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How to Start an HVAC Business

Written by:

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 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.

How to Start an HVAC Business

Fast Facts

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

Everybody needs heat in their homes, and most of us have air conditioning as well, which explains why the US’ heating, ventilation, and air conditioning (HVAC) industry is worth a massive $120 billion. 

If you’re an HVAC technician, you already know how in-demand your services are. You could start your own HVAC business and keep all the profits. Even if you’re not an HVAC tech, you can get certified in a matter of weeks, start a business and make a good living.

It’s a challenge, however, to start a business. You need to learn the ins and outs of the business world, as well as those of furnaces and air conditioners. Luckily, all the business homework you need is in this step-by-step guide, which should put you well on your way to being an HVAC entrepreneur.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting an HVAC business has pros and cons you should consider before deciding if it’s the right path for you.

Pros

  • Good Money – HVAC services cost up to $150 per hour
  • Steady Demand – Somebody always needs repairs
  • Provide Value – HVAC repair is a critical service for people in need

Cons

  • Training Required – Courses and certification are necessary
  • Odd Hours – Emergency service is sometimes needed

HVAC industry trends

Industry size and growth

hvac industry size and growth

Trends and challenges

hvac industry Trends and Challenges

Trends in the HVAC industry include:

  • Eco-friendly products, such as geothermal heat pumps, are in greater demand. 
  • Technologically advanced products, like smart furnaces, are also increasingly popular.

Some challenges also exist in the HVAC industry which include:

  • Changing technology means HVAC professionals need to continue their education to keep up.
  • The number of people working in the HVAC industry is increasing, creating more competition.

What kind of people work in HVAC?

hvac industry demographics

How much does it cost to start an HVAC business?

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: 

  • Hammers
  • Screwdrivers
  • Pliers
  • Tape measure
  • Crescent wrench
  • Flashlight
  • Drills
  • Pipe wrench
  • Core removal tool
  • Coil fin straightener
  • Thermometers
  • Multimeter
  • Pumps
  • HVAC load calculator
  • Thermal imaging tools
  • Psychrometer
  • Nitrogen regulator
Start-up CostsBallpark RangeAverage
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

How much can you earn from an HVAC business?

HVAC business earnings forecast

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.

What barriers to entry are there?

There are a few barriers to entry for an HVAC business. Your biggest challenges will be:

  • Completing the required education and getting certified
  • Facing increased competition as the number of HVAC techs grows

Related Business Ideas

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Step 2: Hone Your Idea

develop a business idea

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.

Why? Identify an opportunity

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. 

What? Determine your services

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.

How much should you charge for HVAC services?

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.

Who? Identify your target 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.

Where? Choose your business premises

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:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
hvac business idea rating

Step 3: Brainstorm an HVAC Company Name

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “heating and cooling”, boosts SEO
  • Name should allow for expansion, for ex: “Air Comfort Solutions” over “Humidity Control Solutions”
  • A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

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. 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.

Step 4: Create an HVAC Business Plan

Here are the key components of a business plan:

what to include in a business plan
  • Executive Summary: Summarize your HVAC business’s goal to provide efficient, reliable heating, ventilation, and air conditioning services, focusing on installations, repairs, and maintenance for residential and commercial clients.
  • Business Overview: Describe your business’s specialization in HVAC services, including system installation, routine maintenance, repairs, and energy efficiency upgrades.
  • Product and Services: Detail the range of services offered, such as HVAC system installations, emergency repairs, regular maintenance, and energy-efficient upgrades.
  • Market Analysis: Assess the demand for HVAC services in your area, considering factors like climate, building construction activity, and existing building infrastructure.
  • Competitive Analysis: Compare your services to other HVAC companies, focusing on your strengths such as technical expertise, customer service, or specialization in certain systems.
  • Sales and Marketing: Outline your strategy for attracting clients, including digital marketing, partnerships with construction firms, or offering seasonal promotions.
  • Management Team: Highlight the qualifications and experience of your team, especially in HVAC technology, project management, and customer service.
  • Operations Plan: Describe the operational process, including client consultations, service scheduling, equipment procurement, and service execution.
  • Financial Plan: Provide an overview of financial aspects, covering startup costs, pricing strategy, and projected revenue.
  • Appendix: Include supplementary documents such as licenses and certifications, service agreements, or detailed market research to support your 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.

