If you’re mechanically inclined, have a talent for troubleshooting, and are looking for a business that you can grow over time, then starting an HVAC business might be the right option for you. You might currently be working as an HVAC technician and want an opportunity that gives you more independence and control over your work, but if you don’t have HVAC experience, you can still enter this industry with the right training. When you start an HVAC business, you’ll be entering a field where there’s plenty of demand. And, with the need for system maintenance and repair, as you build your customer base, you can be assured of plenty of future work.
HVAC businesses travel to homes, apartments, and commercial buildings to install, replace, maintain, or service heating, ventilation, and air conditioning (HVAC) systems. HVAC technicians have the specialized knowledge and skills needed to work on these systems. Some businesses may focus largely on installing new systems, while others may offer a combination of installation plus maintenance and repair. Because maintenance needs to be done regularly, businesses can build up a roster of returning customers for a more stable, ongoing base.
With the recent growth in the construction industry, the HVAC industry has grown, as well. IBIS World reports that from 2014 to 2019, the industry experienced a 2.4 percent annual growth, and the number of businesses increased to 112,154. Industry employment also grew to 518,714, and in 2019 the industry brought in $97 billion in total revenue.
That growth is largely spurred on by increased residential construction. During that same five-year period, residential construction increased at a 3.5 annualized rate, and low-interest rates also led to increased home buying. With more homes being built, the need for HVAC installation increased. Disposable income also increased during that time, meaning more families were able to buy homes and had the money to invest in HVAC installation or renovation.
Many trends are shaping the HVAC industry. According to AeroSeal, single-family homes make up 28 percent of the United States HVAC industry. Apartment buildings account for 6.1 percent, while healthcare industries make up 13 percent of the industry revenues. Other leading components include manufacturing and industrial applications and office building applications, which account for just over 10 percent of the industry’s revenue.
Technology is also driving changes in this industry. An increased focus on energy efficiency has led to refined equipment. With big data and analytics offering in-depth information on buildings and their energy usage, HVAC systems should continue to become more efficient with more precise installations in the future. Building managers are using technology, like smartphone apps, to control lighting and ventilation in their buildings. HVAC businesses can also embrace this technology by using online marketing, widgets, and other tools to connect with potential customers who are researching these systems online.
HVAC businesses focus on different target markets. Some businesses provide mostly residential services, so they’ll market to homeowners or builders who create new houses. Others offer more commercial services, and they will market to a healthcare facility and other commercial business owners. HVAC businesses offer a specialized service with skills and equipment that your average homeowner or business owner doesn’t possess, so these businesses can truly market to nearly anyone with an HVAC system.
Skills, experience, and education useful in running an HVAC business
You won’t necessarily need a business degree to start an HVAC business, but if you have certain skills and experiences, the process of starting your business can be smoother and easier.
Math and physics knowledge. An understanding of math and physics will be helpful in learning this trade and understanding how HVAC systems work.
HVAC training. HVAC technicians need to receive training, which is offered at community colleges and trade schools. According to Career Trend, this training can take between six months and two years to complete. A technician can also choose to work as an apprentice for three to five years, but this option offers the benefit of both work and training.
Sales skills. To be successful, the owner will need to have confidence and talk with potential clients in order to sell projects.
Problem-solving skills. Technicians who repair systems will benefit from strong problem-solving skills. An “up to the challenge” attitude can also be helpful when working on a challenging repair.
Attention to detail. This work is highly detailed, especially when cleaning, inspecting, and repairing heating and cooling systems.
Customer service skills. A business owner will need to engage with customers, schedule appointments, provide updates, and answer customer questions. Experience in customer service is highly valuable in this industry.
Management experience. For businesses that hire HVAC technicians, management experience is important. A business owner will need the skills to hire, train, and effectively manage employees.
Amazon has several books that go into detail on starting and running an HVAC business:
101 Ways To Suck As An HVAC Technician (Free on Amazon Kindle Unlimited)
Make More Money: 12 Profit Pillars For HVAC Contractor Success
Build and Grow Your HVAC Business: How I Turned $274 into a Multi-Million Dollar Company
The E-Myth HVAC Contractor: Why Most HVAC Companies Don’t Work and What to Do About It
The Only Guide to HVAC Sales
Costs to Start an HVAC Business
The cost of starting an HVAC business will depend on the size of the business and your existing resources. You can start an HVAC business on a budget between $2,000 and $10,000 if you already have your own vehicle. If you’re purchasing a vehicle and outfitting a business with extensive equipment, plan to pay closer to $50,000 or $100,000 in startup costs.
