Why To Expand

Hunter said any successful expansion, either geographically or trade-wise, comes down to three components: systems, procedures, and people. And to develop those components, HVAC contractors really need to know why they are in business and they need to make sure everyone in the company knows why they are in business.

If an HVAC contractor wants to add plumbing just because everyone else is doing it, that expansion is less likely to succeed, Hunter said. But if the expansion comes from a vision of creating something and enhancing the lives in everyone at the company, the chances for success improve.

“What is the business doing that serves that purpose to help you in your personal mission in life?” Hunter said.

There are, of course, tactical reasons to expand into plumbing as well. For one, much of the hard work of starting a business has been done. An HVAC contractor has the customer base, the marketing strategies, and the back-office systems to launch a related trade. Plumbing isn’t seasonal like HVAC work, so it evens out the year. Technicians can be cross-trained, which helps with staffing.

“So if you've got goals and revenue goals, this will help you do that even faster — and it gives support to the shoulder season of HVAC, which is so awesome,” Hunter said.

While getting into plumbing just because of everyone else isn’t a good reason for expansion, Hunter said the fact that competitors do both creates a risk for an HVAC business. So expanding to fend off competitors does make sense.

When to Expand

Once an HVAC contractor decides to expand into plumbing for good reasons, the question becomes when to expand. This decision takes careful consideration. Hunter recommends developing a plan as part of an annual planning event. The firm’s management should go off-site to plan out the revenue and goals for the upcoming year.

If an HVAC contractor does add plumbing, it needs to be a profit center, not a distraction.

“Are you ready for that distraction?” Hunter said. “Is your house in order? Because if it's not, this may not be the right time to expand.” The answer is almost guaranteed if the HVAC contractor has yet to master the initial trade, Hunter said.

If an HVAC contractor does decide to move forward, there are two basic ways to proceed: start from scratch or acquire an existing firm. Hunter started from scratch, but he said he would probably go the acquisition route if he had it to do all over again.

“If you decided to acquire an existing plumbing company in your market, you've got a huge head start. You've already got license holders in place, you've already got labor, you've got customers, you can now market your HVAC business to that plumbing business, and vice versa,” he said. “Plus, you get a lot of operational synergies. You're going to find ways that, where two companies were paying for something, now only one has to pay for it. You're going to find ways to help drop those savings right to the bottom line.”

HVAC contractors also need to consider how quickly they want to roll out their plumbing services. Hunter’s firm had multiple locations when he added plumbing, but he only added it to the location that had the highest market share of the HVAC business. Even then, Hunter said it would have been better to start slower, only offering water heater installation and repair at first.

Who to Hire

Then comes branding. Hunter’s firm had been called Hunter Heating and Air. He changed that to Hunter Super Techs. Branding is really about sharing the story of a firm with its clients, Hunter said. He recommends consulting with a brand expert to determine the best way to do that.

One of the biggest challenges for HVAC contractors who want to get into plumbing is the licensing. Most states require a master licensed plumber at any plumbing firm. This almost always means bringing in someone from the outside.

“This is what tripped me up three times,” Hunter said. “Three times I failed at this.”

Hunter’s first piece of advice is to get the master plumber to sign a non-solicitation agreement. Next, there needs to be a compensation plan for the license holder. This can be either a flat fee or one tied to the plumbing division’s profitability. Finally, an HVAC contractor needs a backup plan if something goes wrong with the master plumber.

There are two types of master plumbers HVAC contractors can hire. One is someone whose sole role is to meet the licensing requirements of the state. This may be someone close to retirement, Hunter said, who doesn’t really want to get involved in the day-to-day operations. The other is someone who does — someone seeking new opportunities. They usually love plumbing, Hunter said, but they hate marketing, billing, insurance, and other parts of the business side.

How to Expand

After all these pieces are in place, HVAC contractors need to start looking at the nuts-and-bolts concerns. What kind of trucks are needed for this new trade? Hunter said when he started his plumbing operation, he bought a fleet of pickup trucks. Then he did some research and found that cleanly laid out box trucks and vans worked better.

Then there’s the issue of what equipment to stock, and that gets back to determining what services to offer. Some services require a major investment in equipment, such as a backhoe. This requires technicians who know how to use that equipment.

HVAC contractors also need to make sure the back office can handle the new requirements. Can the management system break out the plumbing business from the HVAC business? How are the plumbing jobs going to be priced?

These are all questions that need to be answered and details that need to be worked out. But the rewards are there, Hunter said, for those who are willing to make the effort.

The original webinar can be viewed here.