proportions.
Conclusion As To How A HVAC Company Is Valued And Divided In An Illinois Divorce
Valuing a HVAC company in an Illinois divorce requires more than simply looking at annual revenue, equipment, or an industry multiple. Customer concentration, recurring service agreements, trained employees, construction exposure, owner dependence, working-capital needs, goodwill, and the company’s mix of services can all impact fair market value.
The court must also determine whether the ownership interest is marital or nonmarital property, whether the marital estate has a reimbursement claim, and how the company’s value should be accounted for in the overall division of property.
Overall, two HVAC companies with identical revenue or EBITDA can have substantially different values. An appropriate appraisal must examine the specific business, the risks attached to its earnings, and which economic benefits would remain with the company after a change in ownership.
Contact my Chicago, Illinois divorce law firm to discuss how an HVAC company may be valued and divided in your divorce.
Russell D. Knight is a Chicago divorce and family law attorney who has practiced family law since 2006. He represents clients in complex Illinois divorce matters involving closely held businesses, business valuations, property division, and other difficult-to-value marital assets.
CASES, STATUTES, AND OTHER SOURCES REFERENCED IN THE VALUING AND DIVIDING AN HVAC COMPANY IN AN ILLINOIS DIVORCE ARTICLE
750 ILCS 5/503 — Marital And Nonmarital Property, Reimbursement, Equitable Distribution, Fair Market Value, And Valuation Date. 750 ILCS 5/503 — Illinois General Assembly
40 C.F.R. pt. 82, subpt. F — Refrigerant Handling, Emissions Reduction, And Technician Certification Requirements. 40 C.F.R. Part 82, Subpart F
In re Marriage of Frazier, 125 Ill. App. 3d 473 (1984) — Business Valuation And The Owner’s Post-Divorce Labor And Future Earnings. In re Marriage of Frazier
In re Marriage of Gunn, 233 Ill. App. 3d 165 (1992) — Fair Market Value And The Inherent Uncertainty Of Closely Held Business Valuation. In re Marriage of Gunn
In re Marriage of Grunsten, 304 Ill. App. 3d 12 (1999) — Fair Market Value And Valuation Of A Closely Held Business. In re Marriage of Grunsten
In re Marriage of Cutler, 334 Ill. App. 3d 731 (2002) — Fair Market Value, Transfer Restrictions, And Inapplicable Rules Of Thumb. In re Marriage of Cutler
In re Marriage of Schneider, 214 Ill. 2d 152 (2005) — Personal And Enterprise Goodwill And Accounts Receivable. In re Marriage of Schneider
In re Marriage of Werries, 247 Ill. App. 3d 639 (1993) — Nonmarital Business Interests, Appreciation, Tracing, And Reimbursement. In re Marriage of Werries
U.S. Environmental Protection Agency, Section 608 Technician Certification Requirements — Federal Certification Requirements For Technicians Who Handle Refrigerants. EPA Section 608 Technician Certification Requirements
U.S. Department of Energy, Consumer Central Air Conditioners and Heat Pumps — Federal Energy-Conservation Standards Affecting HVAC Equipment. DOE Consumer Central Air Conditioners and Heat Pumps
U.S. Bureau of Labor Statistics, Occupational Outlook Handbook: Heating, Air Conditioning, and Refrigeration Mechanics and Installers (2026) — HVAC Technician Training, Licensing And Certification, And Employment Projections. BLS Occupational Outlook Handbook — HVAC Mechanics And Installers
U.S. Census Bureau & U.S. Department of Housing and Urban Development, Monthly New Residential Construction, September 2026 (Oct. 20, 2026) — Housing Starts And Residential Construction Data. Monthly New Residential Construction, September 2026
Christoph Totter, Valuation Multiples in U.S. HVAC Service Businesses: A Synthesis of Tiered Pricing, Recurring-Revenue Premia, and Buyer-Archetype Differentiation in the Lower Middle Market (2026).
Business Valuation Resources, What It’s Worth: Valuing HVAC Companies (2017).