Common startup costs include:
- Supplies and tools
- Inventory (repair parts)
- Company vehicles, like a van or truck
Steps to Starting an HVAC Business
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write an HVAC business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2: Form a Business Entity
A business entity (sometimes called a business structure or legal entity) refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
Related: Comparison of Business Entities
Step 3: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
It’s possible to start a small HVAC business out of your home, using your garage or another area to store extra inventory. As your business grows, you may need to rent a larger space or garage to store vehicles and equipment. Exact rental costs will depend on the building’s size and location.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Some states require HVAC businesses to obtain a state contractor’s license, while others don’t. The requirements for acquiring a contractor’s license is generally four years or more of Journeyman-Level HVAC experience, in addition to a state test.
Even in those states with no requirements, local areas may require licensing to do work, so it’s important to check first before opening your business or starting a job.
In addition to HVAC related licensing, there may also be additional business registrations depending on where the business is located, such as a sales tax permit, Employer Identification Number, and Occupancy Permit.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start an HVAC business is another. Funding to start an HVAC business can be difficult. To get a loan, the borrower(s) will need to have good credit and personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the business’s income and expenses.
Step 8: Get your Marketing Plan in Place
Marketing is an essential and ongoing activity for HVAC businesses. Businesses that offer repair and maintenance can develop repeat customers, but businesses that install systems need a steady supply of new customers. Common marketing options include print advertising, direct mail, radio advertising, and online marketing using social media on Facebook and Instagram, or sites like Google My Business, Yelp, Angie’s List, etc. However, the cost of each activity will depend on the activity type and the volume of marketing performed. Business owners who can do some or all of their marketing can reduce the cost of hiring a professional marketer.
Step 9: Get Business Insurance
An HVAC business will need multiple types of insurance:
- General liability insurance protects the business if customers are ever injured due to the business’ work. This insurance helps to protect the business in the event of a lawsuit.
- Commercial property insurance protects the business against the financial loss it could face if its inventory or equipment is damaged in an event like a fire.
- Commercial auto insurance covers legal fees and medical bills resulting from a company-owned vehicle in an accident.
- Worker’s compensation insurance covers medical bills, lost wages, and other expenses that could occur if an employee were injured while on the job.
The cost of insurance policies depends on many factors, including the business’ location and the number of employees on staff. To get an accurate idea of what insurance will cost, request quotes from multiple insurance companies. When comparing the quotes, consider factors like the premiums, deductibles, policy exclusions, and coverage.
Step 10: Hiring Employees
A smaller HVAC business may have just one truck and one technician, who is the business owner. As a business grows, it may be necessary to hire additional HVAC technicians. According to PayScale, HVAC technicians earn a median of $21.08 per hour, while some earn as little as $14.39 per hour, and others earn as much as $31.65 per hour. The salary range is often linked to a technician’s experience, and those with over 20 years of experience tend to be the technicians who earn over $27 per hour.
While HVAC certification isn’t required in all states, it does make an HVAC company more competitive by having certified employees.
In addition to budgeting for salary expenses, the payroll budget also needs to include workers comp insurance, paid time off, and health insurance contributions for employees.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your HVAC business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
How much can you potentially make owning an HVAC business?
HVAC business owners typically make between $35,000 and $70,000 each year, according to Success Group International. Factors like the service area covered, the number of employees a business has, types of work that the business specializes in will all affect the business’ income.
While system installs bring big dollars, those sales are often sporadic. The key to a profitable HVAC business is securing preventative maintenance contracts. PMAs also provide stability and even out some of the seasonal fluctuations in sales.
Things to consider before starting an HVAC business
If you’re already working as an HVAC technician and want to start your own HVAC business, it’s important to realize that running a business requires different skills than working on HVAC systems daily does. HVAC business owners told The News that many HVAC technicians want to start their own business but underestimate the necessary business skills needed. Integrity, the ability to pay your employees well, and the skills and willingness to shift and change focus with changing market demands are all essential skills of any HVAC business owner.
As your business grows, you may need to find ways to draw the line between your responsibilities and those of your employees. If you’re a technician, you may find yourself being pulled into jobs when your time would better be spent on marketing and other management tasks. While being a technician offers valuable firsthand experience in the industry, making the transition from technician into a business owner can be a challenge in itself for many.
Air Conditioning Contractors of America
Air Movement and Control Association
American Society of Heating, Refrigerating and Air-Conditioning Engineers
Indoor Environment Energy Efficiency Association
International Institute of Refrigeration
Refrigeration Service Engineers Society