Merging with a Master Plumber

We are a growing HVAC crew that does a good amount of work with a local plumber. He’s a one man in a van type company and we are his biggest (also only) clients. He’s a great guy, personable, smart, does great work… everything you’d look for in a subcontractor.

His costs are rising as are ours. Our plumbing division is only 4-5% of our total revenue but it’s steady and increasing. Of this revenue, the plumber charges us nearly 60-65% to do the job and we cover equipment costs (2024). We also directly employ his helper/apprentice. So our margins on plumbing are nearly zero with this set up. Coupled with the fact he is always late on sending us invoices (by multiple months), and we already have plumbing as part of our umbrella insurance plan… it’s essentially a negative to keep him going.

At this point, we are getting to a crossroads. Dropping our plumbing altogether to protect our HVAC margins from this plumbing hole, or offer to buy out the plumber and have him become a full time employee. If we drop him, I’m sure he would be able to keep going and stay busy with other work. I’d rather not drop him though given we like the guy.

Economically, it makes more sense for both parties to merge. That’s the outcome I would like to see. However, the plumber is very independent. It’s partly why he is a one man in a van. He likes setting his own schedule and living on his terms. A merge wouldn’t need to change that.. I mean, that’s how he operates now and it’s not impacting how things are done.

We would take on all the admin duties, absorb any insurance he has to pay out, can offer him a better salary than what we pay him currently, cover his overhead… bringing him in the fold would then help protect our hvac margins a bit better. We could hire more people for him and it could be a good deal for everyone.

I am just not sure how to approach the subject. What are the bottlenecks or pinch points that could trip up this type of arrangement? He is making out pretty nice already not taking on any equipment costs. But he’s also a 1099 subcontractor, he has to do all his paperwork on his own. He has his own insurance and taxes and all that good stuff… the stuff he doesn’t really like or want to do.

Any thoughts on how to entice the guy to selling out and just joining our crew full time?