Step 5: Register Your Business

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! 

Choose where to register your company

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. 

Choose your business structure

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:

types of business structures
  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

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. 

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Step 6: Register for Taxes

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.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

types of business financing
  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding an HVAC business. 

Step 8: Apply for HVAC Business Licenses and Permits

Business Licenses and Permits

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.

Step 9: Open a Business Bank Account

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. 

Step 10: Get Business Insurance

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:

types of business insurance
  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

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. 

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop your website

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.

Marketing

Here are some powerful marketing strategies for your future business:

  • Local SEO Optimization: Ensure your business is easily found online by optimizing for local search engine optimization (SEO) — list your business on Google My Business, use relevant keywords, and encourage satisfied customers to leave positive reviews.
  • Referral Programs: Implement a referral program that rewards existing customers for referring new clients. Word-of-mouth recommendations carry significant weight in the HVAC industry, and incentivizing referrals can boost your customer base.
  • Seasonal Promotions: Create targeted promotions and discounts based on seasonal demands. Offer preseason check-ups, discounts on air conditioning services in the summer, and heating system promotions in the winter to attract customers when they’re most likely to need your services.
  • Social Media Engagement: Leverage social media platforms to engage with your audience. Share maintenance tips, highlight successful projects, and run contests to increase brand visibility. Social media provides a direct channel to connect with potential clients.
  • Partnerships with Local Businesses: Forge partnerships with local businesses, such as real estate agencies, home improvement stores, or property management companies. Offer them special rates or referral incentives to encourage collaboration and expand your reach.
  • Educational Workshops: Host workshops or webinars to educate homeowners on HVAC maintenance, energy efficiency, and the benefits of regular servicing. Position your business as an authority in the field, building trust with potential customers.
  • Customer Loyalty Programs: Implement a customer loyalty program to reward repeat business. Discounts on future services, priority scheduling, or exclusive offers can incentivize customers to stick with your HVAC services over the long term.
  • Strategic Community Sponsorships: Sponsor local events, sports teams, or community initiatives to enhance your brand’s visibility and goodwill. This not only supports the community but also establishes your HVAC business as an integral part of the local fabric.
  • 24/7 Emergency Services Promotion: Emphasize your availability for emergency HVAC services. Highlighting 24/7 availability can set your business apart and attract customers who value reliability and immediate assistance.
  • Optimized Vehicle Branding: Ensure your service vehicles are prominently branded with your logo and contact information. A well-branded vehicle serves as a moving advertisement, reaching potential customers as your team travels to job sites.

Focus on USPs

unique selling proposition

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:

  • 24/7 heating and cooling service
  • Save the planet with green heating and cooling 
  • The smartest furnaces and air-con in town! 

Networking

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. 

Step 12: Build Your Team

Building a Team for a New Business

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:

  • Technicians – HVAC services and installation
  • Dispatcher – dispatch techs to jobs
  • General Manager – scheduling, staff management, accounting
  • Marketing Lead – SEO strategies, social media, other marketing

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. 

Step 13: Run an HVAC Business – Start Making Money!

Running a Business

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!

HVAC Business FAQs

How profitable is an HVAC business?

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!

How much should I pay my business’s HVAC techs?

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.

How can I increase my HVAC sales?

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. 

How can I ensure the quality and reliability of my HVAC services?

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. 

How can I differentiate my HVAC business from competitors in the market?

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. 

Who makes the most efficient HVAC?

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.

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How to Start an HVAC Business