Why Home Services Companies Make Great Acquisitions - Acquira

Why Home Services Companies Make Great Acquisitions

What You’ll Learn
  • How to identify recession resilient businesses.
  • Why the home services industry has great growth potential.
  • Key statistics for a number of different types of businesses.
  • How to create post-acquisition growth within your business.

While many people realize that buying an existing business can provide a high ROI (return on investment) and more personal freedom, some people still wonder what type of business they should buy.

We have found that, while no two businesses are alike, there are some industries that have proven better investments than others. 

In an earlier article, we discussed how to appraise companies in various business sectors and which ones we find the most attractive. But in general, whether a business is a good investment or not generally comes down to the companies’ ability to withstand economic hardship and provide a high CAGR (compound annual growth rate). In almost all cases, we have found that businesses in the home services industries exemplify these qualities.

Broadly speaking, the home services industry is made up of businesses whose primary purpose is to work on residential homes (though many also take on commercial business). If an Acquisition Entrepreneur knows that they want to buy a company but doesn’t know where to start, we usually recommend they start by looking in the home services industry.

Home Services Companies Are Recession Resistant

It can often seem like we are experiencing more economic downturns than were felt in the past. From the global financial crisis that started in 2008 to the Coronavirus pandemic that spread around the world, very few industries were left unscathed. 

While most large and multinational companies were able to stay afloat, many smaller businesses were forced to close.  However, one of the industries that managed to thrive despite these challenges was the home services industry.

There is a famous saying that “remodelers hire as builders fire.” During times of economic difficulty, most people can’t afford to buy new homes so they turn to the home they have and look for ways to make improvements. Some homeowners may invest in a new roof, others in new floors. One family may wish to buy a new air conditioner while another may finally want to fix that plumbing problem that’s been bothering them for years. Essentially, anything to make their homes more comfortable.

Businesses that can tap into this need tend to do very well during recessions. This is true whether you’re talking about home services franchises or family-owned companies that have served a community for generations.

Types Of Home Services Companies

It’s a simple but often overlooked fact: houses in the United States are getting older. With that, many homeowners are more concerned with repair and upkeep than with buying a new property. That’s where home services companies come in.

Of course, “home services” as an industry can mean a number of different things. The type of home services business that you buy should be reflected in your personal experience and expertise, but it’s important to know what your options are.

HVAC

Sometimes called HVAC/R, this stands for heating, ventilation, air conditioning (and sometimes refrigeration). The need for HVAC services has remained consistent through all kinds of economic turmoil. 

HVAC contractors repair and install air conditioning, furnaces, and refrigeration systems. And especially during difficult times, most people want their homes to at least be comfortable – climatically speaking. In fact, in 2014 the HVAC industry accounted for 292,000 jobs with that number expected to grow by 14 percent by 2024.

Here are some interesting HVAC industry facts:

Acquira actually has some experience in the HVAC industry, having grown one company’s revenue by 31 percent over a period of eight months. You can read about that story here.

Plumbing

While the plumbing and HVAC industries are often lumped together, we prefer to separate them in the interest of our Acquisition Entrepreneurs. The two types of companies may operate in similar areas of the home, but they are different enough to require different considerations if you’re thinking about buying a company.

That said, the combined industries accounted for around $174 billion in revenue in 2014, and that number has only grown in the years since. The plumbing sector alone accounted for approximately 425,000 jobs and is expected to grow 12 percent by 2024.

There are a number of factors that make this an interesting industry to get into in the near future.

Like HVAC, a shortage of skilled professionals remains a problem with this industry. But if you can find a company with a strong relationship with the community and improve culture so that employee retention is less of an issue, it’s likely a very good opportunity.

Roofing

Shingles don’t last forever, and most homeowners look to replace them before their warranty expires. As houses across the country age, the roofing market is increasingly made up of replacement work, accounting for approximately 90 percent of all roofing jobs.

Largely spurred on by the wider home industry, the roofing industry has continued to grow. In fact, between 2015 and 2020, the roofing industry grew by an average of 2.7 percent each year. 

Note: Just for comparison, the US auto industry fluctuated between 0.5 percent and -1.5 percent year-to-year in the same period.

Home Healthcare

Just as homes across the country continue to age, so does the country’s population – and at an accelerating rate. That aging population means an increased strain on the healthcare industry, including doctors’ offices, hospitals, and clinics – all of which increase demand on the home healthcare sector. 

Moreover, while a large swath of the population is aging into their senior years, life expectancies are also on the rise. These simple facts are causing many people to start considering home healthcare options as a growing necessity.

This is reflected in a number of industry statistics, namely:

Home healthcare operations are generally led by nurses and supported by physical, occupational, and speech therapists. There are often government subsidies for this type of work.

Would You Do The Job Yourself?

Identifying home services businesses is relatively easy – simply ask yourself “would I do this job myself?” If the answer is no, and someone else needs to come to your home to do it, then it’s a home services business.

There’s a reason that these companies tend to do so well – most people either don’t have the necessary skills to do the job themselves, or they simply would rather pay someone else to do the work. 

It’s for these reasons precisely that the total addressable market of the professional home services industry is valued at roughly $600 billion, and it is growing rapidly. 

The total addressable market of the professional home services industry is valued at roughly $600 billion, and it is growing rapidly.

It’s for reasons like this that, anytime a potential business buyer comes to Acquira asking “what type of business should I buy?” we invariably point them in the direction of home services.

Of course, the list above is just a sampling of the various types of home services businesses. Other types of companies you might consider could include:

  • Deep house cleaning
  • Garden services
  • Apartment prepping
  • Interior decorator
  • Handyman services
  • Solar energy consultant
  • Home energy auditor

The Secret Sauce: Post-Acquisition Growth

A home service business can be an incredible investment if you know what to look for. Oftentimes, these companies have been in families for many generations and are deeply ingrained in their local communities. That means they have a built-in customer ecosystem that can only be improved upon.

One of the fastest and most cost-effective ways to grow a home services company post-acquisition is by investing in digital marketing. Many of these companies, especially HVAC, plumbing, and roofing companies that have remained in a single family for a few generations, have very little digital expertise.

An investment in digital marketing can grow a company’s total addressable market by an exponential amount, providing immense potential.

A website redesign and increased social media presence can attract many new customers. When this strategy is effectively deployed, the hard part is often just keeping up with demand. A systematic approach to this strategy can yield great results.

Conclusion

Buying a business is one of the most effective ways to create an income for yourself while also ensuring your personal freedom. It has the added benefit of being a force for good in many communities. After all, you’re creating jobs and providing a service to people. 

These home services companies are recession-resistant, they have strong community relationships, and they have continually shown immense potential. They can withstand economic hardships while offering an outstanding compound annual growth rate. Finding a solid acquisition target in this industry can provide years of upside growth. For a full breakdown of how Acquira appraises business sectors, we recommend checking out our Best Business Sectors to Buy in 2022 article.

Have you had any particularly positive experiences with a home services company, whether it’s through acquisition or just in your day-to-day life? Let us know in the comments below.

In order to learn how you can acquire a home services company and begin your own Acquisition Entrepreneur journey, give us a call. Someone will get in touch with you shortly.

Key Takeaways

  • Home services businesses are recession resilient.
  • Each of these types of companies has shown immense growth in the past.
  • They also show great growth potential in the future.
  • An effective digital marketing strategy can ensure post-acquisition growth.

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