The Best Plumbing, HVAC, or Electrical Business to Buy in 2024

How to Decide What Is the Best (or Worst) Plumbing, HVAC, or Electrical Business to Buy in 2024

Buying an existing Plumbing, HVAC, or Electrical business that is for sale is like buying the rights to a mine rich in gold. You just need to know how to mine it. We can help you.

Lucky for you, there are thousands of business owners who don’t get it. They are frustrated with the amount of effort it takes to make such little profit, frustrated with finding good employees, frustrated with marketing, and flat-out burnt out.

More likely than not, the seller of a plumbing business lacks the knowledge, tools, focus, energy, and discipline required to turn it into a happy client-producing, money-printing machine.

So, they do the next best thing… They sell it to you. And you’ll do what they couldn’t. Mine the gold.

Buying a home service business, be it plumbing, electrical, or HVAC, can be an excellent investment. I can tell you from experience that a properly positioned business offering residential plumbing and HVAC repair and replacement services can be as close to recession-proof as it gets.

In the years between 2008 and 2012, while other contractors were going broke and laying off employees, we were setting new high sales and profit records in our plumbing & HVAC service company’s history. Same during the COVID era of 2020 through 2023. There are very few business opportunities that I am aware of that have the potential return on investment that buying the right plumbing, HVAC, or home service business provides.

Popular Reasons to Buy or Become an Investor in a Plumbing & HVAC Service Business:

  • Can be virtually recession-proof: Essential services like plumbing and HVAC are always in demand.
  • Superb return on investment: High profitability potential with proper management.
  • Low initial capital investment required: Most ripe businesses for acquisition are priced under $750,000.
  • Stable revenues: Residential service and repair business can provide very stable revenues month-to-month, which banks appreciate.
  • No need to be a tradesperson: You don’t need to be a plumber, electrician, or HVAC technician to own a home service business. While having technical knowledge can be beneficial, many successful owners focus on managing the business, marketing, and customer relations. You can hire skilled tradespeople to handle the technical aspects of the job.
  • Highly profitable: Service businesses are highly profitable – we run ours at over 20% and have for decades.
  • Easy to run with the right systems: With the right business systems, they are easy to run – we will help you with this.

You should probably wipe the drool off your chin.

Have a look around. If you’re serious about your success in the Residential Plumbing, HVAC, or Electrical home service space, we need to talk. Contact Us

We feel this is pretty obvious, but my attorney felt it was important to say:

DISCLAIMER: Although all information on this site is based on our real-life experiences and results, none of it is intended to be used as investment advice.

Other Points That Hit Hard in This Post:

  1. Most companies for sale for less than $2 million are worth nothing.
  2. Business brokers prey on first-time plumbing, HVAC, and electrical company buyers.
  3. Most business postings are overindulged and misleading.

Traits of Companies to Avoid

There is a barrier to entry in the home service business. Build it yourself from the ground up or overpay for a starter business. Here are some major red flags for any plumbing, electrical, or HVAC company being sold today with a brief explanation of why you should run:

Purchase Price Under $3,000,000

Under $3M for a purchase price usually means under $3M in revenue. We consider businesses bought under $3M by first-time home service company buyers the kiss of death for the following reasons:

Declining EBITDA or SDE:

They have between $500k-$700k of EBITDA or SDE, and most of it will disappear as soon as the original owner is gone.

Lack of systems: These companies lack systems, procedures, or the ability to scale.

Dependency on owner: Heavily dependent on a controlling and likely micromanaging owner.

EBITDA or SDE Under $1M

Another huge indication that you may be buying a hugely underpaying job is a company that has less than $800k-$1M in EBITDA or SDE. Of course, there are some variables at play here, but for sure avoid any company that has $500k or less of SDE or EBITDA if you are a first-time buyer.

In Business Less Than 20 Years

Yes, there are some mega brands that are less than 20 years old, but not many in the home service business.

Over 10% of Revenue Comes from New Construction or Remodel

Any home service business that relies on new construction or remodeling work should be highly avoided for many reasons.

No Written SOPs

If the business you’re looking at cannot produce a written SOP for every major function in the business… run for the hills.

Less Than 20 Employees

Plumbing, HVAC, and electrical businesses that have less than 20 employees are not really marketable businesses.

Broker and Owner Are Selling the Future, Not the Present
Be leery of any company that puts more sales emphasis on the future than what has been done in previous years.

Low Tenure

If more than half of the company has been with it for less than 5 years, this is a sign of an unstable culture.

The Market Is Isolated or Small

Often times cornered markets are also isolated, and if it’s hard for companies to start up or move in, this is the same when it comes to hiring new employees. Markets that are considered exclusive should be approached with caution. You want to be within a 40-60 minute drive (at most) from a major market or be in an area that has no major market within a 1.5-hour drive.

Less Than 500 Google Reviews

One of the more valuable assets of an existing company is its online presence, which is anchored by its Google business profile.

