With renewed geopolitical tensions and elevated oil prices, home services operators are taking a hard look at one of their most volatile cost lines: fuel. The connection is direct. The US Energy Information Administration estimates that crude oil accounted for ~51% of diesel fuel prices between 2004 and 2025, with refining, distribution, marketing and taxes making up the remainder. When oil moves, pump prices follow, and for operators running large vehicle fleets, the impact lands fast.

The exposure is significant. Fuel accounts for 10-20% of total operating costs for HVAC companies, making it one of the largest expenses after labor. Given the daily travel required to deliver services across dispersed geographies, fuel represents one of the most persistent and unpredictable cost pressures operators face.

That pressure has intensified recently. As of March 28, 2026, Brent Crude was trading at ~$112 per barrel, up from ~$70 per barrel just one month prior. The US Energy Information Administration predicts the price of Brent crude to remain elevated at $91 per barrel in Q2, then slowly ease to $70 per barrel by Q4 of 2026. Against that backdrop, operators are effectively left with three choices: absorb higher costs and accept margin compression, pass costs through to customers, or reduce fuel consumption through operational improvements.

Absorption is often the first response, particularly when elevated prices are viewed as temporary. Many operators are reluctant to raise prices in competitive local markets, fearing customer attrition. That calculus can make sense in the short term. If oil prices normalize quickly, margin compression is manageable. If they do not, the consequences compound: reduced capital for reinvestment, stunted growth and in some cases business failure.

Passing costs on to customers is more common when elevated prices appear durable. Operators can raise base service rates or introduce a fuel surcharge, a mechanism that emerged in the 2000s as oil volatility increased. Surcharges offer transparency, help stabilize base pricing and allow margins to flex with fuel costs rather than absorb them. The limitation is structural. Home services businesses operate in local, competitive markets where pricing power is constrained, and customers are sensitive to line-item additions. Passing on costs can protect margins, but it is not a complete solution on its own.

Optimizing routing and fuel usage is the most durable response, and often the most underpursued. Fieldproxy, a field service management platform, found that HVAC technicians may drive 20-40% more miles than necessary without optimized routing. Oxmaint, another fleet management provider, found that inefficient routing, coupled with excess idle time, aggressive driving and fuel fraud can account for up to 48% of total fuel spend. Proper tracking and fuel management can reduce that figure substantially, delivering savings that compound regardless of where oil prices trade.

Rising oil prices will continue to test home services operators through their fleet costs. Reactive responses like absorption and cost pass-through have their place but carry real limitations. Optimizing routing and fuel usage offers a more sustainable path, one that improves margins independent of global commodity movements. For operators and investors monitoring the oil outlook, the more productive question may not be where prices are heading but how efficiently the fleet is running today.

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Home services businesses are often described as cash generative, but reported earnings and actual cash flow are not the same thing. In the lower middle market, the gap between them is where deals get into trouble. Net working capital sits at that gap, shaped by billing delays, extended payment terms, seasonal inventory builds and payroll cycles that run ahead of collections. For sponsors underwriting home services platforms, understanding that gap is not a secondary diligence item. It is central to deal performance.

Growth makes the problem more acute, not less. According to ServiceTitan research, 63% of home services businesses are experiencing consistent growth, but growth is not inherently cash generative. Hiring technicians, purchasing inventory and scaling operations require upfront cash while revenue collection lags. That dynamic is especially pronounced in businesses with commercial exposure. Residential models typically benefit from payment at the point of service, while commercial projects introduce invoicing delays, extended terms and in some cases retainage structures that stretch the cash conversion cycle and increase working capital requirements substantially.

The macro environment compounds these pressures. According to PwC's Working Capital Study 25/26, both days inventory outstanding and days sales outstanding are returning toward pandemic-era highs, with NWC days deteriorating by 13.5% for small businesses and 19.8% for mid-size firms since 2015. Deloitte's 2024 Working Capital Roundup found that persistent inflation and rising interest rates are forcing companies to treat cash flow management as a core operational discipline. For home services businesses with seasonal revenue profiles, these forces can strain even well-managed operations.

