If someone handed you $5 million… would you buy an HVAC business or a security/alarm business?
In this episode of Owned and Operated, John Wilson is joined by Stephen and Collin from the Entry Exit Podcast to debate where they’d place the bet.
HVAC has massive buyers, big platforms, and strong exit demand — but it’s also weather-driven, cyclical, and much less “truly recurring” than most operators think. Security (especially commercial security) can offer real monthly RMR, faster tech upgrade cycles, and sticky accounts — but it comes with licensing complexity, scope creep, and higher-stakes failure points.
If you’re thinking about acquisitions, roll-ups, or just want a clearer lens on what $5M can actually buy in different trades, this episode is for you.
In this episode, we cover:
- The $5M question: Why the “best” business depends on your goal (sleep-at-night vs. build-to-sell)
- Recurring vs. sticky revenue: Security RMR vs. HVAC memberships (and why they aren’t the same)
- Commercial vs. residential: Where security wins, where HVAC wins, and how each segment behaves
- Roll-ups and multiples: What’s getting bought right now and why commercial fire/security is heating up
- Geography matters: Why Texas (and other growth markets) changes the math
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Host: John Wilson — https://x.com/WilsonCompanies
Guests: Stephen + Collin — https://www.entryandexit.co/
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John Wilson, CEO of Wilson Companies
Jack Carr, CEO of Rapid HVAC
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If someone gave you $5 million, would you buy an HVAC business or a security business? I'm planting my flag security industry all the way. We're getting very close to where our service is going to outpace our project work, and that's a place that we want to be. That's beautiful. If you're looking at a $5 million purchase price, 50% reoccurring, I feel like I would sleep better than I would buying a $5 million purchase price.Hvac. What's ebitda? I would say it's maybe 800 K. So like what? What's some, what's some shitty stuff? Because right now I'm leaning security. I mean, there's just.Welcome back to Owned and Operated. I'm your host, John Wilson. During the day, I run a large plumbing and HVAC company out of Cleveland, Ohio. And for fun, I run a podcast where I talk to my buddies about how to grow their businesses. It's a ton of fun. Today I have my good friends, Steven and Colin on from the Entry Exit Podcast where they talk about growing their security and alarm company in Texas.Welcome guys to the show. Thanks for having us. Happy to be here. Thank you. Yeah, this, this will be, this will be an interesting one. Um, it's sort of like a, a head-to-head, you know? We'll, we'll, we'll see how we feel, but what we're gonna be diving into today is if somebody gave you $5 million. Uh, which first off, I'll take it.Excuse me. Like, I'll take, I'll take 5 million bucks. Yeah. Uh, yeah. If someone gave you $5 million, would you buy an HVAC business or a security business? Hmm. Don't get me in front of the whiteboard. I'd have some, I'd have some things to write down. This is, uh, this is reminiscent of Steven and i's, uh, first meeting before we purchased ALARM Masters.'cause I went through this very exercise to explain why, uh, I would, I'm all in on the security industry. Um, Steven can kind of share some of the details of what we wrote on that whiteboard. But, um, as expected, if I had to put my chips all in, I would go chips all in, in the security industry. I think there's a lot of great things about every industry, ups and downs, pros and cons to each one.Um, and maybe familiarity plays, plays a big role into that. I think you're good at what you know. Um, mm-hmm. Yeah, but I'm, I'm planting my flag security industry all the way. I would specifically say commercial security, which I think is, yeah. You know, we, we do have about 80 20 today, so about 20%, um, of our customer base is residential.But as we continue to, you know, we're three years in, you know, we. Really just heavily focused on the commercial side of our business. And so I would say, are you buying a residentially focused HVAC business? Are you buying a residentially focused security company? Is commercial, you know, in the mix on that.Um, I think that changes, you know, how I might think about it, but overall I would kind of debate. Along the lines of recurring revenue and the percentage of your revenue that's recurring. I mean, I know the membership model has gained some popularity in the home services space. Yeah. But you're, you're still, I don't think it's anything like security.No. It's, I mean, what are you touching 10% of your total gross revenue and membership? Yeah. I think there's a good, a good moment to like, sort of define both industries. Yeah. So for hvac, most people are gonna be talking about residential. HVAC service and replacement. Uh, there is a mem there's a membership component, but it's probably like 20 bucks a month.Yeah. What we find is that the recurring revenue from that is not very significant, uh, like 1% or less of revenue. Um, but what it does do is it, it allows for like reoccurring revenue to happen from that because the comp the customer calls us, I think very similar to sticky to how corporate works for you guys.Yeah. Um, so the membership fee is like 1% of revenue, but the revenue driven from our members is like 60. Mm-hmm. So it is an overwhelming number driven by a sticky customer, um, which I, I think is probably the same for you guys. And so, so your distinction here is, uh, there's residential security, which, you know, we, we've had you guys on the show before, so maybe we can ping the other episodes in our, in our notes here.But, um, there's residential, which is like. I don't know. I've, I've got some alarms on my house. Um, probably super competitive. Really rolled up. I would imagine like pretty, just a couple big players. Yeah. Yeah. Yeah. That, that's how it feels as a consumer. Um, and then there's this commercial side, which is new builds.Like we're putting in a new security system or someone's remodeling a building, they just moved in. Whatever we gotta put in access control, cameras monitoring, um. Or those different fragments. So, so you're, you like the commercial side, which to me makes sense. Um, yeah, I would say the magic is in both the way you guys describe this for us.Like we, I, I, okay. I want to, we place a bigger priority on growing the commercial segment. We want the majority of our revenue to come from the commercial segment, but we do not shy away from residential and we love residential when it comes in. And we love the customers that we have that are residential and I think that they're.I think there's a lot of value in marrying both together, given some of the seasonality differences between both. They have a very weird, like when it's low for commercial, it's high for residential. Uh, and so the other thing about residential is it's pretty consistent from a service perspective. Um, but they're also tougher to collect on.It's harder, you've got more emotions, it's their home versus on a commercial side, it's usually autopay or auto check, a CH, whatever. So there's pros and cons of both. Yeah. We specifically want to target. Yeah, our sweet spot is the commercial. That's