How to Start an HVAC Business: Priceless Tips from Experts
So long as people need heat, air conditioning, and ventilation, HVAC professionals will have a foothold in the market. So if you’re thinking of starting your own HVAC business, or are already in the industry, you’re setting yourself up for success.
Plus, you should expect good times moving forward. Demand for HVAC professionals is expected to grow 15% until 2026. If that isn’t convincing enough, Marc Brewer, Owner of DALCO HVAC in Colorado, explains that the industry is in such high demand due to regular labor shortages. He explains that there are a lot of opportunities, “it’s a seller’s market versus buyer’s market.”
If you’re ready to jump into this line of work, then read on. We’re covering everything you need to know to get your HVAC business off the ground and become profitable.
Seven steps you need to take to start an HVAC business
- Get your HVAC licence and make sure you’re aware of local license laws
- Find a business partner who can help you build your business on a technical or administrative level.
- Get your HVAC business off the ground by establishing your company name, getting your business registered, insured, and set up your online presence.
- Create your business plan and your pricing strategy.
- Find a niche in your city and choose your market to focus your client base.
- Work on a customer service strategy that will set you apart from the competition.
- Set your company up for success with HVAC business tech like Jobber.
- Start marketing your business to get your first clients.
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1. Get your HVAC license and be aware of local laws
This always needs repeating: HVAC is a highly regulated trade and most professionals need a license to work in the industry. Sometimes refrigeration and cooling requires more certifications that heating and ventilation does because of environmental concerns and regulations.
Before you start a business or begin hiring technicians, make sure you’re up to date on your state’s HVAC license requirements. If you’re not certain, search “[your state] + HVAC license regulations” on Google.
If you’re missing trade licenses and certifications you can start a course or program at a local trades college to meet the requirements.
2. Work with a technical or administrative partner
Once you’ve brushed up on your trade requirements, it’s time to start thinking about how you’re going to get your business operating. What will your role be? How much do you want your business to grow? Will you need employees, like techs and administrative assistants?
All the HVAC pros we’ve spoken to have stressed the importance of working with a partner. Van Wu, Co-Owner of Trust Home Comfort Ltd. explicitly says that “you need a good technical partner if you want to start an HVAC business.”
Van explains, “most businesses are started by people with licences but lack office and administrative skills. They end up spending too much time in the field to make money.” Despite their great technical skills, they lack customer service skills which causes their growth and success to suffer.
One partner needs to be business savvy, while the other partner needs to have a lot of technical experience. The truth of the matter is that you can’t effectively operate an HVAC business without both people. You’re going to want to find a reliable business partner to get started with.
Tip: If you’re new to the HVAC industry, you should work for another business for a year or two to learn the ropes. Scheduling, dispatching, and business operations are tough to learn on your own, but seeing an experienced business owner work can help you get a feeling for what skills you need to work on to run a successful business. Once you’re familiar with the ropes you can consider hiring a virtual assistant, or try using an easy HVAC software like Jobber that will automate all your operations for you.
3. Get your HVAC business registered, ensured, and online
You might be excited to start working, but first, you need to make your business official. An official business will operate within the law, which can save you headache in the long run, and help your marketing.
Before you start investing time and money into registering your business and getting insurance, spend a few hours working out the technicalities:
- Your business name. Choose something that sounds professional and describes your services, your name, your values, or your city of operation. For example, Trust Home Comfort Ltd., DALCO HVAC, or VMech Mechanical Contractors. Make sure you’re happy with your business name because you’ll use it for your contact information, marketing, and business registration later on.
- Contact information. You’ll need a business phone number and email. Make sure your email contains your company name and your name, if possible. For example, [email protected] Here’s some great resources to help you set up a Gmail account or a custom email domain.
- Business address. You might not be ready to invest in a separate office space just yet. That’s okay. However, you should purchase a P.O. box. You’ll be able to use this address to register your business and separate your business from your home address (this is helpful for those who wish to get an LLC).
Technical business rules vary between states and provinces, so do your research. Ask your local city hall about how to start a business in your city. Here are some standard best practices:
- Business license and registration. This helps you ensure you’re operating within local laws and regulations. With your business license you can get your business tax number, which helps you keep your business above board and avoid issues if you’re ever audited.
