If you have dreams of launching your own HVAC business, you’ve come to the right place. The HVAC industry is booming in the United States and, with a forecasted growth of USD 130.25 billion by 2024, it doesn’t appear to be slowing anytime soon. With constant changes occurring with energy-efficient standards, that’ll continue to fuel growth within the HVAC industry.
Each of these innovations elicits improvements in HVAC equipment and the subsequent replacement of old and outdated systems. You might also notice that further technological advancements now play an integral role in the industry’s products and services. In this guide, we outline how to start your own HVAC business and navigate each step of the process.
Create an HVAC Business Plan
Your first step in launching a successful HVAC business is by creating a business plan. You’ll use this document to define your business structure, financial obligations, local competition, marketing plan, target market, revenue projections, and more. When you take the time to develop a business plan, that helps keep you on track and secure startup funding.
The best way to determine the viability of your new business is by conducting market research. That involves:
Determining how many other HVAC companies are offering products and services within your service area
- How many homes are within your service area
- How much the competition charges
- Whether or not you’re competing with franchises
You can obtain this data from sources like the Bureau of Labor and Statistics and the US Chamber of Commerce.
The business plan stage of launching your business also involves determining the service area you plan to cover. You’ll also be determining how far you’re willing to travel for a service call and the circumstances under which you’ll work. For example, do you plan to operate only during standard business hours? Or, are you willing to provide emergency repair service calls?
Your business plan also outlines the legal business model under which you’ll be operating. It’s necessary to include this information to ensure you meet tax obligations. You might want to consider an LLC (Limited Liability Company), an affordable business structure that allows you to remain separate from your business. Additional legalese includes ensuring that your company meets local, federal, and state legal requirements. That includes securing insurance and licensing. These requirements vary depending on your business’s location.
Finance, pricing, and profit margins are another area of your business plan you must address. Start by setting up a separate bank account for your HVAC company. That way, you’re sure those funds go toward your business and not any personal expenses. The best way to ensure you have competitive pricing that allows you to sustain your business and pay yourself a salary, spend time figuring out your income. Be sure to consider your skill set and years of experience when setting your rate.
Obtain the Necessary Licensing and Insurance for HVAC Contractors
Every municipality across the United States has different HVAC certification requirements for refrigeration and more, licensing, and insurance. Start by determining if your state requires a contractor’s license or business license for providing HVAC services. Use the following resources to obtain this information:
There are several areas of certification, including:
- Air conditioning and air distribution
- Gas and oil heating
- Heat pumps
- Hydronics gas and oil
- Light commercial refrigeration
The Education, Experience, and Skills Useful for Every HVAC Tech
While it isn’t necessary to have a business degree to launch a successful business, you and every HVAC tech on your team should have specific skills and experience. Here are some examples:
Attention to detail
Installing, repairing, and serving HVAC systems is highly detailed. You’ll find this is especially true when cleaning, inspecting, and repairing air conditioning units and heating systems.
Customer service skills
Every small business owner must engage with existing and new customers. That involves answering questions, providing updates, and scheduling appointments.
You can find training classes for you and your HVAC technicians at community colleges and trade schools. It can take six months and up to two years to complete this training. There are also instances where the HVAC tech might prefer working as an apprentice between three and five years.
Every small business owner must have experience with hiring, training, and managing their employees effectively.
Math and physics knowledge
One of the best ways for technicians to understand the way HVAC systems work is by understanding math and physics.
When technicians repair HVAC systems, they benefit from having strong problem-solving skills. It’s also good for technicians to have an attitude that makes them up for challenges when working on these repairs.
HVAC business owners can secure their success in the industry by having confidence when talking to current and new customers. That means feeling comfortable enough to discuss products and services to achieve a sale.
Understand HVAC Business Pricing Strategies
The best way for a small business owner to get their pricing strategies right is by spending time on research and testing. Ultimately, you have to use that data to understand how your financials are going to work.
Here’s what you’ll need to start researching:
- Competitor rates
- Customer acquisition costs
- Expectations for net margins
- Fixed costs (examples: fuel, rent, tools, truck, and more)
There are several HVAC pricing strategies you can use, including:
Divisor method: Using this method involves knowing your overhead costs and desired net profits. If you don’t know this information, it’s dangerous to use this method.
Flat-rate method: Considered one of the most effective services pricing method, you’ll be assigning a retail labor rate with labor time, add in the cost for parts with markup, and create a cost-inclusive price for each repair.
Gross profit per day: Using this method involves knowing how much profits your company must earn daily and ensuring your pricing reflects that goal.
Markup or Multiplier method: Some consider this method just as dangerous as the divisor method because you must know the total cost for the job and multiply it by a set amount to arrive at your desired gross margin.
SWAG method: This method is the most popular among HVAC business owners, but, unfortunately, it’s the most unreliable and potentially leads to failures.