kind of how our organic growth strategy and our inorganic strategy works.But honestly, we like both. And there's a lot of companies that will go and roll up and they get a segment of, you know, 20, 30% of their businesses, the residential, and they sell it. Because they wanna be exclusively focused on commercial, and I think that's a path. But for us, the beauty and the magic is in both.They compliment a little bit, um, each, each other. I think it's kind of like a diversification strategy, if you will, from a, um, revenue perspective. Yeah. So I, I like both. Um, but, but yeah, we, we focus a lot on the commercial side and oftentimes the. Uh, it, the residential customers are also, you know, clients on the commercial side, and so that creates a little bit of stickiness there.Little that makes sense. Greater LTV. Um, so it just, it kind of makes the switching costs that much. Worse for them. For too long, I was letting the wrong marketing agencies set my money on fire, and their marketing looked pretty good. On paper, the reporting was attractive, but at the end of the day, it just wasn't driving leads.That's why I started using service scalers at Wilson Service. Scalers is a marketing agency built specifically for home service companies. They focused on the channels that actually drive leads, like targeted PPC, local service ads, SEO, Google Business Profile, so that you're showing up. In front of your customers that are actively searching, they'll help you see exactly what's working, so you stop wasting ad dollars on low quality leads.Right now they're doing something crazy and they're giving the opportunity for one entrepreneur to get up to 12 months of marketing on them, so that's up to a hundred thousand dollars in services for the right operator. If you are serious about tightening up your marketing and 2026 and want to see what this could look like for your business, go to service scalers.com and book a free strategy call and let 'em know that I sent you.We're a part of this like local, uh, small business networking group. They have lunch every Thursday or Wednesday or something. And there's a, there's a security business in there. Hmm. And my, you know, we've been a part of this group for like 30 years and, and my dad texted me like a month ago. He's like, Hey, like, I think these guys wanna sell.And I thought of you guys, um. Uh, he's like, do you want it? And I was like, I mean, no. Like, I mean, if, if we had a platform, sure, but this is like a two tech operation. I don't even know what I would do with this. Uh, but it's a good example of exactly what you're saying, where, you know, my dad's used these guys for like 20 years.It's in his house. It's in every real estate rental he's ever had. It's in some of the commercial buildings. Mm-hmm. Um, I don't know how many accounts he has with this security business, but it's, it's quite a bit. Yeah. No, I think that it's great. Yeah. I think also the beauty of it, um, in the commercial side is the barrier to entry is a little bit higher on residential, so you have to have licensing for both.Right. So like, no matter what, you have to have a, a security license in, uh, in Texas to be able to install service or even market. Yeah. Which is an interesting nuance about the security industry. You can't throw up a webpage and market and try to sell and then try to, yeah. Farm those leads out to a security company.In order to market, you have to have your license. The difference though, is if you get the license, the same license applies to both commercial and residential. But because of where residential is with all the DIY stuff kind of coming in the, the work complexity is pretty low. So you get a lot of competitors that are, like you just said, a two tech or one tech operation that does a lot of the Sure.The maintenance and the service for your home. Versus the commercial. It's, it's big. There's a lot of devices, there's a lot of like, critical operations, and it makes up a smaller percentage of their income. Right. So like if you, if you think about what $50 a month is to a homeowner versus $50 a month to a commercial, they're just not, yeah, they're not, they don't need the, the switching cost has not, is just.Inconvenience for them, right, to save $5 a month because they found somebody else. So there's some interesting nuances between both, but you're absolutely right. Like we, we uh, we tell customers that come through that are shopping for residential, Hey, we're not the cheapest, never gonna be. Uh, but when you look at things from a total cost of ownership long term from who's servicing and the quality of the install, like, we're gonna win every single time.But where we really target and where we love it is we go do a. Commercial installation. And then we give everybody that works there a month free of monitoring. So we say, if you wanna switch over to us, we'll give you a month free monitoring. Oh yeah. And it's just additional, uh, you know, recurring revenue that comes into the business and, um, they know who we are.Right. Like, I think people wanna work with people they know and so I think there's some, some benefit there. Yeah. Can you remind me how much of the business is currently RMR? Like what percentage of revenue is? Yeah, so we, we would define RMR as just our subscriptions. And Steven can hold me accountable to this.Yeah. But I think we're sitting right now at about 35% of our total is RMR. And then when you talk about reoccurring, so that would be service plus. Our subscriptions were like over 50%, so probably like closer to 60%. And the balance is like new builds. It's funny, it's, it's really not new builds. So we would say we specialize in renovation or retrofit is what we would say.So it's a lot of, um, existing customer. I just moved in, we need security remodel and that applies for both commercial and residential. Okay. Okay. So that makes sense. Alright, so 35%, that's a lot, you know, uh, just in comparison to HVAC, like 1%. Uh, now I think the total dollars is roughly the same as far as like probably 50 to 60% of revenue comes from the member group.Uh, but 35% of yours is like shows up in your bank account every month. That's, yep. And that's incredible. And 90% of our revenue comes from our subscribers. So only 10% of our revenue That's crazy is coming from a new logo customer. Yeah, I mean that, that would be, uh, the headlines for HVC are kind of funny.Uh, there's a really great, um, like blog news blog called, uh, home Pros. Where they talk about the HVAC industry, I think they have a plumbing segment, but I, I don't know what it's called. Um, but it, it's a fascinating read if you ever want to just like, feel bad for your friends in HVAC because like 2025 was, uh, I mean the headlines are just outrageous.It's a hard year. Oh, it's crazy. It's like 40% less equipment shipped all of the, you know, Lennox and Carrier and train. All these big public companies are just like, it was a shit show. You know, we did layoffs for the first time ever and it's just like, oh my God. Uh, and I'm saying that 'cause I'm thinking about this like, recurring thing, uh, this, and I think that like, that would be, a lot of people would've pro probably preferred that, right?Sort of this. Hey, 40% of our revenue is just coming in on the first of the month. Like that sounds great. Yeah. Uh, versus