We earn commissions if you shop through the links below. Read more
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on January 24, 2022
Investment range
$10,050 - $25,100
Revenue potential
$78,000 - $800,000 p.a.
Time to build
1 – 12 months
Profit potential
$70,000 - $200,000 p.a.
Industry trend
Growing
Commitment
Full-time
These are the critical aspects you should evaluate when launching your HVAC business:
Starting an HVAC business has pros and cons you should consider before deciding if it’s the right path for you.
Trends in the HVAC industry include:
Some challenges also exist in the HVAC industry which include:
Startup costs for an HVAC business range from $10,000 to $25,000. The main costs are HVAC education and certification, tools, and a down payment on a van or truck. You can take courses online, such as with industry leader HVAC school, and be certified in 6 months.
You’ll need a handful of items to successfully launch your HVAC business, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100-$300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| HVAC training and certification | $5,000 - $15,000 | $10,000 |
| Tools | $2,000 - $3,000 | $2,500 |
| Truck or Van down payment | $1,500 - $3,000 | $2,250 |
| Total | $10,050 - $25,100 | $17,575 |
Prices for HVAC services range from $75 to $150 per hour. If you work by yourself, your profit margin should be about 90%.
In your first year or two, you could work from home and work 15 hours a week at $100 per hour, bringing in about $78,000 in annual revenue. This would mean about $70,000 in profit, assuming that 90% margin. As your brand gains recognition, sales could climb to 100 hours per week and you could raise your prices to $150 per hour. At this stage, you would rent a commercial space and hire staff, including other technicians, reducing your margin to 25%. With annual revenue of nearly $800,000, you’d make a tidy profit of $200,000.
There are a few barriers to entry for an HVAC business. Your biggest challenges will be:
Now that you know what’s involved in starting an HVAC business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research HVAC businesses in your area to examine their products/services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a 24/7 HVAC service provider.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as eco-friendly products and services.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Your service list will be determined by your skills and those of your employees. You might be fantastic with furnaces but not so great with air-conditioners. You could decide to just do repairs or do repairs and installations.
Prices for HVAC services range from $75 to $150 per hour. Working by yourself, you can expect a profit margin of about 90%. Once you hire employees and have a physical location, you should aim for a profit margin of at least 25%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be very broad, but it will be mainly homeowners and landlords, who tend to be more established people. You can find them on sites like Facebook and LinkedIn. You could also partner with general contractors to get subcontractor work or connect with realtors who can give you referrals.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office or repair facility. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider finding and hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to HVAC businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your HVAC business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding an HVAC business.
Starting an HVAC business requires obtaining a number of licenses and permits from local, state, and federal governments. In most states, you will need a contractor’s license. You can find your state’s requirements on their website.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your HVAC business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You can use industry-specific software, such as servicetrade, VIIZR, or connecteam, to manage your schedule, dispatching, workflows, and communication.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your HVAC business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your HVAC business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a hearing repair service, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in heating and cooling for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in HVAC services. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an HVAC business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Heating and cooling technicians provide a complex and necessary service to the community, which is why they are paid good money. Running your own HVAC business can be liberating and rewarding, and the cash you make will feel pretty good too. It’s a business that you can grow over time and eventually take over the heating and cooling market in your area.
Congratulations on completing your business homework, you’re now ready to launch your entrepreneurial adventure!
You can charge up to $150 an hour for HVAC services, so it can be very profitable, even if you work as a solopreneur. You can start small, hire more techs later, and have profits into the six figures. The sky is the limit!
The average hourly rate for HVAC techs is about $25 per hour. You should check rates in your area to make sure that the rates you pay are competitive.
To increase HVAC sales, you can focus on building a strong online presence through social media and a website, offering promotions and discounts to attract new customers, and leveraging customer referrals and word-of-mouth recommendations.
To ensure the quality and reliability of your HVAC services, you should hire certified and trained technicians who have the knowledge and experience to diagnose and repair complex HVAC issues.
To differentiate your HVAC business from competitors in the market, you can focus on providing exceptional customer service, building a strong reputation for expertise and quality workmanship, and offering unique value-added services such as energy audits or smart home automation solutions.
Several HVAC manufacturers produce highly efficient systems, including Carrier, Lennox, Trane, and Rheem. The most efficient system will depend on several factors, including the size and layout of the building, the climate and weather conditions, and the specific needs and preferences of the customer.
Published on September 4, 2022
Mechanical engineers are often problem solvers and innovators, which are skills that can be crucial to entrepreneurial success. If you’re amec ...
Read Now
Published on July 13, 2022
Nearly two out of three US businesses were started by men, including many of the country’s biggest firms, like Microsoft, Walmart, Ford,Facebo ...
Read Now
Published on July 13, 2022
As the US economy regains strength in the wake of the pandemic, the construction industry is anticipating strong growth with plenty ofopportunities, ...
Read Now
No thanks, I don't want to stay up to date on industry trends and news.
Comments