How to Start a HVAC Business The Smart Way

April 19, 2021

Did you know that most small business owners (58%) started an independent business from scratch? If you never thought your goal of starting an HVAC business was attainable, this statistic is sure to change your mind. Keep reading to learn more about how you can start your own small business. We'll discuss everything you need from getting into an HVAC certificate program to getting your HVAC license, things to consider when starting a new company, and other business tips.

Getting started in HVAC industry

hvac business

Now is a great time to get into the HVAC industry if you're looking to help people maintain a comfortable temperature in their homes while saving money by making their homes more energy efficient. As a result of recent changes in energy efficiency standards, the HVACR industry is expected to grow even faster in the coming years.

The success of small businesses has many people wondering how to start their own. If you're a certified HVAC technician, you could start your very own HVAC business this year.

Read on to learn how to start an HVAC business the smart way.

Determine your value proposition

As an aspiring HVAC contractor, you may see there are already many commercial HVAC service providers available to you. You must determine how you want to differentiate yourself from other companies. Your goal is to develop an exceptional customer service plan and develop a competitive advantage to stand out from the rest.

Consider what HVAC services are offered to make your customers happy! Determine whether you will have fixed costs for services or other factors will determine the cost. Keep in mind that most customers are price-conscious and will compare different companies to save money. Moreover, homeowners rarely delay furnace or air conditioning repairs or replacements when they need them.

Create a pricing strategy

hvac pricing

After having a clear idea of your value proposition, start with calculating the overhead cost. First, make sure you open a separate bank account for your own business. When doing financial analysis for your new HVAC company, factor in equipment costs, rent, salary for your HVAC technicians, HVAC tools, air conditioning units, sales team, and other financial obligations you may have.  As a business owner, you can mitigate cash flow issues by slightly lowering your profit margin during the off-season.

See what HVAC companies in your region are charging and use this information to build your price strategy. Do a thorough search if needed. Get beyond the website by sending a quick email and making a phone call requesting details about their service or product. Developing competitive pricing strategies can be difficult, but it should never take too much time.

Learn from others in the industry

Mentors, coaches, and associations can be helpful when seeking advice. Look at someone who started their small business in the past and learn from the success and error of others. It is possible to find someone online who does this job for you by simply going online a search. Podcasting is another good way to listen and learn in the car. Podcasts are designed specifically for trade professionals looking into starting their businesses. Almost all smartphones come equipped with a Podcasting App or Spotify.

How much revenue does an HVAC business generate?

Typically, HVAC company sales range around $580K to $125 M yearly based on market statistics. After a successful HVAC business generates revenues, it earns only about 6% to 5% of its earnings. The result would be a relatively minimal wage: A new heating and cooling equipment manufacturing company making $1 million would make just $60,000 per owner. Even if you can maximize revenue earlier, it is unlikely for HVAC businesses to expect revenue beyond this estimate.

Know the cost of starting your own HVAC business

Understanding how to start a successful HVAC business begins with knowing how much money it takes. So, how much does it cost to start an HVAC business?

A startup can cost anywhere from $3,000 to $12,000 depending on the type of HVAC services provided and the necessary equipment. In terms of safety equipment and basic HVAC tools, new HVAC contractors typically invest $200 to $300.

Since you likely won't make a profit right away, you'll also need to consider ongoing operating costs. Crunching the numbers is not easy. When you begin creating a budget, don't forget to note how seasonality may affect revenue.

As a small HVAC business owner, you can plan to take home between 6% and 15% of overall revenue as a salary which adds up to around $71,900 per year on average.

However, it may take months or even a year before you can afford to pay yourself. Luckily, there is a demand for HVAC professionals as the industry continues to grow.

Create a successful HVAC business plan

HVAC business plan

The next step on how to start your own HVAC business is to create a business plan. This will act as the blueprint that focuses on your goals and outcome for success.

Without a clear business structure, you won't have a great chance of getting funding from banks or investors. Your business plan can start small by writing down everything that could help turn your business idea into a real deal.

Business Plan Outline

A business plan outline should include a cover page, executive summary, business overview, description, market analysis, business operations, marketing plan, and financial plan. Determine the service area you will cover, the distance you are willing to travel to a job site, and the conditions you will work in. Can you provide emergency repair service calls, or will you only be available during normal business hours?

Structure Your Business

Your cover page will simply be details of your company such as the business name, logo, address, and contact information. Make sure your business name is registered and unique.

An executive summary is about one page of income and expenses forecasts and how much funding you'll need. You may have saved up money for this exact moment and not need outside funding at all.

The overview should get into the technical details; the business structure and the type of business.

A description should explain your short and long-term goals and your mission statement. Provide a list of the services you plan to provide as well.

You must conduct a market analysis in your pricing strategy by researching the competition. Note how much your competition charges and how you can position your services differently from theirs.

In the business operations category, you'll need to describe how many employees it will take to get the job done. You should also include other needs like safety equipment, HVAC tools, operations software, marketing materials, and invoices.

Every great company has to establish strategies that will help to reach customers. You should have no more than four tactics ready to avoid overwhelming your startup.

Lastly, you'll need to provide detailed information about your HVAC business startup costs in the financial plan section. Do some math to figure out when you'll hit the break-even point.