like, you know, a weather driven, um, sales driven process. That's okay. And like very sticky. Yeah. Particularly on the commercial side. Yeah. Yeah. All right, cool. Let's dive into this a little bit more.So. Security versus HVAC security's being rolled up, right? Just not with the same fervor of hvac. Yeah, I would say it's, it definitely is getting rolled up and I would say there's a lot that it used to be. It's funny, if you would've asked this question 10 years ago, it would've been. Everyone wants to buy residential accounts.That's like the hottest of hotness. Sure. Was residential accounts and now it's flipped. Yep. It's really commercial security and, and commercial fire alarm is the two fire hot, like Yeah. The biggest multiples. That's what they're trying to roll up and we actually see more roll up. The commercial security and commercial fire alarm industry are, are very, uh, intertwined.And so as a result of that, yeah, you're seeing a lot of companies getting rolled up on the commercial fire alarm, but that as a result, 50% of the revenue is also commercial security. So by default there is some roll up happening in the commercial security play. There's not a tremendous number of people Yeah.That are rolling up exclusively commercial security and not looking at fire as well. And so we're at a little bit of an advantage here. Um. From an availability on the commercial security side, but on, but, but again, it, it, it's all just a matter of time because a lot of these companies that are private equities that are rolling up the commercial fire, they're starting to see the value in the service work that's coming from commercial security.And so now they're buying some accounts too and pulling them in. So I think we're gonna see a bigger wave of that coming very soon. And honestly for us, that's sort of our thesis is, um, it's happening. There's definitely rollups happening. It's just not to the extreme that you see in hvac. Yeah. But what we've noticed is, yeah.What's funny about in the HVAC industry is so much of y'all's revenue is obviously service work and not new build. Obviously, I know you do new build too, but like the service work is a big piece of what y'all are doing in our industry, right. The service work is. An afterthought. People don't want to target this.They think of it as a, a nuisance. I don't, if I could get rid of my service department, I would. I can't figure it out. It's too hard. They're really focused on recurring revenue and project work, and that middle ground is just to retain their customers. We're the opposite. We are exclusively trying to build.Yeah. I would love and we're getting very close to where our, uh, service is going to outpace. Our project work and that's a place that we want to be. Yeah, that's, that's beautiful. I remember thinking this like five, six years ago. Uh, I've changed my perspective on it a lot over the years, but you know, earlier we mentioned like home service versus security.I think people tend to like go, I think you could say home service versus anything really. People tend to navigate towards home service. And, and I know I did too. I, I think it's kind of a mistake. Like if you look at landscaping, uh, that's a great example there, there was a few other ones, but yeah, landscaping is like residential landscaping kind of sucks Totally.But like commercial landscaping is the shit. Yep. Uh, and I think just like getting really tight on like which side of the market you want to be on. I, I also do think h HVAC's crazy, right? So I don't know if you guys saw this, but yesterday. The largest investment in hvac, uh, yeah, was announced it was two and a half billion dollars.It's the largest platform sale. I think the previous largest was 1.8 or 1.9. Uh, so it was a almost a 19 times ebitda. Um, let's go, you know, a hundred insane, 40 million of ebit. Yeah. It's insane. It's insane. Yeah. And it was Blackstone, so, so Blackstone came in and, you know. Planted a flag, uh, which was pretty interesting.The, the other one, uh, previously was Goldman, so like big names. Yeah. Really entering the space. So I think what a lot of people are looking for is like one, what is the next one? And I keep hearing about more and more, like I'm hearing about like remediation is going crazy. Roofing seem to have a thing there for a couple years.I don't know if it's still crazy hot. I'm sure there's others, but it, it, it's, we're, we're like trying to find it. But the, the one I found interesting, I might have said this on the show, but landscaping specifically, there was a, uh, a, a buddy of ours got a 10 times on 500,000 of E. Wow. Whoa. Yeah. That's crazy.Uh, yeah, we could have, we could have bought that with our 5 million theoretical, 5 million. Yes. With our Yes. Yeah, yeah. Yeah. We could have, we could have. Yeah. No, it was, it was unreal. So, um, so I'm all, all that to say, I'm sure that like security becomes more and more invested in, 'cause what it feels like after, especially after seeing that like LOI of the landscaping company.Is like, how does that make sense? Right? Like, how does a 10 times and 500,000 make sense? You, you either have to like come in and completely remove the labor force and do like lawnmower robots, which I think those exist now. Or like you are trying to make the biggest bet you possibly can into things that AI won't disrupt.And it feels like home service had this like COVID bump. Yep. Or home service. I don't mean just home service. I mean like. The trades in general, which I would include security in, correct? Yeah. So like I, we had this like COVID bump and then now there's like an AI bump where like, hey, the numbers are remaining irrational because we look SRT by ai.Like someone still has to unclog a toilet. Someone still has to install the wire for your security system, correct. I mean, someone literally has to build the AI centers. That's right. Like, it's like almost the greatest example of like GDP growth is purely coming from, we don't have enough electricians to build our AI centers.Literally, there's like a huge labor shortage in that industry. Like I was actually reading about that. It's hilarious. Yeah. Yeah. It it's a wild, it's a wild problem. It's like generators and HVAC and cooling and plumbing and, and they're like to build ai. Unbelievable. I know a guy who worked at a security company.He was a large, uh, he was like their COO, one of their biggest segments was data centers. He left, started a security company and they exclusively work in security and fire alarm and fire sprinkler, all in data centers. And they, and, and it's what's wild is he said for them it's the price is literally not a question.It's all about speed. Who can get out there the fastest? Yes, it's fastest speed to lead. So he's got guys that like, they'll literally get a call and the next day they're mobilizing a crew in New Mexico or whatever to go build it. And that's all they focus on is data centers is pretty wild. Yeah, so, so maybe, uh, your industry gets even hotter and hotter over the next couple years 'cause they're, yeah.The only thing that makes sense to me here is someone's got a thesis on robots or they're trying to find somewhere to park money that AI can't touch. Yep. Which I mean makes sense. Like I think AI is, uh, it's eating the world right on top of that, like you have. What, what is