The luxury home services industry is evolving, with institutional investors recognizing the potential of integration businesses. For independent operators, this shift may feel unsettling, but it’s also an opportunity to strengthen and future-proof your business.
In a recent episode of The Flywheel Effect podcast, Brent Sonnek-Schmelz and I tackled this timely topic, offering insights on how to adapt, compete, and thrive in a changing market. Our advice is clear: focus inward, refine your operations, and position your business to succeed on your terms.
Why Is Institutional Money Coming In?
Industries like HVAC, plumbing, and roofing have already seen waves of consolidation, with private equity and other investors building larger, more scalable businesses from smaller independents. Now, custom integration is on the RADAR. Investors see an industry with a strong foundation, untapped growth potential, and the opportunity to bring efficiency to fragmented markets.
The influx of institutional money is a sign that the custom integration market is maturing. Investors wouldn’t target an industry unless they saw value and potential. For integrators, this recognition underscores the importance of running a professional, well-organized business.
Who Are These Investors
Private equity firms buy established businesses, improve their operations, and grow their value over time. Their focus is on profitability and efficiency, which means they look for companies with consistent cash flow and room to scale. Often, the goal is to grow and sell over a defined time horizon, such as three to seven years.
Venture capital firms, on the other hand, take calculated risks on companies with high growth potential, often backing new technologies or services. Their approach is about transformation and long-term growth, often building larger, legacy businesses.
The point isn’t to adapt your business to these investors — it’s to understand their impact on the market and how their strategies could influence the competitive environment. Knowing what they value can help you strengthen your business for the future, regardless of your goals.
How to Build a Stronger Business in a Changing Market
Get Your Financials in Shape — Every business owner benefits from clean financials. Not only does it provide a clear picture of your company’s performance, but it also makes your business more resilient. Avoid “co-mingling” personal and business expenses — transparency is key.
Create Recurring Revenue — Think about how HVAC companies sell annual maintenance agreements or pest control firms offer quarterly services. Service contracts and maintenance plans create steady, predictable income streams and build long-term customer relationships. This kind of stability is crucial, especially in competitive markets.
Focus on Scalability — If your business relies too heavily on the owner, it’s time to invest in systems and processes that reduce that dependency. Scalability isn’t just about growth; it’s about making your business more efficient, less stressful, and more adaptable to change.
How Independents Can Win
When larger players enter a market, they often invest heavily in marketing and customer education. This raises awareness of the industry as a whole, giving all businesses — big and small — a boost. Take advantage of this heightened visibility by showcasing what makes your business unique.
Also by Matt Bernath: The Psychology of Pricing
As service contracts and professional systems become more common, they raise the bar for the entire industry. Independents who adopt these practices early can stay ahead of the curve and deliver a better customer experience.
Large companies can struggle to provide the personalized service and community connections that independents excel at. Lean into your strengths as a local operator by offering customized solutions and building strong relationships with your customers.
Rethinking the Competitive Landscape
It’s easy to view institutional investment through a lens of scarcity: if they win, I lose. But that’s rarely the case. These investors are interested in expanding the market and reaching customers who may not have considered integration services before. A growing market creates opportunities for everyone.
The best way to compete is to focus on your own business. By delivering exceptional service, streamlining operations, and building customer loyalty, you can thrive regardless of market changes.
It’s About Running a Business You Love
Running a more efficient, scalable business doesn’t have to mean preparing for a sale — it means creating a company that works better for you. With the right systems in place, you can spend less time putting out fires and more time focusing on the parts of the business you enjoy.
Building a stronger business gives you flexibility. Whether you want to grow, sell, or simply enjoy less stress and more profit, the choice is yours. The goal is to create a business that aligns with your values and goals, to provide the most happiness today and options for the future.
Turning Disruption Into Opportunity
Institutional investment in the luxury home services industry is not going to replace the independent operator. Just look around at how many successful independent HVAC, pest control, and roofing contractors still exist. It’s time to recognize the value of an evolving market that you are lucky enough to be a part of. For business owners, this is an opportunity to focus inward, refine operations, and build something even stronger.
Also by Matt Bernath: Navigating the Economic Environment
Think about your next steps. Are your operations as efficient as they could be? Are your financials clean and transparent? Are you offering value to your customers in a way that sets you apart? These questions aren’t just about competing — they’re about thriving.
For more insights and strategies to adapt to this evolving market, tune into The Flywheel Effect podcast. Brent and Matt share practical advice to help you navigate and succeed in today’s dynamic industry.
