TillerStack Field Service Scheduling Software Homepage
HVAC Business Management 101: Some Key Concepts
Whether IT, data storage, or general office work, businesses worldwide have a high demand for HVAC services.
HVAC ensures that workspaces and homes are neither too hot nor too cold. While no two businesses dealing with HVAC are identical, they all face similar challenges.
On top of that, while their importance makes them a highly competitive industry, they are also highly profitable.
This article will examine everything you need to know to start your HVAC business and work with HVAC concepts. We’ll also learn about the role of field service management software and how it is critical for streamlining operations for technicians and support staff.
Additionally, we’ll also learn more about the following:
- What is the Business Model for HVAC companies?
- What are the Most Effective Ways to Manage Your HVAC Business?
- How Do You Manage Your Finances?
How to Start an HVAC Business: 4 Key Tips You Need to Know
As more businesses emerge worldwide, the demand for HVAC services will continue to grow. Depending on where you are situated, this can serve as a perfect niche, especially if you already have prior experience.
Here are the steps on how to start an HVAC business:
Decide Which Services to Offer
What services can you do best? Starting your business is not about how many services you can offer, but their quality. Most companies often begin with a small selection of services that expand with their operations.
Here are a few you can start with:
- Maintenance – Regular check-ups help lower electricity bills for businesses and homes. Preventive maintenance ensures comfort for clients while extending their HVAC units’ operable lifetimes.
- Repair – Repair services can go a long way since heating and air conditioning units are often expensive. Businesses try to save as much as possible by having existing units repaired.
- New Installations – HVAC systems have a lifespan of about 10 to 15 years. Offering new installations of more efficient systems is a staple when starting an HVAC business.
Be Aware of Common Mistakes
HVAC businesses manage to find their niche. As a result, they are highly profitable but also require extensive certifications, insurance, and an extensive logistical system.
Beware of these common mistakes when starting your HVAC business:
- Lack of Insurance – HVAC businesses contend with hazards regularly. However, there are ways to minimize their impact on your business and your employees, the most important being insurance.
- Not Developing an Accounting System – Every business needs a robust accounting system, especially when starting out. Tools like accounting software can go a long way.
- Lack of Oversight – When starting an HVAC business, your involvement with regular operations will fluctuate. Management software can help you keep track of work volume and quantity.
Get Your Licenses and Certifications
Licenses and certifications are necessary for any HVAC business to begin operations. That said, these can differ depending on your state.
On top of that, you also need to ensure compliance with existing HVAC codes, such as the International Energy Conservation Code.
Learn more about Steps to Get Your HVAC License: A Beginner’s Guide.
Additionally, maintaining your licenses includes ongoing education and compliance with insurance requirements. You need to know which refrigerants are being phased out and ensure that equipment and practices are up to code.
Invest in Essential Tools and Equipment
When people ask how to start an HVAC business, they will eventually ask about equipment. Two particular factors stand out: service vehicles and operational tools.
Different service vehicles are best suited for other needs. For instance, cargo vans offer ample space and security because they lack windows. Meanwhile, pickup trucks are more open, which allows towing and easier tool access.
Regarding operational tools, HVAC technicians need a wide range of essentials for daily tasks. These can range from basic tools like screwdrivers and pliers to specialized ones like tubing cutters or vacuum pumps.
Market Your Business
Finally, you also need to market your business like any other. Marketing is a primary means of building and attracting clients to your HVAC business services.
Basic marketing strategies, such as professional uniforms, office signage, and local ads, can go a long way. On top of that, direct engagement through networking events and partnerships can help your business gain traction.
Next, digital marketing strategies such as social media can help drive visibility during high-demand periods. Valuable online content, SEO strategies, and live chat services can also help build a strong client base.
What is the HVAC Business Model: Understanding the Basics
When you begin learning about how to start a heating and air conditioning company, you have many choices. HVAC businesses are either solely owned, privately owned, or stakeholder-owned, each with advantages and drawbacks.