- Trade License. You need your trade license in most states before you can start performing work in the HVAC industry. Without it, you could face serious penalties and fines.
- Business insurance and bonds (LLC). Insurance and bonds helps you protect and separate your personal assets. For example, your personal assets will be protected if you accidentally cause damages to your clients’ property.
It’s important to do everything right the first time, even if it means it’ll cost you a bit more money up front. Spending the money up front could save you thousands of dollars in legal fees and fines down the line. If you’re not sure how to start your business professionally, speak to a consultant or business advisor. There’s no shame in that!
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4. Create your business plan and pricing strategy
You’re probably wondering how much it costs to run an HVAC business. The answer isn’t simple because every business is different.
We asked Marc Brewer, owner of DALCO HVAC, how much it costs to run an HVAC business and here’s what he said:
“Every business is different. For example, my little HVAC business of myself plus four sub contractors needs to make $720,000 a year before I’m able to pay myself. That means I need to make $60,000 a month to start making money. I need to clear that, guaranteed.”
Marc didn’t just pull this number out of the blue, though. It took a lot of trial and error and calculations.
“I figured it out using different methods. I decided not to obsess over monthly income in my annual business statements. Instead, I compared each month on an annual term (for example, this March to the year previous) to see if the top and bottom line numbers improved or not. I didn’t change my proposal and accounting overhead if something had changed from the previous month. That doesn’t make sense because business is seasonal, so monthly comparisons are not helpful.”
I didn’t change my proposal and accounting overhead if something had changed from the previous month. That doesn’t make sense because business is seasonal, so monthly comparisons are not helpful.
What are HVAC business overhead costs?
Marc suggests looking at your year end income statement and at your overhead. Then you need to divide it by 260 (daily workdays in the month) or divide it by 12 (for a monthly breakdown). From there you can figure out how to use that money to run your business. Some people will use overhead to buy products, others will use it for marketing.
Another option is to look at the number of motor bearing units you’ve sold in a year and divide the total price from the year you sold them at during the year into overhead cost of that year. This helps you understand your overhead to account for motor bearing unit cost.
How to deal with high and low seasons in the HVAC business
One of the biggest challenges within the HVAC industry are low seasons. “I’d say that four months a year you’re losing money for seasonalities. There are only eight profitable months, and four of eight are very profitable,” Marc explains.
The best way to work with these seasonalities is to understand how sales in high season makes up for low season. “Selling a furnace unit and AC in one day during the summer makes up for the slow time of the year. So even if you’re not working for a few days in slower months, higher volume months make up for any losses you have,” Marc explains.
“When you have enough people selling, you can cover your bases. Two installs a day might mean you’ve sold four motor bearing units, and therefore a day of profit and installs builds in the slow season,” Marc explains.
“Most homeowners don’t know why a bid is higher than another, but the reality is that half of the quote is supposed to cover overhead costs, but overhead costs differ. You need to ask yourself: am I running a lean business, or am I running a business with a fancy shop and tons of ads in the newspaper?” That will help you determine what you should be quoting clients.
5. Find a niche and choose your market
Finding clients seems like an easy task in a hot market, but it can still be a challenge if you don’t go in with a solid strategy. The easiest and most reliable way to find clients is to focus on a niche in your market. For example, you can choose to service residential furnace units in the suburbs of your city, rather than every type of unit across town. This strategy will help you improve your marketing efforts and focus your skill set, which will ultimately help you grow your business.
Luisa and Juan Vesga, Co-Owners of VMech Mechanical Contractors decided to take this approach. They decided to specialize in commercial HVACR.
Their first large customer was in the commercial space, which turned out to be a blessing in disguise. “The buildings were always a mess, and we created a solution for a problem we didn’t know existed,” Luisa explains.
As their commercial client base grew, they noticed that mechanical maintenance was often not top of mind for property managers. These were expensive buildings, right on the Miami beachfront.
