Responding to Real-World Needs

As the commercial real estate market continues to evolve, we’ve seen that the most valuable companies on the market are not just selling parts, just installing systems, just monitoring, or just doing service work. The companies that are seeing valuations north of 10x are the companies that are providing a full-service workflow at scale to better serve their customers. These businesses have taken ownership of the entire process, from the monitoring company that detects equipment issues and dispatches the service company to the HVAC contractors who install the equipment.

Being a full-service solution means having a fully integrated workflow for the market. Rather than a customer having to go to a different company for each service or need that may arise, a workflow ecosystem increases efficiency and enables one company to provide enhanced tech-enabled services for all needs and by de facto own those additional future revenue streams, which are re-occurring in nature as well.

Providing the Ability to Make Data-Driven Decisions

As the onset of the IoT drives deeper and smart features become increasingly integrated into our daily lives, the importance of data has become more than just your smart TV remembering which shows you’ve been watching. However, the commercial tech space is behind in tech adoption and IoT solutions compared to the home tech space — creating the perfect opportunity for companies to still have the first-mover advantage. Building owners, tenants, and property managers need to continuously make expensive maintenance, repair, and replacement decisions, generally based on suboptimal estimations. This can lead to underestimating the maintenance required (leading to failures and costly emergency repairs and downtime) or overestimating (leading to overpaying for too-frequent replacements or service work). Having those decisions be based on proactive data rather than traditional methods enables higher ROI and greater efficiencies. That’s where taking ownership of the workflow allows companies to adapt to the increasingly technological needs of consumers. Companies that own and maintain the “smart” part of the HVAC system control the data and, thus, the relationships that data may bring. For example, if a company monitors and collects the data produced by equipment in a building, that company will generally be the first to identify any maintenance issues or potential project needs and have a competitive advantage as the proactive incumbent who can recommend the services needed, rather than a reactive party receiving the service call.

Going Green Brings in the Green

The use of data in this space also benefits the environment — a concept that has become extremely important in today’s social and corporate atmosphere. Focusing on being green is a venture that will not only bring goodwill to your brand name but, in turn, carries financial benefits with tax credits and regulations. Going green requires embracing the technology that comes with it, and it is truly an exciting time to do so. A building automation and control (BAC) system can control everything from lighting and illumination to access and security. They can be programmed to shut off lights during certain times of day and control air conditioning units to only flow when the facility reaches certain temperatures. These functions are energy-saving and give consumers the ability to go green themselves which drives future growth for their companies.

Being Sticky is a Good Thing

Adapting to the needs of users by owning the workflow has more than just customer-oriented advantages. More often than not, a traditional HVAC contractor relies on project-based work — a more challenging business model to maintain a stable and repeatable cash flow. Becoming a full-service solution provider gives you the ability to maximize the workflow and capitalize on each step of the process — installation, system integration, remote monitoring, preventive maintenance — positioning your company to generate repeated revenue and create sticky customer relationships. In addition, integrating programming and monitoring into your company’s service offering can maximize revenue and build long-term, sustainable customer-focused relationships that can increase your valuation dramatically.

The Time is Now

As the use of technology evolves throughout every sector of the economy, owning the HVAC workflow enables your company to adapt to consumer needs, push towards environmentally friendly efforts, and create sticky consumer relationships that lead to re occurring revenue. Whether you are ahead of the curve or not, the time is now to focus on growth and integrated strategy to reap the reward of expanded valuations. Even if your business solely performs installation work — the essential base of the HVAC systems pyramid — acquiring and integrating a higher multiple controls business can bring accretive growth and meaningfully increase your enterprise value. Having ownership of each step of the HVAC process, from installation to monitoring, positions your company as a stable, reliable organization that creates sticky consumer relationships, builds re-occurring revenue, and meets the ever-changing needs of the consumer ecosystem.