Seasonality adds another layer. In segments like HVAC, inventory buildup and labor scaling ahead of peak demand create cash outflows before revenue is realized. Technicians are paid on a regular schedule regardless of when customers pay, requiring companies to fund payroll in advance of collections. According to ServiceTitan data, rising labor and overhead costs, cited by 63% of contractors, and increasing material prices remain persistent pressures, particularly when combined with delayed collections.

Not all structural trends cut against operators. Technology adoption is improving billing speed and cash visibility, while maintenance agreements and subscription offerings generate upfront cash and improve revenue predictability. PwC has noted that receivables and inventory represent the most significant working capital opportunity on the balance sheet. Sponsors who tighten billing cycles and collections early are not just protecting liquidity. They are building a more valuable asset.

The platforms that scale successfully in home services will be the ones that pair growth with disciplined cash management. Tighter billing cycles, improved collections and standardized workflows can unlock meaningful cash with limited incremental investment. As consolidation accelerates across the sector, the winners will not just be the fastest growers. They will be the operators that manage cash the best.

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The artificial intelligence gold rush is in full swing. Billions are pouring into AI infrastructure, tools and deployment programs across virtually every industry. But behind the bullish headlines lies an uncomfortable truth: most companies are not getting back what they put in. A landmark MIT study released in August 2025, examining over 300 AI projects and drawing on interviews with 153 executives and 300 corporate employees, found that 95% of corporate AI projects failed to deliver any return on investment. Nearly three years after ChatGPT democratized generative AI, the gap between expectation and reality has never been more expensive.

The spending shows no signs of stopping. A Deloitte 2025 survey of 1,854 senior executives found that 85% of organizations increased their AI investment over the past 12 months and 91% plan to increase it again in the year ahead. Most organizations only achieve satisfactory ROI within two to four years, far longer than the seven to twelve months typically expected for conventional technology investments, with only 6% seeing payback within a year. Investment accelerates even as returns disappoint. The driver is largely fear. The fear of being left behind keeps checkbooks open regardless of whether the numbers justify it.

Several structural problems consistently undermine AI ROI. A McKinsey study found that 70% of AI projects fail due to data quality issues rather than algorithmic limitations, and a KPMG survey found that 85% of business leaders cite data quality as their most significant challenge in AI strategy for 2025. Infrastructure costs compound the problem. Investor Global Strategist has calculated that AI data center facilities coming online in 2025 will face ~$40 billion in annual depreciation costs while generating only $15 to $20 billion in revenue at current utilization rates. According to Gartner, at least 30% of generative AI projects will be abandoned after proof of concept by the end of 2025. Guidehouse reports that only 26% of companies have developed working AI products at all and just 4% have achieved significant returns.

The most underappreciated issue is the "80% problem." AI tools can often automate ~80% of a task, but the remaining 20% still requires human judgment. When businesses layer AI on top of existing workflows without redesigning those workflows or eliminating underlying costs, the efficiency gains never materialize. The AI becomes an add-on cost rather than a replacement cost.

Companies that do see returns share consistent traits. According to a Nexos AI industry report, organizations that factor data remediation costs into their planning project 29% higher ROI than those focusing solely on the technology, and firms that focus on high-impact, well-defined use cases deliver 3x higher ROI than those attempting organization-wide rollouts.

The AI revolution is real and the productivity potential is real, but the timelines and projected returns most companies are working with are not. Until organizations close the gap between data infrastructure and deployment, align realistic timelines with investment horizons and resist the fear-driven pressure to simply spend more, the ROI illusion will persist and it will be expensive.

WestGate Partners (WGP) is an independent sponsor focused on acquiring and growing lower middle market businesses in essential residential and commercial services. We bring institutional experience, tailored capital with hands-on partnership to help owners transition, grow and preserve their legacy. By partnering with strong operators, we build enduring businesses in economically-insulated industries.