Many mechanical contractors either didn’t have the knowledge to handle these large-scale messy jobs, or simply didn’t want them. Luisa and her husband, Juan, had the skills and the ambition to focus on this market. They pursued large-scale commercial HVACR projects from there.
Luisa explains that there’s a lot more competition in the residential market. Many homeowners are willing to hire less-skilled or even unlicensed contractors to save money. However, VMech competes on skill and service, not price. This allowed them to tackle the higher-end residential market as the business matured. She believes people were willing, even happy, to pay for the licensed technical knowledge and thoughtful customer service that the VMech built its reputation on.
6. Strategize your customer service approach
Believe it or not, but customer service is going to one of the most important differentiators between your business and your competitors. Our community of HVAC professionals all say that customer service should be your number one priority.
Here are two ways our experts suggest you can provide great customer service in your business model:
Hire the right employees who uphold your values
Lusia Vesga explains that VMech aims to stand out by providing impeccable customer service with a human touch. As a result, she needs employees who uphold those values.
“We are clean. We respect the place. We wear boot covers. We leave chocolates with a note thanking the customer for allowing us into their home. I make sure that the people working for me are of the same mindset.”
These small things stand out to your clients who’ve experienced. HVAC techs showing up late with a messy uniform and bad manners. Even a little can go a long way, but we recommend going the extra mile. Word about your service will travel around town fast.
Building a good reputation online and offline pays off. I’d say that 40% of jobs come from referrals based on our customer service.
Offer your clients good service, empathy, and compassion
Van Wu understands the importance of going the extra mile. It’s what helped him grow his company from a small business to a successful business that everyone around town calls.
“Normally customers are mistreated by tradespeople because they think they know more than them, yet they lack good customer service skills to treat them well.” Van Wu’s team adds value by going beyond expectations by being helpful, completing extra services for free, and offering financing to his clients.
“We once had a senior who had a broken down furnace, no money, and no heat. All the other companies in town turned her down. But we looked into financing companies and options in the area. We look at all options to help our clients. It’s the right thing to do.”
7. Use HVAC business tech right from the start
If you’re going to start an HVAC business, then you need to get yourself and your business information organized.
Your best bet is to find software that helps you keep all your business and client information transparent across your team, accessible, and online.
For example, if your team goes to visit a client, they’ll need to verify their service agreement, know exactly what happened during the quoting process, or what the client’s system serial number is. If they can’t access this information immediately because it’s at the office, then their service call just turned into a half-day of back-and forth with the office administrator.
Van Wu says, “you need to consider a CRM system like Jobber. I found Jobber before I started business. You want to look professional, and this really helps.” Ultimately, a CRM (Customer Relationship Manager) helps you remain in the know with your client’s account history, while reminding you to finish up the invoicing process or call them for seasonal maintenance.
Marc seconds this point. He explains, “there was a bunch of tech that I tiptoed into to try and see what works. It would have been great to make those decisions at once right up front and save time, energy, and money.”
You need to consider a CRM system like Jobber. I found Jobber before I started business. You want to look professional, and this really helps.
8. Getting your first HVAC clients with marketing
We’ve written a whole guide on the ten best ways to market your HVAC business, so we won’t go into too much detail on how to market your business in this section.
Nevertheless, it’s not easy to get your first clients when you’re starting out. Juan and Luisa Vesga started where many small business owners do: with friends and family. Juan started fixing residential air-conditioning units for people they knew, and he had licenses to work on large and small units. “Then we started sending emails everywhere, we opened a Facebook Business page, and sent text messages to everyone we knew. We basically asked for help.”
Through word of mouth they connected with a client who needed an air-conditioning repair contact. It was a large property management company with 3000 houses on its roster. They landed the contract and started working.
“We became so busy that we had to hire someone just one year later,” says Vesga. “We were getting more and more calls on the residential side as well. One building recommended another building… That’s how we did it! All on recommendations.
”If you’re ready to start your own HVAC business, never forget the importance of customer service and reputation. It can be what makes or breaks your company.
Luisa says, “I believe we have to take care of the customers we already have rather than looking for new customers, because if you take care of them, they will recommend you.”
Have you started your HVAC business yet? What was your strategy? Share in the comments below!
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