How to Start an HVAC Business

how to start an hvac business

 

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If you’re thinking of starting your own HVAC business, you’re in luck. The heating and air conditioning industry is booming, and there’s plenty of room for new contractors to make a name for themselves. Below you will learn the keys to launching and running a successful HVAC business.

Importantly, a critical step in starting an HVAC business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.

12 Steps to Start an HVAC Business

Step 1 – Conduct Market Research for Your Target Service Area

Your first step in starting an HVAC business is to conduct market research – but don’t expect to find an area where no one offers air conditioning or heater repair. Instead, you need to target a location with enough demand that your company will be competitive.

For example, if you live near the beach and everyone has their AC running constantly through the summer, you’ll need to price competitively if you want to make a sale. In cities with frigid winters, where everyone’s furnace is running constantly to keep their house warm, your company will have plenty of opportunities for sales during those months.

In addition to knowing where people are using HVAC systems most frequently, it helps to know where there is a large population of homes with older HVAC systems that are due for replacement. Homes in these areas will likely be more open to replacing their current unit, and you can position yourself as the go-to choice for replacement installation.

Step 2 – Choose a Business Name

You’ll want to give your company an effective name that’s easy for customers to remember.

Try using the services you offer in the business name, such as “Carmel Air”, “HVAC Inc” or “Air Conditioning Specialists”. You might also consider including your last name in the business name, such as “Smith HVAC” or “Higgins HVAC”.

Step 3 – Write an HVAC Business Plan

Having a realistic business plan is essential to starting any type of company. It outlines your goals and strategies for achieving them, which allows you to better manage your time and resources as you work towards success. This step helps you develop a mission statement, decide on a budget, figure out a marketing plan and identify the legal necessities that apply to your area.

Step 4 – Pick a Location

Choosing your location means finding the right place for your business. This is usually done by identifying where you’ll find most of your customers, then picking the best spot to offer HVAC services that are within an easy drive or commute.

To get started, create a list of potential locations and then rent a space that meets your needs.

Step 5 – Register as a Business

You’ll need to register as a business with your local government. This means you’ll have to pay all of the applicable taxes and look into obtaining any necessary licenses or permits that apply to HVAC systems. For example, some states require commercial heating, ventilation, and air conditioning companies to be licensed.

Step 6 – Get Business Insurance

Once you’ve set up your business, make sure to get insurance. This covers any damage that may occur during service calls and prevents lawsuits if your customers are dissatisfied with the work you perform.

The general rule is that every new company needs general liability and workers’ compensation insurance.

Step 7 – Get the Right HVAC Equipment and Supplies

Make sure you have all of the HVAC supplies and equipment necessary to get started, such as tools, appliances, and signs for your company. If you need any items, factor in the cost when setting up your budget.

Step 8 – Market Yourself Effectively

There are many HVAC companies out there so you’ll need to find a way to stand out from your competition. You can use social media, word of mouth, or paid advertisements for this purpose.

If you want to make more money through referrals, develop an excellent customer service reputation, and recommend only the best products and services to your customers.

If you want to go the traditional route, then you should develop some business cards and flyers that can be distributed.

Step 9 – Hire Employees

Once you get established, you might even need employees. Make sure to advertise in places where good workers are likely to be looking for a job.

Also, take time to interview each of your applicants so you can get the best workers on your team. Your business will only succeed if you hire reliable employees who know how to communicate with customers and get the job done right.

Step 10 – Price Your Services Competitively

You’ll need to set a fair price for the HVAC services that you offer. You should also be ready to negotiate, especially if your business is new and you’re still trying to gain a foothold in the industry. For example, if you know how to work with clients on maintenance costs, you might be able to get them to sign up for a year of service instead.

Step 11 – Keep Records

To run a business, you’ll need to keep good records of everything you do and how it’s performed. This includes information about HVAC systems that have been installed or repaired, your employees and the services they’ve provided, and any contracts you sign with new customers.

The most reliable way to do this is by using accounting software that allows you to track your business data in an organized manner. You can then find reports that include useful information for analysis.

Step 12 – Adopt the Right Mindset

Running a successful HVAC business requires more than just technical knowledge. You’ll have to learn how to effectively communicate with customers, work with employees and promote your business if you want to produce positive results.

If you follow these steps, then your HVAC business should do well into the future. You can hire people as needed, but you must understand how every aspect of the industry works first. That way, you’ll be providing top-notch HVAC service to your customers and they’ll keep coming back for more.

 

How Big is the HVAC Industry?

The heating and air conditioning industry is a multi-billion dollar industry reaching more than $120 billion in annual revenue. This trend is expected to continue as HVAC services are one of the most important methods of modern day home comfort and convenience.

Every year, HVAC technicians install millions of furnaces, central air conditioners, heat pumps and other heating and cooling appliances in homes across the United States. These professionals are also responsible for keeping these systems running smoothly on a daily basis.

If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

What are the Key Segments of the HVAC Industry?

The HVAC industry is made up of two distinct segments, commercial and residential. There’s also a third sector that’s usually combined with these two aspects: engineering and design.