Identify HVAC Business Startup Costs
Failing to account for every business expense means the difference between having a successful HVAC business and failing. Launching a business within this industry is slightly more expensive than average startup costs. The best recourse is to keep costs low by purchasing gently-used equipment. Here are examples of what your HVAC company is going to need:
- An appropriately-sized vehicle for carrying equipment and tools
- Hand tools, including battery-powered drill, electrical testers, Sawzall, tape measure, and more
- Insurance, including liability insurance and workers compensation
- Marketing materials, including business cards, door tags, hats, and t-shirts with the company logo, and vehicle signage
- Safety equipment
- Sheetmetal HVAC tools, including aviators, crimpers, drive bender, shears, and more
- Tools for working on an air conditioner
- Website design and hosting
Develop a Marketing Plan Your HVAC Company
More often than not, HVAC contractors depend on word of mouth for referrals to keep them busy. If you fall within this category, then you’re missing out on many opportunities. The main reason is that profit margins combine several variables, the most critical of them being lead generation.
Think about it this way—the HVAC industry involves supply and demand. So, the more leads your company receives, that leads to greater demand. Naturally, that increases profit margins. Achieving this goal involves ensuring you’re offering the highest quality products and services at a fair price. Here are steps for developing a marketing plan for your HVAC company.
Set up a budget for marketing your HVAC company
Growing your business through word of mouth referrals isn’t enough. When you approach HVAC marketing strategies analytically, then you have full control over the leads coming in. You’ll be using advertising channels like:
- Google and Google My Business
- Lawn signs
- Local advertising
- Vehicle signage
- Website design
Setting up a marketing budget involves researching to determine your CAC (Customer Acquisition Cost). After deciding that, you’ll need to figure out how many customers your company needs weekly and do some math. For example, if you need 15 new customers weekly and the CAC is $30, then you’ll need to spend $450 each week on your HVAC marketing plan.
Ideally, you want to keep your CAC low. One of the best ways of achieving that goal is by increasing organic traffic to your website using SEO. Focusing your budget and time on SEO is an excellent way to build your business’s foundation. The main reason is that if your website lands on the first page of Google’s results, you don’t have to spend as much on advertising.
Create a digital marketing strategy
Unfortunately, there’s a high rate of failure among skilled tradespeople because they focus on just that – their trade skills. Part of running a successful HVAC company means that you’re also working as a business manager. The only way profit margins increase is when your phone continues to ring each week. That involves applying digital marketing strategies to your HVAC company.
- Create a website for your company to attract customers conducting local searches
- Use social media for marketing your business to attract new customers and create brand awareness.
- Use Facebook to create brand awareness by focusing on products, services, and tips.
- Develop a referral program whereby customers receive incentives for referring new customers
- Network with the Chamber of Commerce and other networking groups
- Send out press releases to associations, local news stations, podcasts, and radio stations about your business.
Digital marketing also extends to reputation management. Your company’s online reputation is critical and requires focus and dedication. That means asking homeowners and commercial customers to post reviews on sites like Google and Yelp. While negative reviews for HVAC professionals happen from time to time, you can bury them by ensuring good ones keep flowing into those sites.
Set Up an Accounting System
The long-term success of your HVAC company hinges on setting up an accounting system. You can use many powerful and user-friendly software options to keep track of your accounting, like QuickBooks. Accounting is also essential for tax preparation and your company’s tax return.
The reports you’ll be using the most often include:
Balance sheet: This document defines how much of the company you own and how much you owe.
Profit and loss statement: This document outlines how much profit or loss your company experiences over a specific timeframe. That could be a month, quarter, year, and more.
Cash flow statement: This document tells you if your company has more cash than you had at the start of a specific timeframe and their sources and outflows.
Launch a Successful HVAC Business
Your friends and family can play an integral role in launching a successful HVAC business. Involve as many people as possible with this launch. Consider throwing a launch party, using your customer referral program, and creating a buzz with a press release. Use the following steps to develop a successful launch for your HVAC business.
At least four months before the launch, make sure your local listings, social media, and website are complete. That includes spending time on SEO and ensuring there are no loose ends with content or design.
Ask friends and family for referrals and, when arriving at your party, ask every guest to check into your company’s Facebook page. Then, ask everyone to use Google My Business to post a review that focuses on your business’s launch. For example, it can read something like, “Joe just launched his HVAC business and, while I haven’t received HVAC service from his company yet, I can vouch for the fact that he and his HVAC technicians are great at what they do.”
Send out a press release
At least two months before the launch, it’s a good idea to send out a press release. Make sure you hit every local news and radio channel. Include information about when you’re opening up for business. Make sure every association and community organization also receive this press release.
Set up an email and direct mail campaign
Send emails and direct mail marketing materials to everyone you know. Direct mail marketing materials have a 2% success rate. So, if you print and mail 1,000 postcards, that could equal 20 new customers. Print flyers and put them inside door jams throughout your service area.
The Bottom Line
It’s exciting to start a new HVAC business. While it might be tempting to go “all in” and try to get as many new customers as possible, there’s nothing wrong with starting small. For example, you can work on HVAC services part-time while scaling up your business to full-time. One of the best ways of relieving intimidation feelings is to use a business plan template or marketing plan template to ensure you’re not missing any of the necessary details. By following to tips above, you can launch a successful HVAC business.