Industry Description
The plumbing, heating, and air-conditioning contractors industry in the U.S. comprises establishments primarily engaged in installing and servicing plumbing, heating, and air-conditioning equipment (NAICS 238220). Contractors in this industry may provide both parts and labor, and the work performed includes new work, additions, alterations, maintenance, and repairs. The industry excludes establishments installing electrical controls for HVAC systems, which are classified as electrical contractors, and establishments installing septic tanks, which are classified as site preparation contractors.
The following are some basic characteristics of the plumbing, heating, and air-conditioning contractors industry:
- Plumbing, heating, and air-conditioning contractors industry has a combined revenue of $159.4 billion in 2026, growing at an average annual rate of 2.6% between 2021 and 2026
- There are approximately 120,000 businesses as of 2026
- The plumbing, heating, and air-conditioning contractors industry employs approximately 623,700 people, with the average business employing 5.2 workers
Industry Trends
The plumbing, heating, and air-conditioning contractors industry is highly fragmented and has low levels of market share concentration, consisting overwhelmingly of small, locally owned and operated businesses. Some key external factors that influence this industry are (i) construction activity and interest rates, (ii) environmental regulation and the transition to new refrigerants and heat pumps, and (iii) a persistent shortage of skilled, licensed labor. Each of these is described in further detail below.
Construction activity and interest rates have a significant effect on industry demand. A substantial share of revenue is generated from new residential and nonresidential construction, so periods of elevated interest rates tend to dampen new housing starts and commercial building activity, slowing new-installation revenue. At the same time, a large share of industry revenue comes from maintenance, repair, and replacement of existing systems, which is far less sensitive to construction cycles, since heating and cooling equipment must continue to be serviced and eventually replaced regardless of broader economic conditions. This mix of cyclical installation revenue and more resilient service and replacement revenue helps explain why the industry tends to hold up better than the broader construction sector during economic downturns.
Environmental regulation is reshaping the products and systems that contractors install and service. The phase-down of high-global-warming-potential refrigerants under EPA rules is requiring contractors to transition to new A2L refrigerants such as R-454B and R-32, which involves new handling procedures, tools, and technician certification, and has added meaningfully to the installed cost of new systems. Federal and state incentives for heat pumps and other energy-efficient equipment, including rebate programs tied to the Inflation Reduction Act, are accelerating a shift toward electrification, with heat pumps now representing a substantial and growing share of primary heating systems installed in new construction. Continued consumer and building-owner attention to indoor air quality has also sustained demand for filtration, ventilation, and system upgrades beyond simple like-for-like replacement. Contractors that invest early in training and equipment for these new standards are better positioned to capture this demand.
A persistent shortage of skilled, licensed technicians constrains industry capacity. Over half of the current workforce is over the age of 45, and tens of thousands of experienced technicians are retiring each year faster than new entrants can be trained and licensed. Because state licensing is required to pull permits and legally oversee installation work, the number of licensed contractors, not just technicians, can act as a bottleneck on a company’s ability to grow, even where a business has an adequate bench of field labor. This labor scarcity has also encouraged consolidation, as private equity-backed platforms compete with independent owner-operators to acquire established local businesses with trained crews and existing customer bases.
The plumbing, heating, and air-conditioning contractors industry in the U.S. is shaped by the interaction of construction cycles, evolving environmental and refrigerant regulation, and a tightening skilled labor market. Businesses that build recurring service and maintenance revenue, invest in technician training and licensing, and adapt to new equipment standards are best positioned to navigate these pressures and to attract buyer interest.
Key Performance Metrics
In evaluating the plumbing, heating, and air-conditioning contractors industry, the following metrics can provide useful information in comparing a subject company to guideline companies and transactions.
- Service agreement (maintenance contract) penetration rate
- Average ticket / job size
- First-time fix rate
- Technician utilization and billable-hour rate
- Backlog (for commercial and mechanical contractors)
- Customer retention and callback rate
- Gross and net profit by service segment (e.g., diagnostic/repair, replacement, installation, service agreements)
- Field-to-sales and support staffing ratio
Industry Organizations & Publications
The following organizations publish useful information:
- Plumbing-Heating-Cooling Contractors Association (PHCC)
- Air Conditioning Contractors of America (ACCA)
- Mechanical Contractors Association of America (MCAA)
- ACHR News
- Plumbing & Mechanical (PM Engineer)
Guideline Information: Private Purchase Transactions
Most plumbing, heating, and air-conditioning contracting companies are privately owned. While there are publicly traded companies, data regarding the sale of 100% of closely held plumbing, heating, and air-conditioning contracting companies is generally the best source of information to appraise a subject company.
The following are typical appraisal multiples from sale of plumbing, heating, and air-conditioning contracting companies:
- Revenue multiples between 0.3 and 0.7 times
- Gross Profit multiples between 0.6 and 1.4 times
- EBITDA multiples between 2.6 and 6.5 times
In selecting guideline transactions, it is of critical importance to select transactions that are similar to the subject company. Unique factors for any subject company must be considered to yield credible results. Additionally, industry economic conditions also vary over time, which must also be considered.
Guideline Information: Publicly Traded Companies
Most plumbing, heating, and air-conditioning contracting companies are privately owned; however, there are a few that are publicly traded, meaning it is possible to compare a subject company based on industry metrics and appraise using industry multiples. However, as with the guideline transactions described above, it is of critical importance to select publicly traded companies that are similar to the subject company. Also be aware that multiples of certain publicly traded companies, particularly large national mechanical and electrical contractors with significant data-center and industrial exposure, may not accurately reflect a subject company.
The three largest publicly traded U.S. plumbing, heating, and air-conditioning contracting companies ranked by market capitalization are:
- Comfort Systems USA, Inc. (FIX) – $69.0 billion market capitalization
- EMCOR Group, Inc. (EME) – $33.8 billion market capitalization
- Limbach Holdings, Inc. (LMB) – $0.9 billion market capitalization
The Price-to-Earnings (P/E) ratios of these three companies range between 26.5 times and 55.1 times.
Appraisal Rules of Thumb
Please note you should never use a Rule of Thumb in place of a professional appraisal. You will never see a competent professional appraiser do their work using a Rule of Thumb. The professional standards that govern professional appraisal practice, which all professional appraisers should follow, specifically prohibit the use of Rules of Thumb.
Plumbing, heating, and air-conditioning contracting companies are businesses sold based on sound economics. These economic considerations can be measured using the key performance indicators described above, but such economics cannot be accurately summarized in these simple formulae.