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Owned and Operated Growth

I Have $5M. Do I Buy an HVAC Company or a Security Business?

📅 February 24, 2026 ⏱️ 55:07 🎤 John Wilson, Stephen, Colin

Chapters

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  • 0:00
    HVAC vs. Security
    The hosts introduce the main question: Which business would you buy with $5 million, an HVAC or a security company?
  • 1:44
    Security Industry Focus
    The guests express a strong preference for the security industry, particularly the commercial segment, citing recurring revenue as a key differentiator.
  • 4:03
    Recurring Revenue Comparison
    A detailed comparison of recurring revenue models between HVAC (low percentage, high revenue from members) and security (high percentage) is discussed.
  • 12:21
    Barriers to Entry
    The discussion shifts to the licensing and regulatory barriers in the security industry, especially for commercial operations, and how they create a moat.
  • 20:38
    Industry Roll-ups
    The hosts and guests discuss the current trends of industry consolidation and roll-ups, noting the increasing interest in commercial security and fire alarm businesses.
  • 28:50
    AI and Undisruptible Trades
    The conversation touches on the impact of AI on various industries and how trades, including security, seem less susceptible to disruption.
  • 35:54
    Technology and Service
    The technological advancements in security, like camera systems with AI, are highlighted as a source of recurring upgrades and business, contrasting with HVAC's less tech-driven service needs.
  • 44:49
    Labor Challenges & Licensing
    The hosts and guests discuss the common challenges of finding skilled labor in both industries and the specific licensing requirements for security and fire alarm systems.
  • 1:05:04
    HVAC & Security Crossover
    The potential for cross-pollination between commercial HVAC and security businesses is explored, given the interconnectedness of building systems and monitoring.
  • 1:13:55
    Valuation and Profitability
    The episode concludes with a discussion on what a $5 million investment would buy in each industry, focusing on valuation, EBITDA, and the impact of recurring revenue.

Speakers

J
John Wilson
Host — large plumbing and HVAC company out of Cleveland, Ohio
S
Stephen
Entry and Exit podcast
C
Colin
Entry and Exit podcast

Key Takeaways

✦

Prioritize building recurring revenue streams, as seen in the security industry's 35%+ RMR, to create a more stable and predictable business model.

✦

Explore commercial contracts to diversify revenue, as commercial work often offers more consistent payments and potentially higher margins compared to residential.

✦

Invest in technology that allows for frequent upgrades or replacements (like security cameras with AI features) to drive new service opportunities.

✦

Understand the regulatory and licensing landscape in your region, as these can create significant barriers to entry and protect your market share.

✦

Consider the 'moat' around your services; industries with high-stakes (like fire alarm systems) or specialized knowledge often command better pricing and customer loyalty.

✦

Evaluate potential acquisition targets based on their recurring revenue percentage and EBITDA, not just top-line revenue, to gauge long-term stability and profitability.

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