Commercial

There are about 2 million commercial HVAC systems in the United States, but only 25% of them are actually controlled by a central thermostat.

This means that many companies are wasting money on heating and cooling costs because they don’t have a centralized system for monitoring and controlling HVAC output.

If you can offer your commercial clients a fix to this problem, then it will be easy to get new customers and grow your HVAC business.

Residential

HVAC systems for residential use make up the largest category, and this is where you should focus much of your attention.

Your HVAC business plan should include information about how to work with homeowners and home inspectors, plus tips on how to maintain equipment and keep it in good working order.

This will ensure that you can provide valuable HVAC service to your customers and they’ll recommend you to others in the future.

Engineering and Design

This third branch is related to commercial and residential applications, but it’s unique in that it focuses on how HVAC systems work with other building elements.

Engineers and designers help clients plan and build structures that are energy efficient and meet their HVAC needs.

 

Who are the Key Competitors in the HVAC Industry?

You only have a handful of major competitors, but they may offer similar services so you need to figure out how to stand out.

Service providers

It’s not just HVAC contractors that can give you competition. You’ll also face off against building maintenance companies and other service providers.

Your company needs a clear focus so it remains distinct from these other businesses that have similar offerings.

Manufacturers

There are a few manufacturers of HVAC equipment, and many of them also offer repair and maintenance services. This is a much more direct competitor because they may actually sell the same products as you.

You’ll need to go beyond just having a basic understanding of HVAC equipment. You need to be familiar with the manufacturer’s warranties so you can recommend repair services when necessary.

 

What are the Key Customer Segments in the HVAC Market?

Before you can begin to reach customers in your target market, you need to understand who they are.

Homeowners

Most people get their HVAC system at home because it’s where they spend the most time. Those systems tend to break down or wear out after about 8-12 years, so homeowners are always looking for HVAC contractors.

Commercial buildings

Business owners and managers want their heating and cooling systems to keep the employees comfortable and the building at a pleasant temperature. Making these customers happy is about more than just fixing broken equipment; you may need to help them manage costs and improve energy efficiency.

Industrial companies

Large buildings, factories, construction sites, and other industrial areas require HVAC equipment to meet the specific needs of the organization operating in that space. If your company doesn’t have experience with these types of setups, you need to find someone who does.

If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

What are the Typical Startup Costs for a New HVAC Business?

Your startup costs will depend on how you plan to run your business.

Understanding the leanest way to get started is one of the most important things you can do when planning your HVAC company. Whether you choose to work alone or hire employees, make sure it’s a cost-effective decision that doesn’t eat away at your profits.

Costs to consider when you’re just starting:

Business licenses, permits, and certifications

HVAC contractors need specific licenses in many areas. The only way to get them is by meeting the requirements laid out by your state or locality. You may also need additional training or degrees so it can take up to 6 years before you really start making money.

Supplies and equipment costs

You’ll need to buy tools, cleaning supplies, and other items to make sure your HVAC business is operational. If you’re planning on hiring employees or contract workers, you may need to provide uniforms for them as well.

Insurance Premiums

Hiring new people can increase your insurance costs so you’ll need to budget accordingly. You may also be more exposed to risk if you’re working in customers’ homes.

Rent or Mortgage

It takes something as specialized as HVAC work to necessitate renting your workspace instead of operating out of your home, but the cost is still significant. That’s why most contractors start with small home offices before they move into something bigger.

Marketing and Advertising Fees

You need to market your business to compete with other companies and attract new customers. It’s a key part of getting your name out there so you can build a reputation as an expert in the field.

Day-to-Day Operations

Once the HVAC equipment is installed in your customer’s house, worksite, or industrial facility, you still need to manage it. That means your work doesn’t stop when the sale is complete; you need to make sure your customers are happy with their equipment and repairs.

Staffing and Training Costs

The more employees you hire, the higher your monthly costs will be. HVAC companies start small (often with just one or two people), but they can grow much larger if they want to. You may need to add staff to take on large jobs or provide 24-hour service to your customers.

 

Is Owning an HVAC Business Profitable?

The short answer is yes. HVAC work is a growing industry that’s experiencing high demand from both residential and commercial customers.

To run a profitable HVAC business you should know how to:

  1. Estimate the costs of replacing HVAC equipment before you make a sale
  2. Identify fixes that will save your customers money over time
  3. Charge competitive prices for your HVAC services
  4. Advertise effectively so you can attract new customers and increase retention rates

 

What are the Keys to Launching a New HVAC Business?

Your HVAC business won’t start generating revenue until you become the go-to HVAC professional in your area.

Starting something new is always risky, but it can be even harder when your industry is dominated by local companies that have been in business for decades. You need to develop a strategy that generates leads, turns them into paying customers, and makes sure they remain loyal.

Industry recognition and growth

You can’t grow your HVAC business if no one’s ever heard of you, so you need to get the word out there as soon as possible. Be sure to join industry associations and put up a professional-looking website with photos and testimonials from happy clients.

