October 31, 2022
It’s definitely possible to make a lot of money in HVAC. The global market size is expected to reach $288bn by 2077, with revenue up to almost $456bn the following year. The leading US HVAC company alone hits above $10bn in revenue a year, and air conditioner shipments in the US have stayed between three and seven million per year for two decades, and are on the increase since 2010.
So there are a lot of incentives for learning how to start your own HVAC business. However, it’s a competitive industry, and the costs of doing business are rising too. This means that without a good plan of action, many startups will fall flat.
Fortunately, we’re here to help, and this article should be able to get you started with what to think about before you begin starting an HVAC business of your own, and how to go about getting off the ground. Let’s dig in.
The HVAC Industry: Why Start a Heating and Cooling Business?
If you’re still on the fence, it’s worth considering some of the perks and drawbacks of getting involved in this particular industry, to help you make up your mind.
The first thing to consider is that the startup costs of a company like this aren’t so high, and that makes finding funding and getting yourself off the ground a whole lot easier than with certain other industries. It also reduces financial risk!
Then there’s the salary: once you’re up and running, and as long as you’ve done things right, you should be bringing in a decent income, too.
As a founder, you’ll also have full control over the direction of your company, and this brings a lot of benefits relating to your independence and freedom to act and make decisions. Do note though, that complete control might be sacrificed to some degree if you take on investors!
This independence does come with a flipside, though. The same freedom to make decisions stems from the responsibility to do so; something which falls solely in your lap, so there’s no going home at 5 pm and leaving the decisions to your managers. You will have a legal and financial responsibility to the entity that you create, and this comes with a lot of work, especially at the beginning.
You’ll also probably have to dive in and get your hands dirty. If you’re looking into how to start an HVAC business, you’re likely experienced in this already, but don’t be mistaken in thinking this will be an easy ride; you’ll need to lead by example in the early stages, at least.
If all this sound well within your capabilities, let’s move on.
How to Start an HVAC Business
Starting an HVAC business involves a series of steps. We’ll outline and describe them here, and then go into some more detail about the business model and planning stages. Each step is as important as the next, however, so don’t be misled into thinking anything can be skipped!
1. Start on your business plan. Your business plan is more than just a reference document of your company information, it’s a collated record of your research and your forecasted business success. It will involve everything from the hardware you need to buy to the services you provide and a detailed understanding of your financial prospects too. We have a whole section on this coming up, so if it sounds confusing, don’t worry!
2. Register your company. This means finding your name and making the company a legitimate entity. The path to take here will depend on whether you’re going to register as a sole trader or as a partnership. Then, decide whether you’ll be making it a Limited Liability Company. All of this will likely depend on your business model, which we will cover later. Make sure you get the appropriate licensing for what you’re planning to do.
3. Gather funds. Now is the time to get your money together to start up. There are loads of options for this, especially with something as cheap to set up as an HVAC business. You can go small or go big, and this will depend on your experience and your research. We’ll go into those more in detail later too!
4. Get Certified. If you don’t have this already, this is about the latest time you should be getting it. A NATE certification can go a long way to impressing investors and gaining customers but there are also HVAC Excellence, HVAC Quality Installation Standard, and the environmental protection agency’s EPA 608 certification that you might want to consider.
5. Buy your equipment. This is pretty self-explanatory. You’ll need hardware to do your job. Whether this includes a vehicle or not depends on what you’ve got already. If you’re mostly going to work as a service tech, it’ll be mostly tools. If you’ll be installing and vending, you’ll need some stock too.
6. Promote your Services. This is where the information from your business plan will come in handy. You’ll have to find your ideal customers and present your services where they’re looking. Around about this time is when you should be at least interviewing, if not hiring your new staff.
7. Hire your techs. In an ideal world, you’ll pay for the best, but for startups, you might have to take what you can afford. If this is the case, focus on potential rather than dazzling resumes, and consider training good people on the job as apprentices.
That’s more or less the process of starting an HVAC business but each stage comes with a lot to manage, so it’s worth breaking some of them down for a closer look. The major, most complex components of this process are generally the financing, the marketing, and the business plan. Let’s take a look at what goes into those.
The Business Model for Starting an HVAC business
You’ll probably have a name before you have a business model in mind. We touched on some of the elements of an HVAC business model earlier, but it’s worth expanding on them. You can approach your business in a couple of ways, and they differ mainly in how many people are going to be involved.
If you’re going to be a sole trader, you’ll have complete control over everything from what you sell, to when and how you scale up. If you’re starting with partners, you’ll be registering as a partnership, and this comes with its own benefits of spreading the workload, but will reduce the power of your voice when it comes to making decisions.
There’s no real template for your business model; you’ll have to decide what works for you and your market. However, the major components of a successful air conditioning business include the answers to the following questions:
- Who’s running the show?
- What are your key activities going to be?
- What will you use to execute these activities?
- How will you be adding value and staying competitive?
- To whom are you appealing with your service?
- How many revenue streams will you have?
Once you’ve got this in mind, you’ll be able to form your business model.
The Marketing Strategy
Slipping up here can make all the difference to the success of your business. Startup costs are high enough already, so it’s important that you make your marketing investments count, and this means you’ve got to do your research.
Evidence suggests that the vast majority of purchase decisions across the board are influenced by search engines, and there’s only one search engine that’s really worth considering here. Google owns 92% of the market share when it comes to people looking.
So it stands to reason you’ll want to be visible on search results. The rest of your marketing strategy will depend on the results of your market research, which will be one of the foundations of your business plan.