the business? Is it disrupt?Well, also where is it? Right? So we talked about like, yeah, 5 million bucks. So while buying an HVAC company, residentially focused in Cleveland versus DFW versus Tulsa, right? Yeah. Um, also has different dynamics. Same thing, like for us, we are really not surprisingly, you know, very biased on the Texas triangle.Yes. And we think it's the greatest place in America. To build business and, and do a roll up and like, we just think it's the best. I think there's a lot of good data to support that. So that $5 million, you know, where Yeah. Where are you gonna deploy that and, and into what? I think the geography and demographics are a huge part of the answer to that too.I would, I would almost imagine that's even more important for security than it is hvac. Um, 'cause like you need businesses and you need businesses growing. Yeah. And, um, I met a guy, I met a guy a year and a half ago. He's a $30 million plumbing HVAC electric business in a town of 30,000 people. And I have never heard of that.See, the only plumbing, electrical waste saturation in my life is is, is it, uh, is it a luxury market? I don't think it was highly luxury. It's like western New York. It's, it's like near Buffalo. It's disgusting. It was crazy. Yeah, it was crazy. I love that. Uh, no. Yeah, me too. And I, I think we had someone on the show maybe six months ago, and they're just south of Toledo.They're a $10 million business and. Maybe like 15,000 people in that town. Uh, now granted your upside is absolutely capped, but I mean, they're, they're producing, which is I think, really interesting. I think for security. Well, for any bus, I agree, like the more population the better. But I, I think as far as like impact, it probably impacts you guys more than like an HVAC plumbing business.Just 'cause everyone's got a furnace. Uh, but not everybo. Not everyone needs a security system in business if there's no businesses there to serve. Yeah. The difference with that would be on the fire alarm side. And that's one thing why folks really like fire is you are required to, to have a certificate of occupancy, you have to have a fire alarm system.In fact, they take it so serious, at least here in Texas that. For every, for any time that you go past 12 hours of your fire alarm system not being monitored, you have to have what's called dedicated fire watch, where somebody is standing and watching to make sure there's no fire so they can call 9 1 1.So there is a lot of that. One thing that I think is an interesting nuance about security that I love, um, is. It is technology. So it, there's some pros and cons to that, right? 'cause the technology is always evolving, so there's some investment in having to learn the new standards of technology and how they apply to physical security.Yeah. But, but on the flip side of that coin is this technology is cycling over. So if somebody has a camera system for five years, and it's the same camera system that that. They're usually gonna be replacing that. We, we think, we see the, the cycle time is about three and a half years on average for security products.So even if you have an existing business, yeah. Theoretically, if there's. Three or four scopes of work in the physical security industry, you're, you're cycling one of their physical security products every year to year and a half no matter what. Yeah. And so it's not on this like, just break fix model.It's like, hey, they may need something. Right. So we, we have retail customers who now with ai, they can do hotspot analysis with their cameras and figure out where people are, you know, like hovering and staying and so they can make business decisions. They're wiping out all of their physical security cameras that they just installed two years ago.To get the hottest thing with AI that's built into it. So there's a little bit of a technology driven business decision. Um, that's interesting. Yeah. Demand that happens there that I think is unique to the industry. People have tried to do that type of, uh, deployment into hvac. It doesn't seem to work. Hmm.Uh, like there's like monitoring and like some companies do it, but. I mean, it, it wouldn't work nearly as well as it would on a commercial facility. We're like, Hey, you know, fuel is a $500,000 line item. Like, yeah, we're gonna put some monitoring on that. Uh. If, if a customer's like engineering focused, maybe they want it, but like for the most part, like, I don't, I'm in the industry and I don't give a shit what my HVAC equipment's doing.Right? Yeah. Right. Like I wouldn't, I wouldn't wanna monitor it even if I had the tools to do it. Uh, so I, I definitely think that is a, that is a big difference on, uh, we've got some big, like revenue stability. I think we covered that a little bit with. You guys have 35% just like coming in like that feels way better than hvac, which is gonna be weather driven, weather enhanced, however you want to think about that.Yeah. The technology changes or adaptations are probably good for you. So like your example of, um. Like, Hey, this new camera came out, so we're gonna install a bunch of 'em. Like, that's a good thing. That's a win. Uh, the counter to that in HVAC is they just changed refrigerants and it was an absolute epic level shit show, uh, that I think even has like Congress talking about, like, do they delay the deployment of this new standard?Yeah, because it, it just flopped so miserably. Um, so like no one won in that scenario, like nobody. Mm-hmm. Uh, whereas like technology changes or like upcoming things are, are wins for you guys. So revenue as a whole feels less spiky. Does that feel fair? Like Yeah, I think for sure, especially on the, uh, especially on when you're doing a lot of service focus for a lot of these companies that are very project oriented.Yeah. They do feel the spiky nature of, um, the revenue. The other thing I think that's important to call out on the flip side of the technology coin is, and this is something that I actually think is a chip in the bucket of, you know, hvac, plumbing, electrical, your scope of work has a defined. End point, meaning you go in because the toilet's not flushing.The very end is, does the toilet flush? Yeah. Does the, does the water run outta the faucet? Does the electrical out? Like is the power back on, is the HVAC blowing cold? Yeah. In the security world, it's very blurry. And the reason why it's blurry is, is it doing everything that the customer's expectation. Was from the beginning of the sales process.And so that could be something like in their brain, they wanted to get these cameras to pick up license plates and yeah, you, you could use these cameras to pick up these license plates, but you didn't communicate that. And so then at the end they're like, well, I want to have a list of all license plates.Well, it's like, well, you didn't. Pay for the specific license plate camera. And so there's this like, okay, this tension of, so that's where you have to get scope of work has to be really tight. And also training has to be tight. Yeah. 