Long-term strategy

Every HVAC contractor starts as a one-man operation, but it’s important to think about how you’ll expand down the line. You don’t want to remain a small business forever, so make sure your plan includes growth and hiring more employees as soon as possible.

Competition

You’ll need to establish yourself as the best HVAC contractor in your area before you can attract enough customers to make a living. That means making sure you beat out all of the other companies when it comes to quality and reliability, and offering better service overall.

Before going into the HVAC industry, it’s a good idea to research what you can expect as a business owner. That way, you’ll be well equipped to target customers and set up a system for getting new referrals.
 

Additional Resources

HVAC Mavericks
 

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How To Start an HVAC Business FAQs

Several trends will have a major impact on how HVAC businesses operate over the next few years.

Green building initiatives

The federal government is requiring all new homes to be green by 2020, and many states also have policies that address energy efficiency. This trend will continue and encourage homeowners to use more environmentally-friendly HVAC equipment.

Businesses addressing climate change

More organizations are starting to recognize how global climate change affects their bottom line, so they plan accordingly with changes such as more insulation and energy monitoring. This trend will eventually expand outside of businesses and impact how everyone consumes electricity.

More distributed HVAC equipment

In the past, many buildings only needed a small heating and cooling system. Now, more mid-sized structures have multiple systems to handle different parts of the building. You may need to maintain or install several types of HVAC in your new business.

You can make money with your HVAC company by selling new equipment, offering repairs, and doing general maintenance on existing systems. Here are some of the most common ways to earn money:

Installations

This is one of the best ways to gain new customers. HVAC installations can be expensive so you can charge more for your services.

Repairs

Even if you're not selling new equipment, you'll still get business by keeping existing HVAC units running properly. It helps to have a list of trustworthy subcontractors that you can refer to in an emergency. If someone's furnace breaks down during the winter, they'll be happy to have someone who can help them.

Maintenance contracts

Selling monthly maintenance contracts is a great way to earn recurring revenue from your customers. You handle all of their HVAC needs so you can collect payments for as long as they want to stay with you.

Parts and supplies

You don't always get new customers by selling parts and supplies, but it's an easy way to boost your profits. If you're purchasing items in bulk, you can offer them to your existing customers at a lower price than your competition.

Selling HVAC Equipment

Contractors who sell their equipment often find that they have a competitive advantage over other companies. You can purchase new units in bulk and sell them to your customers for a considerable markup. That way, you're making money on the HVAC installation as well as from future monthly maintenance fees.

It depends on how much capital you start with and how long it takes you to gain customers. If you want to attract new business within the first year, your HVAC company will need to offer a superior service at a higher price than your competition.

A Few Other Things to Consider

To make the most money possible from your HVAC business, you'll need to learn how to estimate square footage. If you're giving a price quote before seeing the building, you won't have accurate numbers. Be flexible with your prices and try to be as precise as possible when explaining your services.

During each month, you'll be dealing with budgets and deadlines. Customers expect HVAC contractors to arrive on time and finish their work as quickly as possible. Make sure that your employees meet these standards and provide them with the right tools for the job.

Your HVAC business will need a reliable telephone system, particularly if you're doing repairs or installations. Everyone will be contacting you for these services, so don't let your phone system become outdated. If you want to upgrade or change anything about your phone line, now's the time to do it.

HVAC businesses face a lot of competition, but there are certain advantages that you can use to stand out from the rest.

For example, if you offer a list of recommendations and tips to your customers, they'll be more likely to work with you. They may even recommend your company in the future when one of their friends or family members needs help.

The most important thing is to learn about all aspects of HVAC. You may need to attend a trade school or hire on with another company to get hands-on experience. Once you've gathered some knowledge, you can start looking for the supplies that you'll need to begin your own business.

You should always have contracts and invoices available for your customers, and you can create them with just a few clicks on your computer. Even if you're doing repairs, it's important to work from an invoice so that your customers will know how much they owe you.

It also helps to have a website created by professionals who specialize in these kinds of services. If someone is searching online for an HVAC contractor, they'll expect to see a site that looks modern and informative. That way, you can reach out to potential customers before they even contact you about your services.

You need all of the supplies and equipment necessary for heating and cooling systems, such as thermostats and circuit boards. It's also a good idea to stock up on filters and other supplies, such as window insulation for older buildings.

To complete repairs, you'll need an assortment of tools that includes screwdrivers, hammers, and tape measures. You should always have these items around because they can come in handy the next time one of your customers experiences an HVAC emergency.

There are often times when HVAC systems can't be repaired and need to be replaced with new ones. This is the most expensive service that you'll provide for your customers, so you must be ready in case they ask for a replacement system. Consider how much money you have and what kinds of loans or other financial assistance you can take out before you start stocking up on new heating and cooling units.

There are several ways to promote your HVAC business, including flyers, word of mouth, and social media. Write a press release about your company's grand opening or other major events, then distribute them in person or post the information online. If you have a long list of customer reviews, you can create a website that focuses on those testimonials.

You may need to hire employees to meet the needs of your customers. Once you have enough staff members on hand, it might be time to rent an office space to separate work life from home life.


 

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