Other Business Interests = HUGE Red Flag

In 20+ years of business building and entrepreneurship, I have never met a business owner that gets sick of making lots of money the easy way. When the reason for selling is other business interests, that means I am working way too hard and not making any money.

No Software

A business that doesn’t utilize modern software for managing operations, scheduling, and customer relations is a red flag. It indicates outdated practices that can hinder efficiency and growth.

No Marketing Automation

Lack of marketing automation means the business likely has a poor marketing strategy, which is crucial for generating consistent leads and growing the customer base.

Poor or Vague Financial Records

Businesses with poorly maintained or vague financial records should be avoided. Accurate financial records are essential for evaluating the health and potential of the business.

Family Business Dynamics

Family businesses, particularly those operated by husband and wife teams, can present unique challenges. These businesses often rely heavily on the personal relationships of the owners, which can be difficult to replicate or sustain after the sale. Additionally, family dynamics can complicate decision-making and create an unstable business environment.

Traits of Good Plumbing, HVAC, or Electrical Companies

  • Companies with a purchase price over $3M and revenue reflecting that.
  • Companies with EBITDA or SDE over $1M.
  • Businesses in operation for over 20 years.
  • Less than 10% of revenue from new construction or remodeling.
  • Comprehensive written SOPs for every major function.
  • More than 20 employees.
  • Proven historical performance and future potential.
  • Stable culture with high employee retention.
  • Located within reasonable proximity to major markets.
  • Strong online presence with numerous positive reviews.
  • Utilizes modern software for operations and customer management.
  • Employs effective marketing automation strategies.
  • Maintains accurate and detailed financial records.

Why Most Plumbing, HVAC, and Electrical Companies Are Overpriced (and Many Are Worth Nothing)

Most trade service businesses start and eventually end up for sale due to a failure to build something truly valuable. At the end of a long career, the owner has not developed the necessary systems and processes. Business brokers market these companies to first-time buyers because, on the surface, they make money and look good, but they are far more complicated to run effectively.

Very good companies are rarely sold because they are built on a foundation of sustainability and can produce generational wealth. Most companies that are sold have been taken as far as the owner can take them and teeter on the edge of a major pullback.

Times When Making a Bad Purchase Is a Good Decision

There are times when buying a plumbing, HVAC, or electrical company that fits into our previous definition of a bad company buy is a no-brainer for some. Let’s dig into when buying a diamond in the rough is a no-brainer:

  • You’re Buying Employees You Can’t Hire: Acquiring skilled employees can be invaluable in today’s tight labor market.
  • You’re Adding a Trade or Additional Service Offering to Your Business: Expanding your service offerings can strategically benefit your business growth.
  • Entering a New Market: Sometimes, buying a business that isn’t performing well can allow you to enter a new market where you see potential. This can be particularly advantageous if the market has high demand and limited competition, giving you the opportunity to turn around the business and capitalize on the new customer base.

How Much Should You Pay for a Good Plumbing, HVAC, or Electrical Company?

This will depend on many business valuation factors such as your risk tolerance, skill, and the overall quality of the company. 

  • For first-time buyers, ones that are not tucking in an existing smaller company into their larger company, you want to keep the multiple paid as low as possible. Shoot for 2-3x SDE or EBITDA and use extreme caution for going over that.
  • For good companies that are more than $1M, it is common in today’s market to need to pay 6-8 times because they attract much more astute buyers. During the COVID era, some companies sold for up to 10x, and there are stories of unicorn companies selling for as much as 18x. However, as the market has settled and interest rates have risen, the number has settled towards 6-8 times. It’s essential to perform thorough due diligence to ensure you’re not overpaying.

Use Our Tools to Evaluate Business Value

Take advantage of our free plumbing, HVAC, and electrical business valuation tools to get an accurate estimate of the business you’re considering buying. These tools can help you make informed decisions and avoid overpaying.

Maximize Your Investment with Elite Trades

Elite Trades can help you double the value of the business you’re looking to sell in a few years or grow the one you are buying. Our services include strategic planning, operational support, and post-acquisition consulting to ensure your business reaches its full potential.

How Elite Trades Can Help You Avoid Bankruptcy After Your Investment in the Home Service Space

Elite Trades provides comprehensive services to help even first-time buyers of plumbing, HVAC, and electrical companies buy the best business for their goals. Our services include:

  • Due Diligence: We help you thoroughly evaluate potential purchases.
  • Strategic Planning: We guide you in developing a robust business strategy.
  • Operational Support: We assist in setting up efficient business systems.
  • Post-Acquisition Consulting: We provide ongoing support to ensure your business thrives.

By leveraging our expertise, you can avoid common pitfalls and maximize your investment in the home service industry. Let’s build something spectacular together.

Eric Smith - Founder & CEO of Elite Trades

Discover How We Can Help You Grow and Scale Your Business Effectively

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