The Beginners Guide To Owning a HVAC Business

A HVAC business owner working on a unit outside

The U.S. HVAC market is currently valued at $17.45 billion and is projected to grow to $26.93 billion in 2030, according to data from Grand View Research. For those with an entrepreneurial spirit, there’s never been a better time to take advantage of industry growth by starting an HVAC business.

Successful business owners have several potential revenue streams, including new and replacement demand, repair and maintenance activities, and parts and component replacements. According to Grand View’s forecast, millions of heating and cooling systems are replaced in the U.S. annually, and $10 billion is spent each year on HVAC repair and maintenance services. With the constant demand for HVAC services, HVAC companies are some of the most recession-proof businesses in the U.S.

Creating an HVAC Business Plan

A business plan is essential for any new business venture. An HVAC business plan needs to include information on services, the market, finances, and more. Here are essential elements to consider when starting a business:

Know Your Niche: There are a lot of different services that an HVAC company can provide. HVAC companies and technicians need to be skilled in many different areas, but you should think about where you can provide the most value. The U.S. Small Business Administration recommends creating a clear and compelling statement about the unique value your company brings to the market. Are you located in a region with more significant needs in heating versus air conditioning, for example? Are there some services that are going to be more profitable for you? You may have loss-leading services to get your foot in the door, but you should also determine how you will drive services overall. Also, take time to identify your competition, their areas of expertise, how you could do it better, and any backlogs or unmet needs.

Identify Your Target Market: Have a clear sense of who you will serve, including the geographic location you want to target and the size of the population. Is it dense enough to support a business? Will HVAC technicians spend a lot of time driving from job to job? Will you focus on commercial or residential?

Build a Marketing Strategy: How will you attract and retain the customers you want to serve? What do you want to be known for? Will you provide only HVAC services or will you dig into plumbing as well?

Determine the Unit Economics of the Business: There are startup costs associated with every business, and HVAC companies are no exception. Understand the upfront expenses for equipment, business licenses, HVAC software, etc. Also, detail how your business will actually make money, estimate your financial projections and what it will take to achieve those.

Understanding HVAC Business Finances

It costs money to start and run a business. In the early stage of a business, it is easier to forecast expenses than revenues, so that is an ideal place to start.

Startup Costs: Startup costs for HVAC business owners typically include HVAC tools, HVAC software, insurance, licenses and permits, insurance, HVAC technician salaries, website creation, and advertising and marketing. Expenses can then be broken down into one-time costs and ongoing monthly costs. To help business owners estimate startup costs, the Small Business Administration created a fillable spreadsheet.

Fixed/Variable Expenses: In addition to startup costs, you should list your expected fixed costs/overhead and variable expenses. Fixed costs include monthly expenses such as rent, utility bills, phone bills, insurance, salaries, training, etc. Variable costs include materials and supplies, overtime, and marketing. HVAC business owners must also determine how to deal with callbacks if the job isn’t done right the first time. Sending technicians to do re-work results in lost revenue and could hurt the business long term.

Revenue: Businesses can’t run without money coming in, and you must identify how you will generate income. To help determine revenue, multiply the price of your service by the expected sales. Then, determine your gross profit.


Learning HVAC Responsibilities

HVAC business owners have several responsibilities, including licensure, training, and meeting regulatory requirements.

Licensure: Not only do businesses need a license to operate, but in 10 out of the 50 states, technicians must also be licensed. Also, EPA regulations under Section 608 of the Clean Air Act require that technicians who maintain, service, repair, or dispose of equipment that could release refrigerants into the atmosphere be certified. To receive the certification, technicians must pass an EPA-approved test. The tests are specific to the type of equipment the technician handles.

Other certifications aren’t required but are good to have from a marketing perspective to let your customers know you’re an upstanding and reputable business. If more than 50 percent of your technicians are certified through the North American Technician Excellence (NATE), the largest non-profit certification organization for heating, ventilation, air conditioning, and refrigeration technicians, you can advertise your business as NATE certified.

Training: As a business owner, training and helping develop your technician is part of your overall responsibility. Training can not only serve as an incentive to help attract and retain top talent, but it will also allow you to provide better and faster service. In an industry that is time-bound, the more jobs you and your technicians can get through in a day, the better.

Regulations: Heading into 2023, several HVAC regulations for what HVAC systems you can install are changing. For example, next year, seasonal energy efficiency ratio (SEER) ratings for AC units and heat pumps will increase from 13 to 14 in northern states and 14 to 15 SEER in the South and Southwest regions of the country.

Additionally, state and federal regulations are requiring the phasing down of HFCs (hydrofluorocarbons) in air conditioning and refrigeration equipment. Technicians in the field need to know how to safely handle the new low global warming potential (GWP) refrigerants that are replacing them. As the country becomes increasingly sensitive to environmental trends, HVAC business owners will need to stay current on changing regulations.

Incentives: Staying current on incentives can help HVAC owners increase sales. For example, the Inflation Reduction Act has huge benefits and incentives for certain types of HVAC equipment. Staying on top of trends allows owners to advertise benefits while also helping customers save money.

Marketing Your HVAC Company

Marketing plans can be as simple or as complex as you want to make them, but businesses typically need to be visible in the digital world. Today, every company has to be a content company, starting with a website, which could include a blog with helpful information. You also should have a social media presence. You can use social media to share HVAC-related tips and interact with customers. If you’re producing content, people will recognize your name.

Email marketing and direct mail are good ways to reach people with seasonal promotions or even advertising new incentives they can take advantage of to upgrade equipment.

Branded trucks are also a powerful marketing tool. When people see you on the street or parked at their neighbor’s house, they’re more likely to remember you.

The goal is to make it easy for potential customers to find you and keep your business in the front of their minds.

Growing Your HVAC Company

Ultimately, you’ll want your business to grow, and your ability to serve and add customers, and expand your business depends on your success with hiring, training, and retaining techs. Service businesses, by nature, are people-driven operations, and the faster you grow your technicians under you, the quicker you’ll grow. Well-qualified technicians also encourage repeat business, word-of-mouth marketing, and positive reviews.

Unfortunately, hiring new technicians as you grow is difficult. The U.S. is currently experiencing a labor shortage, with 11.2 million open jobs in the U.S. If every unemployed person in the country found a job, we would still have 5.2 million open jobs, the U.S. Chamber of Commerce reported. There isn’t a ready group of technicians to go out and add, which means you’ll need to recruit new hires, hire for attitude, and then train them. Using online training with simulations that let new workers practice in a safe environment can help you get them job-ready and profitable faster.

Company culture is also critical to growth. Culture, which touches all aspects of the business, includes how the team operates together, how technicians advance, and how the company invests in its employees’ development and learning. Creating a culture of learning improves operational performance, hiring, and retention metrics.

Growing Your Business with Interplay

Because training is critical to growth, companies need to develop a structured, yet flexible, way to train employees. Interplay offers 3D simulation-based HVAC training online with “real-world” scenarios where techs can learn hands-on and improve troubleshooting skills so they get it right the first time. HVAC companies using Interplay Learning grow their business four times faster than their peers and can significantly reduce the time it takes to make new techs profitable. This modern training makes it easier and faster to train employees so new business owners have more time to focus on growing the business.

For more information or assistance with creating a training program that helps you as you start and grow your HVAC business, contact Interplay Learning today.