Owned and Operated – Episode Summary

Podcast: Owned and Operated – A Plumbing, Electrical, and HVAC Business Growth Podcast
Host: John Wilson (A)
Guests: Stephen (B) and Colin (C) from Entry and Exit Podcast
Episode Title: HVAC vs. Security: If You Had $5M, Where Would You Invest?
Date: February 24, 2026

Episode Overview

This episode takes a deep dive into a hypothetical investment scenario: If you had $5 million, would you buy an HVAC business or a security business? Host John Wilson is joined by Stephen and Colin, commercial security professionals from the Entry and Exit Podcast. The panel explores both industries in-depth, examining business models, revenue dynamics, labor challenges, market trends, and M&A climates. The conversation is candid, data-driven, and slightly irreverent, featuring memorable anecdotes and practical analysis for aspiring and current service business owners.

Key Discussion Points and Insights

1. Investment Choice: Security vs. HVAC (00:00–04:57)

• Stephen and Colin both "plant their flag" in the security industry, especially the commercial segment.

  "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." – Colin (00:05)

• Commercial security businesses tend to have a higher proportion of recurring revenue compared to HVAC.
• Residential vs. Commercial Segments: Both security and HVAC have different dynamics depending on target markets. The number, quality, and stickiness of recurring contracts are much higher in commercial security.
• Recurring Revenue Is Key:

  "If you're looking at a $5 million purchase price, 50% recurring. I feel like I would sleep better than I would buying a $5 million purchase price HVAC." – Stephen (00:16)

• HVAC Membership Revenue Is Limited: Even implementers of the popular "club memberships" in HVAC only get 1% of their revenue as direct membership fees—but up to 60% of total revenues are driven by these “sticky” members who become loyal repeat customers.

2. Defining Industry Models and Revenue Streams (03:18–06:44)

• Security Industry
  • 80/20 split: 80% commercial, 20% residential.
  • Commercial jobs are larger, more complex, higher LTV, and have automatic payment/less emotion.
  • Residential side brings consistency and helps offset commercial seasonality, though more emotional and harder to collect.
  • Many companies pursue a blend for diversification.
• HVAC Industry
  • Mostly residential “service + replacement” with a small membership/recurring maintenance component.
  • Revenue can be weather/event-driven and “spiky,” as opposed to steady subscriptions.

3. Market Barriers and Competition (08:22–10:49)

• Security Industry Barriers
  • Strong licensing requirements (especially in Texas): Technicians must be licensed; even marketing the service requires licensing.
  • Commercial security has higher complexity and barriers—retrofitting is more common than new build.
  • Small “two tech” residential shops are common in security due to lower entry complexity, but commercial work is stickier and harder for others to undercut.

  "The beauty of it in the commercial side is the barrier to entry is a little bit higher. On residential... with all the DIY stuff, the work complexity is low, so you get a lot of competitors." – Stephen (08:22)

• Recurring Monthly Revenue (RMR)
  • Security: 35% direct subscriptions, 50–60% when including recurring service contracts (10:07–10:49).
  • HVAC: Membership fee is just 1% but drives 60% of total revenue (due to customer loyalty, not subscription itself).

4. Industry Headwinds and Rollup Climate (11:24–15:29)

• HVAC Facing a Tough Year: Big drop in equipment shipments, layoffs, OEM struggles, “weather-driven” business.

  "2025 was... I mean, the headlines are just outrageous." – John (11:55)

• Security Roll-ups Trending Commercial: Ten years ago, residential security was hottest for M&A. Now, PE and strategic buyers are focused on commercial security + fire alarm.

  "Commercial security and commercial fire alarm are the biggest multiples—that's what they're trying to roll up." – Stephen (12:48)

• Biggest Names Entering HVAC: Huge deals—Blackstone recently closed a $2.5B HVAC platform at ~19x EBITDA, signaling continued institutional interest in HVAC.

5. Market Multiples, AI, and Disruptability (15:29–19:29)

• Trades businesses are attracting capital partly because they are less susceptible to AI and automation risk.
• “Dirty work” – like unclogging toilets, installing wires – is protected from software disruption.

  "Someone still has to unclog a toilet. Someone still has to install the wire for your security system." – John (17:46)

• Rapid Growth in Data Centers: Demand for skilled security/fire alarm integrators servicing data centers (AI infrastructure).

  "The price is literally not a question. It's all about speed. Who can get out there the fastest?" – Colin (18:34)

6. Geography and Demographics Matter (19:40–21:41)

• Location influences opportunity: Strong commercial security market in booming regions like the Texas Triangle.
• In small towns, even substantial HVAC businesses can thrive (e.g., $30M HVAC in a town of 30,000).

7. Technology Refresh Cycles & Product Demand (21:41–25:12)

• Security: Short tech cycles (3–5 years) drive project revenue. New AI-powered cameras/tech result in constant upgrades even for current customers.

  "We see the cycle time is about three and a half years on average for security products." – Stephen (21:41)

• HVAC: Tech adoption (e.g., new refrigerant standards) tends to result in confusion and frustration rather than revenue opportunities.