For example, many HVAC contractors operate as solely owned or family-run businesses. While they have full authority over their decisions, they have less time, resources, and opportunities for scaling.
Meanwhile, the opposite goes for privately owned or stakeholder-owned companies. While the decision process is shared, the company has more available resources. As a result, it can scale more easily, which lets it service more clients.
Being aware of the differences between the following can make a huge difference when outlining your HVAC business model:
Residential vs. Commercial
The main difference between these services is that residential HVAC is more customer-focused. They deal with small homes and businesses and are an excellent option for small HVAC companies.
Meanwhile, commercial HVAC services are more collaborative because HVAC systems on properties, like warehouses and office buildings, are more complex.
There are a few additional differences between the two, such as:
- Working Conditions – Residential HVAC workers will often work indoors or alongside houses, while commercial workers are more exposed to outdoor work
- Team – Employees at residential HVAC companies can work independently, while commercial HVAC work requires more collaboration, especially with other contractors
- Market Outlook – The residential HVAC business model is linked to new house construction, while commercial models are related to office buildings, warehouses, etc.
- Required Skills – Residential HVAC work involves more direct customer interaction, while commercial HVAC work often requires specialized and professional learning.
Service-Based vs. Installation-Based
Another factor to decide on is whether you want a service-based or installation-based model.
Service-based businesses rely on repair and maintenance, two recurring services that residential or commercial customers need. These services range from general cleaning and routine checks to filter changes and repairs.
Meanwhile, installation-based services deal with entire units, which include replacing old ones or choosing new ones that fit the building.
What is Effective HVAC Business Management?
Like all service-based businesses, HVAC businesses require extensive administrative and technical skills. In particular, HVAC companies with excellent leadership, organization, and management will likely succeed and scale up.
Effective HVAC management gives employees a clear roadmap and vision through many factors. These include properly allocated human, financial, and material resources and informed decisions to achieve key objectives.
There are many ways to manage your business well, and the best ways to do so include the following:
Keep Customers Informed
Regular updates are critical for establishing customer trust and satisfaction, which is key for keeping and attracting new customers. In this regard, even standard confirmations can go a long way.
Staying in touch with customers includes the following sent via email or text messages:
- Confirm their job booking – Send a message (email or text) to validate the job booking days before the visit. Be sure to include the service’s date, time, and details to help outline customer expectations.
- Sending notifications in advance – Notifying customers hours before the job can help them prepare for the visit, which retains confidence.
- Follow up with post-service surveys – Post-service surveys can help you correct mistakes and resolve issues after the job. It’s also the best way to gain positive feedback to display to potential customers.
Track Your Inventory Regularly
A big part of HVAC business management is keeping an accurate record of your inventory. Spare parts, materials, and equipment should always be accounted for.
Doing so minimizes long lead times for new and ongoing projects. More importantly, it also helps you deal with overstocked inventory, which helps ensure a positive cash flow.
Ensure Accurate Estimates
Like inventory management, establishing accurate estimates can make or break your company. Both overpricing and underpricing can set the wrong expectations and drive away potential customers.
One way to get an accurate estimate is to understand the project’s scope and the client’s requirements. A site visit can help address both.
You can also accurately gauge material prices by contacting local vendors and suppliers to confirm current prices. Finally, investing in field software helps you update prices and additional costs in real-time.
Optimize Your Dispatches
The next part of effective HVAC management is the adequate distribution of technicians, where dispatch management software can shine.
Using the software, dispatchers can place pins on digital maps to indicate the different service visits to make throughout the day. These pins can help plan daily routes to reduce drive times and gasoline costs.
Invest in Good Technicians
HVAC work, whether it’s commercial or residential, is highly technical. Good technicians mean quality services, which leads to repeat business from satisfied customers.
That said, technical skills are only one part of what makes a great team member. You also want those who can collaborate with contractors and engage customers directly.
Investing in good technicians also means actively investing in team member development. Empowering them with the right tools, from seminars to courses, can positively impact customer satisfaction and feedback.
