Sooner or later, nearly every plumbing company contemplates adding HVAC. Here are the pros and cons.

Pros

Like plumbing, the core of HVAC involves dispatching trucks to homes to perform emergency repairs. You know how to do this. In fact, plumbing contractors are typically better at service than HVAC companies. You have to be. You live on service without the margin that HVAC equipment brings.

Equipment is the big prize for most plumbing companies adding HVAC. Comfort systems carry a healthy gross profit on the material and equipment, resulting in substantially more gross profit per hour of labor than service.

Service agreements, which are the backbone of a customer retention model with recurring revenue, are easier to sell for HVAC because the need for annual maintenance is much more apparent.

In most states, the licensing requirements for air conditioning are less stringent than plumbing. You are less likely to encounter the need to have a limited number of journeymen working under a master license holder. This means you can take advantage of the new schools that will turn out technicians who can start running calls in a matter of weeks. Sure, they can’t do everything a seasoned tech can, but they will be able to start making money for you.

All of your customers need heating and air conditioning, giving you a marketplace with people who already know and trust you. Why shouldn’t you leverage your existing relationships with them to provide it?

When you need an exit strategy, HVAC increases the attraction of your company because it expands the field of potential suitors. You will be attractive to people looking to acquire an HVAC company as well as those wanting a plumbing company. You will be attractive to other plumbing companies seeking an easier entry into HVAC — and HVAC companies seeking an easier entry into plumbing.

Cons

The seasonality plumbers deal with is mild. In HVAC, it is dramatic. Twice a year you need to be prepared to withstand a business slowdown due to mild weather. You need to have money in the bank, a line of credit, and an executable marketing plan. Then, you need enough work for your technicians to keep them from leaving. Typically, HVAC contractors step up maintenance work during the off season.

Inventory requirements are usually greater in HVAC. The parts are often more expensive, not to mention the equipment. Fortunately, creating an equipment “floor plan” can be avoided, and with the right suppliers, you can minimize parts inventory.

HVAC equipment is usually sold by the owner or a professional retail salesperson. While more companies are using selling technicians, this is still the exception. More than likely, you will need to learn how to recruit and manage salespeople.

If you go the selling technician route, be prepared from pushback until you find the right technicians. HVAC technicians have a different mentality than plumbers. They are more likely to resist being asked to “sell” than plumbers. The norm is a fix-it first, last and always mentality.

The Key Performance Indicators (KPIs) in HVAC differ slightly from those in plumbing. Accordingly, you will have to tweak the way you manage the business.

Timing

Some plumbing companies add HVAC with incredible success; others, less so. Timing is important. Your plumbing business must be mature enough and process-centric enough that you are no longer essential to the day-to-day operations. Adding HVAC or any other line of business will cause you to take your eye off plumbing. If your business is not developed to the point where it can operate without your constant attention, horizontal expansion into another trade risks yielding disastrous results in your core business.

The time to consider another vertical is when two conditions are met. First, your plumbing business is process-centric with a general manager or service manager overseeing day-to-day operations.

Second, you are running out of runway. Your growth is slowing, your market share is notable, and expanding geographically is unattractive. At this point, you have no choice but to add additional products and services, whether in plumbing or in another trade, like HVAC.

Get help

You can significantly increase your chances of success by getting help from successful HVAC contractors, especially contractors doing well in both plumbing and HVAC. Find them at your local trade association meetings and at national conferences. For maximum assistance, join a contractor alliance.

For information on the Service Nation Alliance, visit www.ServiceNationAlliance.com.