I often get asked this question: What about adding another trade to my business? If my customers trust me with their HVAC needs, why not plumbing, too? For most owners, it’s a bad idea, or at least, an idea that’s too early to consider. Here’s why.
If you’re running a company, you know how hard it is to find, train, and keep good employees. In fact, it may well be consuming most of your time and resources. Just when you get a tech trained up, he gets lured away by the cross-town competition. Even if you’re the one hiring an experienced tech from the a competitor, you have to invest hours and hours of training to make sure they’re doing business the way you want and not bringing bad habits and baggage from their previous employer.
Now multiply that times two trades.
Adding another trade makes you a startup all over again. You’ll have a steep learning curve, unless you’re experienced in both trades. You probably don’t have the expertise to oversee both the work of your HVAC crew and your plumbing crew. That means you’ll be spending more time and effort on the new trade, at the expense of the trade that’s already running well and profitable. It’s hard to ride two horses at once; your HVAC business will probably take a dip while you’re focusing on building up the new trade.
You’ll also be a startup in your customers’ eyes, even if they’ve used you for years for their heating and air systems. Marketing isn’t the same as credibility; most people will call a specialist in plumbing or electrical services when they need help, rather than trusting a company they’ve known for years as an HVAC expert. It may take years to win over your customer base.
Although the trades share many similarities, their business models differ significantly. What makes HVAC such an appealing business to own is that the industry has figured out how to generate recurring revenue. Maintenance agreements stabilize the workforce, keeping techs busy during slow months, and making income predictable.
Plumbing and electrical companies, on the other hand, are almost always responding to on-demand repairs. (New construction being the exception.) Most haven’t yet incorporated maintenance agreements into their business model, so consumers still plan to call only when something breaks.
Keeping a plumbing crew busy while you build the business will be a challenge, and you’re likely to lose your best talent to other companies if there’s not enough work for them.
So, when is the right time to add another trade? In my experience, once you’ve achieved about $10 million in sales. At that point, you probably have the systems in place to hire, train, and retain talent. You’ve got established customer service and relationship management systems in place. You have an effective marketing strategy that’s consistently generating phone calls. You’re not needed in the business to solve everyday issues because you have a strong management team in place.
You’ll also have a timeline for exiting the business that allows the other trade to become established and profitable first. If you’re thinking about retiring or selling within five years or so, you might be detracting from the value of your current business.
When you’ve achieved those milestones, it might be the right time to consider adding another trade – or acquiring a company that complements your business.
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