Schedule Ahead of Time
Scheduling is another key part of effective HVAC business management since it prevents underutilization.
You can use scheduling software to assign technicians the right jobs and ensure they arrive on time. It also has the added benefit of streamlining different spreadsheets and clipboards by keeping all information in one platform.
HVAC Accounting: How to Manage Your Finances
Accounting can be complex for every business, and HVAC is no exception. Not only do you need to track job profitability, but you also need to manage cash flow and payroll.
Accounting for HVAC companies demands specialized financial tracking, particularly when selling equipment, parts, and services.
Businesses also need to distinguish between residential and commercial projects. Both have billing cycles, payment terms, and even job costing that must be tracked carefully.
Here are a few practical strategies to help you stay on top of your finances:
Choose the Right Method
Setting up the right accounting system helps your company stay profitable long-term. On top of that, it enables you to make better choices when allocating resources and pricing your services.
HVAC businesses often utilize cash or accrual accounting when managing their finances. Here are the differences between the two:
- Cash Accounting – Cash accounting records income from payments and expenses from paying bills. It’s simpler and transaction-based but less accurate in understanding your business’s full profitability.
- Accrual Accounting – Accrual accounting records income when you perform the work and expenses when you incur them. It’s more complex but gives you a clear picture and is helpful with inventory management.
Set Up a Chart
Another strategy used in HVAC accounting is setting up and adjusting a set chart of accounts with different subcategories.
Consider creating those that track revenue and costs according to service type. Doing so will help your financial statements and reports be more readable.
Next, separate accounts for installations, repair, and maintenance for commercial and residential job categories should be created. Keeping these accounts separate can help you determine where to focus your efforts based on profits.
Establish a Process for Inventory Management
Inventory management is a balancing act based on seasonal demand, cash flow, and storage.
Considering these three factors, you should track parts and equipment to keep them at their optimal levels. Regular physical counts can verify numbers while identifying missing items.
Ideally, you want to use your field service management software to reflect and update real-time physical counts. Additionally, you should track warranty parts separately to account for potential defects.
Create Financial Controls
Strong financial controls are among the best ways to protect your HVAC business. They establish standard transaction procedures, track inventory, and ensure accurate financial reports.
Here are a few essential controls you should establish right away:
- Inventory Costs – Set and document procedures for requisitioning parts and tracking warranty. Doing so maintains accountability while ensuring proper credit from manufacturers.
- Purchasing – Set specific authorization levels for different types of purchases. Document your criteria for choosing vendors to ensure consistent quality and pricing.
- Cash Handling – You should set clear procedures for receiving and documenting cash payments. Be sure to reconcile bank accounts regularly to catch discrepancies.
Conclusion
Businesses worldwide have a high demand for HVAC businesses, and this demand will only grow as more businesses emerge.
The HVAC business can be highly specialized, offering air conditioning, ventilation, and heating. Given its niche and importance for various industries, it is highly profitable.
However, they can also be demanding in terms of both technical skills and logistical management. Aside from having the right approach, people and tools are essential to ensure your business’s success.
Frequently Asked Questions
When starting an HVAC business, it’s always a good practice to know as much about it as possible. Here are a few questions people often ask about the HVAC industry:
How profitable is an HVAC business?
Profit margins for HVAC companies depend on location, service specialties, and efficiency. They typically range between five and twenty percent. However, with a focus on efficiency and cost control, achieving as much as forty to sixty percent is possible.
Is HVAC a good business to start?
HVAC can be a great business if you have the skills, experience, and certifications. However, you must still research your market, target customers, and competitors.
What is FMS in HVAC?
FMS stands for “facility management system.” It refers to the tools and processes needed to manage a facility’s operations, including maintenance, space management, and asset management.
Do I Need a License to Buy HVAC Equipment?
You don’t need a license to buy every piece of equipment. However, you need a licensed technician to purchase specific parts, especially refrigerants. Air conditioners, in particular, have HCFC and CFC, which are toxic to the ozone layer.