The Market Research
Your market research will provide the data that forms the lifeblood of your company. You’ll get to know who your customers are, what they’re looking for, how you’ll be able to find them how you can engage them, and ultimately, how you’ll add value to their lives in a way that has them giving you money regularly.
It will also give you an early insight into your company’s financial viability and help provide the fundamental data for your financial projections. The first step here is studying your competition. You should know what you’re capable of, but you’re going to want to see how others are doing things, and how they’re good and bad at helping the people you want to reach.
Forming an ideal customer is a good place to start, assessing what their pain points will be and how you’ll be able to fix them in a more effective way than the competition. Are you better? Faster? Quieter? Do you operate outside of most companies’ hours? You’ll be looking for some way in which you can do something that nobody else is doing, and this will be the basis for your business niche.
This information will also guide your marketing strategy, as it will identify your target audience, and therefore guide your marketing style to their eyes. Once you’ve completed your market research, you’ll have completed a significant chunk of your business plan too.
This document is going to be critical to your success when you come to look for outside funding. Here’s how it might look.
The Business Plan
There are plenty of ways you can lay out your business plan, but this is a pretty standard template. In completing it, you’ll learn a lot about your company and be guided by real data on how to improve and advance it.
The executive summary – this is simply a summary page of the document, and you’ll fill it in at the end. It’ll go over key findings, lay out what you’ve discovered, and generally be designed to appeal to investors as a TL;DR of the overall document.
The market analysis – This is where you’ll detail your market research findings, demonstrating to potential investors that you fully understand the competition and what you’re going to be doing differently.
The Solution – Now you’ll be introducing your company as the problem-solver to the issues you illuminated in your market analysis. List out the things you’ve got that will stand out and set your company up by providing your mission statement.
The Organization – To expand on the previous introduction, lay out your team here. Anyone who will be helping you call the shots and get things done should be named and given a brief profile with the factors that makes them integral to your organization.
Products and Services – Here is where you’ll itemize what you do and how much it will cost.
Your marketing strategies – Linking back to your market research, you’ll lay out your plan of action when it comes to reaching your customers. You should have more than one approach, especially if you’re selling more than one product or service, but don’t worry about padding this out too much if you’re just getting started.
Your Financial Plan – Here’s one of the most important pages of the entire document. You’ll be promoting the financial future of your company in this section, but it must be accurate. Investors may skip straight to this page to see if your assessments can be relied upon, and this means you’ll have to have real data and realistic projections off the back of them.
Once you’ve got this business plan all set up, it’s time to go looking for funds.
The cost of starting an HVAC business doesn’t have to be astronomical. In fact, you may have most of the equipment already. Have a look at some of the things you’ll perhaps need to budget for, and then add it all together:
- Transport – this will be a van or a truck that can handle your equipment. If you’re going a bit bigger, you might want a fleet.
- Standard tools – These are your everyday hammers, snips, and ladders, and are likely things you already have.
- Specialized tools – This will depend on exactly what you’re going to be working with.
- PPE – Again, you might have a set already, but if you’re going to be working with others, you’ll need extra sets.
- Branding – Maybe you’ll want to have cards, flyers, or other promo material, and perhaps even printed car branding for your fleet.
- Headquarters – Will you be using an office or working from home?
Obviously, you’ll need to budget for enough of these for all your relevant staff, so keep that in mind. Once you’ve got a budget lined up you’ll be in good stead to ask for money from somewhere. For this, you’ve got a few options.
1. You can try to cover the costs yourself. This is called Bootstrapping, and it basically involves paying for everything either from your savings or your business credit cards, or running the job as a side gig while your main job pays the wages. This isn’t suitable for a lot of larger companies as it’s just not feasible to come across the large sums needed, but for a small HVAC company, it’s more than possible to cover the costs. As such, you’ll maintain full control and not be financially liable to pay anything back if the business fails.
2. Bank loans should also cover your costs pretty well, but the process could be a long one. Banks love to do their due diligence, and the more you’re looking for, the longer it’ll likely take. However, there are certain subsidies and grants available from some sources too, so keep an eye out for that. Loans will typically be expensive, and you’ll have to pay them back even if you don’t make any money.
3. Investment from outsiders comes in as a good third option, and these will often come with investors who know the industry and can guide you on steps to take to maximize your chances of success. Further, they take the financial risk, so if it goes under, you’re off the hook. Unfortunately, you’ll have to hand over some equity share, meaning you’ll lose ultimate control over the company.
So, go over your options and pick the best one for your startup. One thing that’s worth having in order, regardless of the path you take, is an accurate and detailed record of your finances.
Your Financial Documents
Your three major financial pro forma documents will be your balance sheet, your income statement, and your financial statement. This interconnected series of documents will provide the data you need to make projections into your company’s financial future.
These projections are critical for explaining to investors why you’re worthy, and they need to be honest and accurate. Even if you’re not looking for investors, these docs will help you with your decision-making process, and you’ll be able to factor in the effects of certain business decisions and see how they play out over time.
Here at ProjectionHub, you can find specifically-designed financial projection templates for specialty subcontractors just like HVAC installers. These will give you a professional look for your business plan and they’re entirely customizable. They also come with support included and are designed with lenders and investors in mind.
Hopefully, this gives you a better understanding of how to start an HVAC business. The prospects are good for the right entrepreneur, and with a strong business model and detailed business plan, you’ll soon be on your way to getting the financial help you need to get off the ground!