'cause if they haven't been trained on the thing, then they feel like the feature doesn't exist.And it's like, well no, it does exist, but you gotta read the manual. Of course they don't wanna read the manual. So there's, there's a little bit of like a gray area. We call it the last 10%. It is the hardest part of any project is, yeah. Did you get the closeout and the sign off from the customer saying, this meets everything part of the scope of work and I'm gonna play pay you that deposit at the very end versus, and, and I'm just making the assumption from being a consumer is like when my plumbing guy comes and my toilet now flushes, I don't really know what he did.I just know that it's fixed and I'm happy that it's fixed and I'm happy to pay the bill because it didn't work and now it works. Mm-hmm. So I think that's one interesting nuance about technology specifically that, uh, is unique to our industry. Walk me through labor. How does labor work? There's just so much of it.It's just so readily available. We just never have a problem with labor. It's so easy. It's never. It's never been an issue. We're drowning in candidates. Yeah. We're, uh, it's, it's, the traits is, yeah. Is this like low voltage, is that typically like people with low voltage experience, is that a good candidate or like who's the ideal candidate for you guys?Yeah, you said it low voltage and, and usually they have some level of fire and some level of security experience just 'cause those, again, those two industries are, are mapped and Yeah. Um, it is. Very challenging to find good sources of labor. I would say being in a major market or tangential to a major market is beneficial to that.So we're in Houston. Yeah, that would help. Yeah. Um, so we find that that is helpful. Uh, the other thing that is a benefit to us, especially on the project side is um, we don't take use this as much, but there is, that does free up labor is there's a lot of subcontractors that are out there that exist. So for companies that are.Yeah, ramping up for a project and then coming down, they can leverage more subcontract labor. Uh, they pay a premium for that obviously, but, um, it does exist, but that kind of indirectly frees up a little bit of the free, which versus I, I would imagine it would be challenging if you're an hvac. Yeah. To send a contract technician just for a simple service call.They've never been out there at that location or whatever. Yeah, I talked to a lot of home service business owners and if you are anything like the many shops that I know, you're getting flooded with AI pitches right now. Most of 'em sound great, but then they fall apart. The second they hit the real world.The one that I've kept coming back to is Avoca. What impressed me is they actually get how contracting businesses run. And it's not just some AI answering service. Avoca is going to handle inbound calls, outbound follow-ups, texts, web leads, dispatching, and even coaching your CSRs inside of one system that's built for growing home service companies.And if you're on ServiceTitan, this matters. Their integrations go deep. So you're not duct taping five tools together and hoping nothing breaks during your busy season. I also like that they're honest about what AI should and shouldn't do when a call needs a human. They have a 24 7 live transfer built in, no drop balls, no awkward customer experience owners using Avoca are seeing hold times, basically disappear and booking rates.Sometimes by more than 30%. And that is real revenue, not just a vanity metric. If you're looking for the one AI partner that actually helps you book more jobs without creating more chaos, this is worth taking a look. Book a demo at the link below. Yeah, it wouldn't land. Um, there's, there's like Tradesmen International was around, uh, so.I think on like big commercial applications. That makes a lot of sense. Yeah. Um, but yeah, like some dude's house makes a lot less sense. Um, I think some of the, we probably have like the same challenges with hiring. I think one of the challenges with hvac, um, it's actually if, if I compare it to like other industries, it's not that bad.Hmm. Uh, like landscaping or power washing. So there's a, there's a power washing company up here in Cleveland. And, um, I don't know if they're still the largest, uh, but at one point they were the largest in the us. Uh, like $40 million of power washing one increase one business. It's crazy, and I think 11 or 12 locations, but in the spring they have to hire 400 people to go fucking power wash and train 'em how to power wash.And then in the first 30 days, they expect a 50% attrition. So they go from 400 to two. Insane. That insane, painful. And then over the dude, it's, it's miserable because I like, I'm about to describe hvac and I'm like, it's nothing like this. Right? Yeah. Or like landscaping I feel like is similar. Yeah, it's very summer.A lot of companies, a lot of companies up here, like, they just do layoffs for six months. So like, hey, you're working for six months, you're laid off for six months. You're working, you're laid off. And that's just how the business works. HVAC is, is nothing that extreme. Um. It's like a, you need like 30% more staff during the summer than the winter.Uh, and like there's a lot of strategies in how to, we've done a few episodes on that of like, Hey, do you actually need 30% additional staff or are there ways to drive 30% more output through your existing staff? And that's what the best operators tend to do is, um, just drive more through their existing.Process. But yeah, obviously like labor, I think for any trades business is a challenge. Do you guys see that? Like are people attracted to security, like young professionals? Yeah. I mean it's um, not as much as we'd like. Yeah. Um, I would say, but there are some programs even at like local universities. Um, yeah.You know, things like that, that are encouraging, like directionally speaking that, you know, I think people are aware it's like a large industry, but if you look at like our average age technician, you know, overall, like we still, you know, are, um, older than we'd like, um, but you know, when you're trying to do really high quality work.And we're, we have over the last few years gone further and further up market, and so that just requires a level of skill and experience typically. And so we're trying to like, train people up, but yeah, not, not as young, uh, as we'd like as the, the average age of our technicians. One of the, uh, that might be an advantage for HVAC is like there's just an interest in it.And I think it's big and it's known. Yeah. Um, there's a lot of school programs. There's a lot of high schools, a lot of trade schools with a big focus on it. Um, I think our average age is in the twenties. That's awesome. High twenties, but twenties. Um, which is, yeah. It, it's kind of annoying to be honest.Like it's good and bad, but it's annoying 'cause like, I'm not. I'm too, I'm telling this to myself. Uh, and you guys have to agree 'cause you're gonna be nice to me, but I'm not that old, right? Like, I'm like 34. Uh, thank you. And so I'm like, I'm not that old. I'm, I'm one of the oldest people in our freaking business.Like there's one person older than me in our senior leadership team, eight people. And I'm like, okay, when the hell did this happen? Uh, that's cool. A little. It's a, it's good and annoying. Uh, and then, yeah, in, in the business average, like I'm above, I'm four or five years above average age, which is kind of, kind of crazy.Alright. Licensing or like moat, I guess would be a better way to say this. So, so for HVAC licensing is a moat. Well, depending