This may sound like a lot, but these are just the basics to get you started. Start small, you don't have to go overboard with a startup pricing strategy.

Get the proper licenses and registration

hvac licensing

An HVAC business is not official until it operates within the law.

Because the HVAC industry is regulated, you'll need a business license to be able to service HVAC systems. The type of license required will depend on your business location and the HVAC specialties you plan to offer.

New HVAC business requirements may take a few hours to complete, but this is a necessary step to get started. To register your business, you'll need a business name, contact information, and business address.

The essentials of your new company

Your business name must sound professional and describe in some way the services you provide. Take the time to come up with a business name you'll be happy with. You'll be using it for a lot of things.

A business must have a working phone number and email address. The email should contain the name of the company.

If you haven't bought a space for your business yet, don't fret. Having a P.O. box will work just fine for registering your business. You shouldn't use your home address to register your business.

The technicalities of registering a business depend on the state you are in. You can contact your city to determine the requirements in your area to learn more about HVAC licensing.

Generally, these are the best practices to follow for starting an HVAC business:

Business Licensing

A business license will keep you operating within the local laws. A license can also give you access to your business tax number. If you're ever audited, this number will help you avoid issues.

Trade License

Before you get started, you need a trade license. Most states require this, but not all.

Without a trade license, you could face fines and penalties and risk losing your business. Doing this right the first time can save you from spending more money down the line.

Business Insurance and Bonds (LLC)

Insurance and bonds will protect and separate your business from your personal assets. If you cause damage to a client when performing work, your personal assets won't be involved.

Marketing your business

hvac business marketing

If you start a business without a marketing plan, chances are, no one will know your business exists. Promotion should begin before your business opens and throughout the life of the business.

You don't need to have a huge marketing budget when you are first starting. The most important things your budget should include when it comes to marketing your startup are:

  • Getting referrals from friends and family
  • Creating an HVAC website
  • Building a Facebook business page
  • Generating quality leads

Creating an HVAC Website

Having a website is one of the more important things your marketing budget needs to include when you start. Without a website, you won't have an HVAC business online presence.

You need to purchase a custom domain. Many website building platforms offer this as a monthly or yearly fee.

Online marketing works even in HVAC Industry

If you are an HVAC technician, you may not have the skills necessary to build a well-working website. Even though some platforms are easy to use, hiring a company to complete this task for you may be your best bet.

Your website should have the basics like a company logo, business email account, a work request form, and a place for customers to leave reviews.

The TrueReview system makes it easy for happy customers to leave a review. Customers who are unhappy with your service will have a place where they can provide direct feedback to avoid leaving a negative review on your site.

Your website must also be optimized for mobile use. Many consumers search for HVAC services on their phones or tablet devices. Desktop and mobile are equally important website versions.

Digital Marketing for HVAC Businesses

Most small HVAC business owners know that when you start a new business, you have to have a competitive advantage over other HVAC companies who are competing for the same target market as you. Having the right marketing strategy will help your business appear in front of as many potential customers as possible. This in turn will get you more new customers which means more money for your business.

With so many people using online tools when searching for HVAC services, it makes sense to be visible on as many social media platforms as possible. Reaching your target market will be easier with social media. Create listings and pages of your HVAC company on Facebook, Yelp, Google My Business and other popular websites.

Find the Right HVAC Business Tools

Finding the best HVAC business tools and software may not seem like something you need to implement right away. However, the sooner you set them up, the smoother your business will run.

For example, if you lose just one invoice, it can cost you thousands. Don't let this be an issue and set up business tools right away.

There are many different tools out there so it can be hard to choose the right ones. A great place to start is with a client relationship manager (CRM).

The great thing about CRM software is that you can add to it later when your business grows. It will help you track needed client information that you may not be able to keep up with on your own.

You should also look for an easy-to-use bookkeeping and scheduling tool to start your business with.

Hire the right people

Small business owners often find it difficult to attract enough employees. It is important for a contractor to learn how to build their team and understand their roles. For your company to succeed, you need to hire skilled HVAC technicians as they will be the face of your company. You can also hire HVAC contractors but may run a risk of not getting the best talent, so make sure to do your research if you decide to go the HVAC contractor route.

Build a Standard for Customer Service

The above steps will help you create a profitable HVAC business. Yet, without a customer service plan in place, you won't have much business at all.

Those looking for HVAC companies use customer service as a tool to differentiate one company from another.

With a great standard of customer service, you make it more likely that current customers will recommend you to the people they know. Word of mouth is one of the best marketing techniques you just can't buy.

To make customer service a strong value of your company, hire employees you can trust to maintain the standard. When dealing with clients, every member of the team should act with compassion and empathy.

How to Start a HVAC Business the Smart Way Explained

Understanding how to start a successful HVAC company means nothing if you aren't willing to put in the work. You can start small as long as you focus on the areas that matter most to a startup.

If you truly want your business to be successful, following the tips in this guide can help. From there on out, upholding business standards and generating leads through marketing techniques is key.

To finalize, starting an HVAC business can be slightly challenging at times but it's a great business to start especially if you are a skilled HVAC professional.

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