It’s no secret that Americans have spent more time at home during the COVID-19 pandemic and as a result, they’ve put more pressure on their homes’ systems, thereby increasing the demand for home services like HVAC. According to a report on Fox Business from last fall, HVAC technicians saw a nearly 109% increase in service requests — and this demand shows no sign of slowing down, especially in the midst of peak heating repair season this winter and a residential construction boom. That said, it’s obvious that businesses in this industry are primed to scale and grow.

However, while growth may be the case for a number of these businesses, it’s not necessarily the future of every HVAC business. In fact, because of several driving factors, businesses in the HVAC space are best positioned for market consolidation.

Return Customers Means Guaranteed Cash Flow

According to the U.S. Energy Information Administration’s most recent Residential Energy Consumption Survey, 64% of U.S. households use central air conditioning equipment and 11% use heat pumps for heating and cooling. With a large percentage of households having some sort of heating and air conditioning, ensuring equipment lasts its expected lifetime and beyond requires routine maintenance — about once or twice per year, depending on the age of the system — not just emergency repairs.

Because of this, HVAC businesses not only have repeat customers annually, but have multiple touchpoints and opportunities to upsell customers throughout the year during regular servicing. This built-in, annualized audience is attractive to potential acquirers because of the high potential for both customer acquisition and retention.

Booming and Essential Businesses are a Solid Investment

While there is always demand for residential HVAC services year-round, the region in which a business is located may experience differing levels of repair and servicing requests throughout the year. According to Property Meld, repair requests in the northern region rise about 61% above the average each month; in winter months, that average is higher given peak demand. In the south, repair requests can rise 123% above average each month, particularly in the summer, which serves as peak season for the region.

Beyond the consistent and growing demand within residential homes, HVAC within the commercial space has boomed as well. Given the airborne nature of the coronavirus, the role of HVAC systems in minimizing transmission and improving air quality was emphasized by health organizations like the CDC. As such, HVAC technicians aided health systems around the country with their facilities and reconfigured their units during the onslaught of the coronavirus pandemic to prevent the spread of the virus. While the duration of the pandemic remains unknown, the HVAC practices instituted — including high-efficiency particulate air filtration, negative pressure ventilation systems and more — should remain commonplace.

With more of a focus on needing improved HVAC systems coupled with the ongoing maintenance required from the industry, businesses experienced a slew of return customers that not only wanted services, but needed them.

Lack of Succession Planning Shows Whitespace for New Exit Strategies

Even before the coronavirus pandemic, the HVAC industry was battling a labor shortage that has only since been exacerbated. As older generations look for an exit strategy, there are fewer people available to not only do the job, but also take over the business. In fact, many small businesses lack succession plans and therefore don’t have a clear path to exit the business when it’s time to retire.

With the discrepancy of increased demand for HVAC services, but no one to carry on the business as leadership ages out, looking to sell to an experienced manager within the company or be consolidated by a like-minded standalone business looking to further their investment in the HVAC industry may be some of the only remaining profitable options for consideration.

The pandemic has highlighted many necessary services in the HVAC sector, but one thing is especially clear: HVAC businesses are certainly a worthy investment. Because of this, business owners have to place a greater emphasis on considering their next steps when it comes to growth. Do they have the resources to seek out additional workers to meet demand, especially during peak seasons? Or does it make more sense to look towards an acquisition path?