8. Project Scope and Customer Expectations (25:12–27:10)

• Security has “fuzzy” project finish lines: Commercial projects can suffer from scope creep, ambiguous customer expectations, and difficult closeouts.

  "The hardest part of any project is did you get the closeout and the sign off from the customer saying this meets everything...?" – Stephen (26:30)

• HVAC/Plumbing: Clear “does it work or not?” binary service lines.

9. Labor Challenges (27:10–33:22)

• Security: Requires licensed low-voltage technicians, ideally with fire/security background. Major markets (e.g., Houston, TX) have more available labor. Subcontractors can be used for projects.
• Both industries struggle with attracting young talent.

  "Our average age technician... are older than we'd like." – Colin (31:54)

• HVAC: Better college and trade school pipeline, average worker age in the 20s, but still labor-constrained in peak season.

10. Licensing and Moats (33:22–36:27)

• Security: Multiple business and individual licenses required (security license, fire alarm license, with tiers for type and authority).
• HVAC: Licensing depends on locality; some regions are a “Wild West” with little barrier.

11. Home Automation and Industry Crossover (37:19–38:46)

• Security integrators have encroached into home automation and smart thermostat installs, sometimes leading to turf battles with HVAC companies.

  "For the security, residential security companies... the biggest piece of their revenue [is] selling the smart thermostats." – Stephen (38:12)

12. Downsides and Commoditization (39:40–43:45)

• Security: Life safety issues bring high stakes and stress (fire alarms in schools, for example).

  "You could get like a pretty bad phone call." – Colin (40:13)

• Commoditization pressures in security: Some services (monitoring, cameras) are DIY-friendly and price-transparent, resulting in low-margin competition.
• DIY: More prevalent in security than HVAC; “techy” customers or churches sometimes attempt install themselves, only to call professionals months later.

13. Buyer Profiles, Exit Multiples, and Sizing (45:31–53:29)

• HVAC businesses have broader and more mature acquisition markets.

  "There are big buyers spending a lot of money for an H Vac business. So if the goal is 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." – John (45:31)

• Typical $5M Security Acquisition:
  • Likely gets 15–20 person shop, ~800k–$1M EBITDA, ~30%+ recurring revenue.
  • Multiple on security EBITDA: 5–6x is common; sometimes more if RMR/mix is high.
  • Similar “million-dollar EBITDA” ballpark for HVAC, though topline may be higher for the same profit.

14. “Mega Home Service” Play (47:40–49:44)

• Some mega home service companies do exist, blending all the trades (HVAC, plumbing, electrical, security, etc.).
• Example: Governor Lee’s company in Nashville, with $150M in revenue across every home service vertical.
• Cross-selling and account mining become massive opportunities at this scale.

Notable Quotes & Memorable Moments

• Stephen on Rollups (12:48):
  "Now it's flipped. It's really commercial security and commercial fire alarm is the two fire, like the biggest multiples. That's what they're trying to roll up."

• John on AI & The Trades (17:46):
  "Someone still has to unclog a toilet. Someone still has to install the wire for your security system."

• Colin on the Pressure of Security (40:05):
  "Different levels of risk. ... Just at any given moment, you could get like a pretty bad phone call.“

• Stephen on Project Closeouts (26:30):
  "We call it the last 10%. It is the hardest part of any project..."

• John on Customer DIY (43:04):
  "We've done in our buildings here, we've done a mix...we have someone who's like, tech friendly and like, figured out videos."

• Typical Security Business Size for $5M (51:36):
  "A $5 million operation is probably 15 to 20 people...you're definitely buying something with a little bit of size and scale." – Colin

Segment Timestamps for Key Topics

• Investment Thesis & Recurring Revenue: 00:00–04:57
• Industry Definitions & Buyer Profiles: 03:18–10:49
• Roll-up/M&A Climate: 12:48–15:29
• AI & Disruptability: 15:29–19:29
• Geography & Growth: 19:40–21:41
• Technology Cycles: 21:41–25:12
• Project & Labor Nuances: 25:12–33:22
• Licensing Moats: 33:22–36:27
• DIY Competition, Downsides: 39:40–43:45
• Acquisition Values & Kicker: 45:31–53:29
• Mega Home Services Concept: 47:40–49:44

Conclusion: So, Where Would You Put $5M?

Consensus: If the goal is long-term stability, strong recurring revenue, and potential to ride industry rollups, commercial security (with a good recurring/service mix) is the more attractive investment than HVAC.
However, HVAC has a broader, more mature M&A market and may offer bigger, quicker exits for platform buyers.
Cross-industry, “mega home service” companies are possible—but difficult and rare.

“If you're looking at a 5 million dollar purchase price... with 50% recurring, I feel like I would sleep better than I would buying a five million purchase price HVAC business." – Stephen (46:10)

"Apparently I'm gonna go call my dad... Target acquired." – John (46:59)

For more deep dives into home service operations, check out the Owned and Operated podcast, and Stephen and Colin’s Entry and Exit show for all things security.