on where you are, there's some places that you don't need a license for hvac. Uh, wild West. Yeah. Tennessee. There's like essentially no licensing in Tennessee, which is kind of funny.So all the PE firms stand up a branch there 'cause it's, yeah, it's easy. Yeah. You know, there's, there's no moat. Um, there's licensing, there's uh, you need something to touch refrigerant. There's like some EPA licensing. You need What, what is there like that on security? Yeah. We, we have, uh, really. Um, there's a lot of different types of licenses, but there's two primarily that you need.Yeah, you need a, uh, private security license, and there's a lot of things that fall under that bucket. Like you could do security guards, we, we don't, but that is the same license. Um, and so underneath that license enable, enables you to do what they would say all of the physical security scopes of work.So that would be video, uh, access control, card readers, burglar alarm. Um, it allows you to do all three of those scopes. The other one would be your, uh, fire alarm license. And so that's a separate license for, and what's interesting is there's an individual in a, in a business license, so the business has to hold a fire alarm license and a, and a security license.The technicians have to hold Yeah. An individual license for the security. For the fire. But the difference with the fire is there's multiple levels of individual fire licenses that you have to have that allow you to do some different things. So there's like a residential fire alarm license, and then there is a commercial fire alarm license and there's one that does both.So it's a, it's a combo license, and then there's one that's like a senior fire alarm. And so there's, there's some different levels within the fire alarm. So there's a, a big moat from that perspective. One thing that switched big time in our industry, which was great. For us is a lot of IT companies and AV companies used to do video cameras as sort of a like IT technology.Yeah. And then, uh, Texas Private Security Board said, Hey, no longer can you do that. You have to have a, uh, secure private security license, which was great for us. It created Moat, um, interesting. And made it a little bit more challenging. The, the other thing that's happening too, on the access control side is the access control now has to be inspected and tied in with the fire marshal, um, inspected by the fire marshal.And the benefit to that is you now have to. Pull in fire. And so companies that do both fire and security end up getting a lot of the access control work. Yeah. Um, because they have to be familiar and has to be tied into the fire alarm. So there is definitely some licensing hurdles to jump over. Um, but yeah.But sounds like it, I mean, especially, especially with fire, that's, it's crazy here too. Fire is like its own, there's like the government and then that's, there's the fire. And like there, it's kind of wild. Yeah. And I, we had no idea when we were supposed off. Dude. It's, it's like down here, I don't know if y'all have this like, uh, game wardens, it's like the most powerful government.They can come onto your property Yes. For any reason that they want to come onto your property. Oh yeah. That's fire. Here's it's for fire fires can do, they can do whatever the hell they want. Yes. And the fire marshals can literally dictate. Like there, there's a code. So there's a standard shut down. Yeah.It's called NFPA 72, which basically says, Hey, this is the state level code for fire alarm systems. And then the AHJs get what's called a local interpretation of that. And so their local interpretation of that could mean anything. They could literally say, yeah, I know that the code doesn't actually require a smoke detector in this room.We're requiring that and we will not give you your permit if you don't have it. Yeah. And there's no justification needed. Yeah. That's crazy. Yeah, that's funny. Um, you know, something that my industry was like kind of butt hurt about like six, seven years ago is the security guys. So this is kind of funny.We can, we, we will dive in, uh, but every, you know, smart thermostat started becoming a thing and like the interconnected home. Yeah, and I, I just remember like everyone was like, all these security guys are gonna start messing with my HVAC systems. Like, is that a thing? Like I would assume it kind of is, right?Like the interconnected home, like you're tied a little bit in, but not that much. It is a thing, especially because we would call that home automation. And for the, yeah, security, residential security companies that are really doing residential security. That's actually the biggest piece of their revenue.So there's some, they're selling the smart thermostats, the hvac? Yeah, the smart thermostats. They're selling the a AV stuff. Interesting. The home locks, the garage door opener. Your sprinkler monitoring center like or monitoring station like they want. All of the pieces of technology that can be interconnected.So you see, just like in commercial security, you have a fire element tied in. Yeah. In the residential world it's tied in with home automation and or uh, av. Right. So you see a lot of AV security residential companies that do both because they're kind of interconnected. Interesting. So they were right. So they were right.You guys were coming for our lunch. I don't let my technicians do it because I know we're gonna screw something up with a thermostat. So I'm like, do No, we do not do that. We do not do thermostats. Call your HVAC company. And that's the last thing I wanna screw up. Well, I mean, maybe the answer is, uh, hey, if you have $5 million, right?Maybe you do both. I think that's, that's where I was coming from is like, is there a play for like a commercial. Uh, HVAC business that ties into the monitoring. Um, 'cause I think commercial, hvac, honestly, a lot of people got into it last year with how depressed the residential market was. So they pushed deeper into commercial because it's similar, like big re recurring maintenance contracts.There's monitoring the businesses care less about the dollar or the sale. Yeah. They just want the equipment going. So yeah, I think it's a big part of it. Give me some bad. Because right now I'm leaning security, so like what, what's some, what's some shitty stuff? Life safety like Yeah, just the, the pressure of it.There's just, yeah, there's, because if your fire system doesn't work, like more on the line, you know, like, oh, I'm sweat like Texas, you know, like, yeah, I'm sweating, I'm hot, I'm angry. Wife's angry. Yeah. No one's having fun. Right? Fire alarm doesn't go off at a K through 12 school. Right. Yeah, different levels of risk, different levels of, uh, yeah.You know, just at any given moment you could get like a pretty bad phone call. Yeah, that makes sense. Yeah, I, that's a really great point. Um, particularly on fire alarm, you see, and commercial security, because they. Don't need security until they need security. And so their level of desire to fix a broken alarm system when the keypads beeping and ignoring that for six months is okay.They don't care. And then when they get broken into and then something gets stolen and the alarm system didn't work, there's a lot of frustration that's like, Hey, we've been notifying you that your system doesn't work and