It's getting harder and harder for independent HVAC and plumbing companies to compete with larger platforms.

A confluence of factors — ranging from new technologies, the growing importance of digital marketing, supply chain shortages, and a shrinking labor force — has made a compelling case that solo practitioners face a mounting competitive disadvantage, or even worse, are at risk of eventually dying out.

For the past decade or so, private equity firms have invested in independent HVAC and plumbing businesses in a wave of consolidation that has created bigger players with considerably larger scale and more resources than their smaller competitors. The appeal of the HVAC and plumbing services sectors is straightforward: HVAC and plumbing services are a large, $75 billion market, and these services are non-discretionary. When your A/C breaks in the middle of the summer, in unbearable heat, repairing it isn’t optional. There are also real advantages to scale, which has enabled larger companies to grow three to four times faster than the overall market.

But this isn't bad news for independent operators. Joining with a consolidator, taking an infusion of capital from private equity, or even merging with other firms in their region allows them to diversify their wealth and make investments in their organizations.

Consider technology. Today, it's still common for independent plumbers or HVAC technicians to handwrite sales quotes. Depending on the technician’s handwriting ability, the quote is sometimes illegible, causing confusion for the homeowner. On the other hand, it’s standard practice for technicians from larger firms to provide estimates on an iPad with multiple options in color and with pictures. You can imagine which presentation customers prefer.

Tech-enabled quotes have built-in price books, making technicians more efficient and providing homeowners options like financing, which can convert a daunting $8,000 HVAC system replacement into manageable monthly installment payments. Companies that have converted from handwritten to digital quotes can often see up to a 50% increase in sales conversions.

The resources that larger plumbing and HVAC firms have at their disposal can also be seen in marketing and advertising strategies, which are becoming increasingly digital. Some veteran business owners have traditionally put their advertising dollars toward legacy media such as print, radio, and television. Those media aren't obsolete, but if you consider how a homeowner seeks an emergency repair company, that process typically happens online. Larger firms not only have the resources to spend more, which drives more leads, but they also have the sophistication to mount digital advertising campaigns that can get you to the top of a search results page or onto a social media page.

Labor trade shortages continue to be a challenge for the industry. The scale and resources of larger firms can give a considerable boost toward employee recruitment and retention and training. Those outfits can offer better pay and benefits as well as a well-defined career path for upward mobility, which can be a competitive advantage in a tight labor market.

Those larger businesses will also support their employees' ongoing education by operating in-house academies that offer training on the latest equipment, which is becoming increasingly complex. That kind of ongoing commitment to technicians' professional development can be difficult for independent operators to match.

Finally, larger plumbing and HVAC companies have a significant competitive advantage over their smaller rivals in purchasing power. In an environment with supply chain shortages, the larger platforms are given preferential treatment for purchasing equipment. Moreover, equipment manufacturers commonly enter into pricing agreements with large plumbing and HVAC businesses to sell equipment at 30% to 50% discounts, deals that solo shops would never be able to broker on their own.

These trends show no signs of slowing, which makes it harder and harder for independent operators to compete on their own in the current market.

There is a misconception that agreeing to be acquired or taking a private equity infusion means that a plumber or HVAC technician loses control over their business. This simply doesn't have to be the case. If the deal goes well, the independent operator can accelerate the growth of their business while keeping their family name on the side of their truck. They're just going to be running their business with better resources supporting them.