As an industry, HVAC has been around for ages — but how profitable is it as a business?
Well, according to my 10 years and millions of dollars in research… yes.
With the right strategies in place, HVAC businesses are so profitable that they’re on track to get some of the highest valuations in the next coming years.
On average, HVAC businesses have historically seen a 3.5-5X EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). However, with the right systems in place, that number can go up 10-13X EBITDA.
Value is everything in HVAC
To get those numbers, you need to create value with your HVAC business, which you can do through:
- Platform investments that provide scalability and competitive advantages;
- Strong operating leverage with high capital efficiency;
- Sustainable and predictable organic growth;
- Proven track record of successful acquisitions with a robust near-term pipeline;
- Strong, competitive position in large, growing markets;
- Management depth with a culture of talent development.
Key trends for a profitable HVAC business
If you’re looking to break into the HVAC industry, keep an eye out for these trends.
After that, see how you can implement them into your business to drive the highest value for your HVAC customers.
Firstly, many large public companies have launched initiatives to promote environmentally friendly business practices.
Secondly, market players will develop technologically advanced and differentiated products that comply with regional regulation norms to gain a competitive edge.
Thirdly, the drive for green buildings and energy has brought attention to antiquated technology in both commercial and residential buildings.
Finally, the COVID-19 pandemic has driven commercial building owners to improve their HVAC systems. In doing so, they protect the health of visitors and attract customers.