you've been rejecting the service call, but the perception is the reality of the customer.And so that's, that is tough. I will tell you like. My biggest pain point is what I described earlier, which is the like a non-binary finish of the work. So like this scope and you can have the tightest scope of work. Um, and I would say we have project managers that have the highest level of communication in our industry.Daily touch points. Insane levels of communication. And there's still a struggle at the end. Not for every customer, but a lot of customers. And that's hard. And then I would say the other thing is there is some commoditization on certain elements of our industry, particularly in the video surveillance and in the commercial, uh, burglar alarm, because a lot of that.The, the video is very DIY driven now, so there's a lot of DIY solutions for video. Yeah, there is DIY solutions for alarm that's less permeated into the commercial space a little bit. Um, but the, but everybody posts their prices online and so it is very easy to go shop and get low balled, uh, on the monitoring side.You know, I would say that we don't try to drive our value on being the lowest price operator, but it is can be frustrating. Um, because it does cut you out of Yeah. It's a part of puzzle and it's like, I don't know. I would imagine most HVAC. And, you know, uh, electrical plumbing companies are not posting their quote labor rates on their website.So like, it's gonna require, um, a customer to call y'all and say, Hey, what's, and they're just like, oh yeah. And you're, they're just gonna say, yes. Yeah, let's get it. I'm done. I'm on the phone. I don't really wanna call and shop around. Versus on the website, it's, it's on five your websites. They can go and just select, oh yeah, sign me up.You know, so there's a little bit of commoditization on some elements that I think is tough. Uh, I think too, like HVAC versus security. If you take from, like you think about it as like total addressable market or like 100 potential jobs. Yeah, yeah. You probably have more, uh, more scenarios where someone will lean to a DIY fix or try to do it themselves and security for security.Yeah. Than you would on the HVAC side. That's, I would assume, um. Obviously you've got, you know, handy Andy out there that's gonna just try to do everything. Yeah. But, um, I think more times than not security probably. Um, loses out on a job because someone decided to watch a YouTube video and wanted to figure it out themselves.I think that makes sense. Like we've done, uh, in our buildings here, we've done a mix. Like there's a security company we've used down the road, and then we've also, like, we have someone who's like tech friendly and like figured out Yeah. Videos. Yeah. Um, so like, I, yeah, I think that, I think that resonates.It is, it is funny when that comes back around. I actually kinda love that. Like, we had this church that, uh mm-hmm. We had. Personal contact at and they're like, Hey, you know, actually thanks for the quote, but we have this guy yeah, who's like really into this stuff and he's gonna do it. And then six months later we get a phone call, Hey, can you, Hey buddy, can you come back out?So that's funny. It doesn't always work out. Yeah. That's funny. Yeah. I mean, it, it's the same with, it's the same with plumbing and Yeah, but like plumbing has a lot more DIY electric, like people don't like touching their electric and people don't like touching their hvac, but plumbing is apparently the thing that people are like, let's full send this.And, uh, it's just water. It, it, it can make for some, it can make for some comical phone calls. Yeah. It's, it is plumbing up to gas that, that's like, okay, I won't touch gas. Everything else. Gas is the least destructive of the different things that you could deal with in plumbing. Yeah. Um, that's funny. Um, I think, okay, if I had 5 million bucks, I think what I would be, I think it would depend on like what's my motive.I think one of the advantages that HVAC has, if I go back, you know. I don't know, 20 minutes is there are, and I know that this is the same with security too. I just don't know how it works and maybe you guys can educate me. There are big buyers spending a lot of money for an HVAC business. So if the goal is like build it and sell in five years, it may be maybe that, because it seems like the security business is still like maturing on that, whereas like HVAC is mature.Um. So I, I don't know what your reaction to that is, but I think from like, if I'm gonna own this thing forever, I, I really like the amount of revenue that's coming stably from this recurring model. Like, I think that's amazing and I think that like basically covers your freaking overhead every month.Like that sounds incredible. Uh, yeah, I mean, that sounds incredible. Um, I think a $5 million. Purchase price of security business. Yeah. Of one that we would entertain. Like obviously there are people that are like, we only do multifamily new construction, and that's, and it's just very, yeah, yeah. They're a construction company essentially.This is not that, and so. If you're looking at a $5 million purchase price where the business has 30, 40%, you know, recurring and 50% reoccurring, like that type of profile that I, I feel like I would sleep better at night than I would buying a $5 million purchase price, you know, HVAC business. No, I, I totally would.I totally would. I mean, and, and last year, so yeah, if this was like me owning it. I'm sure there's ev 'cause I know there's really big players in security that like, there's a, there is a buyer somewhere along the line. Um, which I just think, uh, like, I don't know. I, I think people should have on their brain, like, if I grow this thing huge, like, who's there to take it over?Maybe it's your kid or whatever, but like. Ideally there's an outside party as well. But yeah, I, I agree. I think that reoccurring mix is like, is really attractive. Uh, I think if you're built for the seasonal stuff, I think like run it. Um, but like, that's one of the reasons I've always liked plumbing so much is it's fairly just like static.Yeah. Sort of up and to the right. Like it's kind of a beautiful, it's kind of beautiful. No, I mean, almost none of it's recurring, but it is stable. Mm-hmm. Which I, which I'm a big fan of. Okay, cool. Alright, so apparently I'm gonna go, I'm gonna call my dad and I'm gonna say, Hey dad, you know that company that you told me was for, for sale Ready?Jump in. I, I got a Target acquired, I got a beard Target acquired. Yeah, I mean, I, I do think, I do think there's a play if, if, if I wasn't, um. If we were just like determined to stay local, like one market, I think it makes a lot of sense for an HVAC company, right? Or or a security company. I think it makes a lot of sense for that to cross pollinate.Yeah. Just because of how interconnected that you could make a, you could make a mega home service, maybe primarily on commercial, maybe. I think both. I mean, you could make a mega home service business with. All the, basically all the trades right at that point. So then you're, you've got everything from security all the way down to plumbing and electrical and hvac.I, I think there's a few examples of, I think, I think you're right. Um, I don't, I don't know if Milestone has security, but they, we, the, they did try to break into security and I think they did it for a while and kind of backed out, I believe. Yeah. Yeah. The, uh, I know I pretty sure it's the Lee Company in Nashville.It's like the Governor's Plumbing and hvac. It's $150 million. It's gigantic. Wow. But I think that they have secure, I mean, they do everything. Mm-hmm. It, it is literally the mega business. It's, it's, uh, it's kind of funny to look at. I'm gonna, I'm actually gonna Google it right now. It would be interesting from our perspective.The customers that we have. Like so much of our sales strategy is mining our ever-growing number of accounts. That's and like to have even further things to cross sell. And that our, um, lots of kind of like high ticket pro, you know, kind of, uh, one time project type stuff. Just a cash injection on that.That'd be fun. I could, I could see it. Don't get me excited. Don't make me lay your home services. So these guys, these guys did do this, all right. They did, uh, $150 million business. I'm on their website right now and in their services they have, uh, facilities serv, they have home and facilities. So home is like heating, air conditioning, plumbing, electrical, and other home services.I'm curious what else they're doing like garage doors probably. Mm-hmm. And then facilities is facility services management, maintenance smart buildings, which is probably pretty tied into what you guys are doing. Facility construction. Maybe it's inside facility services. Yeah, they're doing backflows.Okay. Yeah. That's interesting. That's a lot. That's a lot. No, it's, it is ridiculous. Yeah. They're doing appliance repair. They have a handyman department, garage door, crawlspace services. They're literally the mega homes. It's, it's wild. It's wild. Are they privately wild? Yeah, the governor of Tennessee owns it.Oh, wow. Well, lesson learned, I think one of us should to go be governor of our state and then province. Yeah, I know. Well, honestly, Abbott, I thought when I, when I found out, when I found out about that, it seems like kind of a really big reputational risk. Hmm. Like people tend to not like calling their plumber.So to also be the governor. Like, Hey man, your guy charged me 50 extra dollars. He didn't use these parts and you're the governor. Like, that feels like kind of kidding. Tough. Yeah, there's, I don't know that there's certain, I don't know that I would want that problem. You're not gonna run that play in certain states.Yeah. But in Tennessee, apparently it's fair game. Okay, so we're all in on security. This was really interesting. Uh, it was fun direct to directly compare it. Now the last thing we didn't ask, uh, and this would probably help answer a lot too. What does 5 million get you in security? Because in hvac that's starting to become a smaller and smaller thing that that's like a, that's like on the, um, smaller end of a mid-size independent security company.So I would say if you're a mid-size business. 5 million, you'd be at the very, the very low end of that range. But you wouldn't really be in like a, the small guys like a lot, honestly, a lot of the smaller operators, I mean there are guys out there that are doing a million and a half a year in top line revenue because they have so much RMR.They're selling for two, two and a half million bucks. 'cause a lot of their RMR 'cause a lot of their revenue is rmrs. Yeah. So that makes sense. I think you could get something. You're definitely gonna be a step above. Uh, a two tech operation, a $5 million operation is probably 15 to 20 people. So you've definitely got maybe, maybe 12 to, maybe a little lower than 20, but like in that range.So you're definitely buying something with a little bit of size and scale. Yeah. You're what's, what's EBITDA like? Is it like a million? Probably about a million on five. Yeah. Yeah. Really? So five times? No, I'm saying, sorry. Maybe I'm saying a million dollars of EBITDA and you're, yeah. Correct. I think, I thought you were saying $5 million a top line.If it's a $5 million business, probably. What do you think, Steven? 500 to some 50. I would say it's, I would say it's, I would say it's maybe. 800 K to a million, uh, of, of ebitda. And then I would also say you, for the type of business we would buy, you're probably looking at a hundred to 120 5K of RMR or recurring revenue.Okay. And so then you're looking at, in that, in that scenario, probably 30% recurring. Yeah. Okay. Something like that. Yeah. That probably boosts up values quite a bit. I think it's about the same with hvac. I think it depends. Um. It's very easy to, like, uh, a million of EBITDA is kind of a funny number I think because it is very easy to fake a million of ebitda it, yeah.Which, which might sound astonishing to some people, but like, for, for our surgery, it's for a searcher friends, you know, fire everywhere. Yeah. It's, it's really easy to like, get there on a spreadsheet. 'cause a million's just like. I remember when people told me this and I was just like, shut the fuck up. But like a million's, just like not that much unfortunately.So like you can, if you are actually profitable at like 20,000 a month in like true profit, but you've got a $4 million a year business, you can make the books look like they've got a million a ebitda. So I, I think it depends. I think, um, you know, for HVAC you might get like one to 1.5 ebitda. Uh, if it's a really well run company, like a five times could be achievable.Um, more likely than not, uh, I would assume it's not achievable. We did a, uh, I mean, and depends on the buyer. Is it strategic? But I, I, I want, I would wanna say it was a million of EBITDA to 1.5. Yeah. Depending on how true that million EBITDA is. Not gonna complain about that. Most businesses don't lose jobs because they're bad.They lose jobs because they're busy, and a customer could not get a quick answer, one missed call, one forgotten follow-up, and the job goes somewhere else. Quo helps solve that by putting every customer conversation, calls, text, voicemails, into one shared thread that your whole team can see. So whoever picks up next.Already knows what's going on. There's no scrambling for context. No more botched communication and nothing gets dropped quo. Helps keep your team aligned, helps you respond faster, and makes the customer experience feel way more consistent. If you want cleaner communication and fewer lost leads, check out quo at qo.com/own.You'll get a free seven day trial. Plus 20% off your first six months. Hey, if you do end up buying a security company, I know a really awesome podcast you could listen to. That's like pretty informative. Yeah. Yeah. I could learn couple handsome bros that run the podcast and yeah. Very handsome bros. Yeah.Nice, strong. They help out. Matching hats. Exactly right. Yeah. No, this is great. Yeah. We'll add a link down to the entry and exit show. Uh, you guys are on YouTube channel, you're on Spotify, you're on anywhere that people can listen to shows. Uh, so make sure you check it out. Thanks for having us on. Yeah, this was terrific.Uh, for all those listening. Uh, make sure you like and subscribe and then leave any comments here if you wanna know more about the security and alarm business'. Uh, or if you wanna go buy one. With $5 million or if you want to give me $5 million, I will accept it. Me too. I will accept it.
