If you’re looking to grow an HVAC business, there’s great news: The demand for heating, ventilation, and air conditioning is growing quickly. Fortune Business Insights notes that the HVAC sector is expected to grow by $20 billion this decade. Also, the Air Conditioning Contractors of America estimate 13% job growth by 2030, outpacing the average across all industries.
What does that mean for you as a business owner? Growth opportunities exist now and on the horizon, and it’s up to you to structure your business to capture them. Taking the time to evaluate and position your business now can help set you up for success for years to come.
So read on to learn about strategies for cash flow, sales, finance, marketing, operations, staff, and leadership. Every business has room for improvement, so if you’re looking to make positive changes, look no further than our guide.
1. Manage your cash flow as well as you handle air flow
An HVAC company that’s not managing cash flow is probably doing about as well as an AC unit that isn’t cooling. Whether you’ve just gotten into business or you’re a seasoned veteran, you know that payments can lag behind job completion—sometimes way behind. But your costs keep adding up, and you need cash on hand to continue expanding your workforce, buying materials, and taking on new jobs.
Managing all of this well means becoming a master of your cash flow.
Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse.
Create a cash flow dashboard and check on it regularly
Work with your accounting team to create a real-time view of your cash flow that you can check any time. Modern accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business. You can also create a cash flow dashboard on your own—just follow the steps in our cash flow calculation webinar.
At minimum, you need to evaluate your business’ cash flow situation every week—and some situations call for daily checks.
Use cash flow to inform your business decisions
When making large financial decisions for your business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your business is doing.
Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you’ve developed operational excellence among your team: prompt invoicing, strong payment terms, and efforts to drive down costs where possible.
Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business’ cash flow at least weekly.
Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your HVAC business means having positive cash flow to expand your workforce and take on new jobs.
2. Set your pricing as precisely as the thermostat
Too many HVAC businesses fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability. For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: HVAC businesses charge wildly different rates (anywhere from $70 to $200 or more per hour), and you need to figure out the price that will work for your business.
Your prices are going to depend on your region, whether you’re doing commercial or residential HVAC, and your specialization.
Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost.
When you’re just doing individual jobs, it’s easy to forget about the cost of doing business—but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for an HVAC installation or repair job, you need to cover the cost of support staff, offices, benefits, and more.
Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account.
Take stock of your current costs and future needs
Tally up everything that you need to operate your business, from materials and staff to training and software.
And remember: The cost of doing business is always increasing, so make adjustments for investments in new technology, higher material prices, increased wages, and more. You may also be thinking about expanding your business, which could require significant capital.
Determine your profit margin to set prices properly
In order to make money, you need to take in revenue that exceeds your operating costs—so decide what percentage you plan to take in above and beyond your expenses.
Let’s say that your business cost $800,000 to run last year, and you project that increases this year will put your costs at $1,000,000. If you want a 10 percent profit margin, you’ll need at least $1,100,000 in revenue. Look at your past year to estimate how many billable hours you expect to accrue over the course of the year. For example, if you’re likely to have 5,000 billable hours from your technicians, you’ll need to charge an hourly rate of $220 to reach your desired profitability.
Financial projections are never perfect, but working with hard numbers is much better than pricing by taking a shot in the dark. Make sure you’re billing for sustainable growth, and follow through with excellent service.
Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.
Why it matters: Too many businesses fail because they underprice or overprice their services. Make sure you know the real cost of running your HVAC business and price accordingly.
3. Get more jobs by training a well-oiled sales machine
The core of a successful HVAC business is a strong sales process. You can have the best technicians, accountants, and customer service reps on the planet, but if you don’t get jobs, your business will not grow. Everyone has had an experience with a bad salesman that has turned them off a company, so you need to make sure to avoid the pitfalls that keep sales from closing.
Here’s what your sales staff should and should not do to close sales
Four techniques for closing sales
Here are four ways that strong HVAC businesses get the sale for both repair work and new installations.
- Do: Participate in a sales training program that includes role playing over the phone and in person.
- Do: Encourage your salespeople to spend more time listening than speaking, and to take notes on what the customer is looking for.
- Do: Ensure your sales staff do a thorough inspection, provide options, and use the echo customer’s language to share that they’ve understood.
- Do: Provide a detailed proposal on site, including transparent pricing and line item costs that give the customer a clear sense of your value.
Remember: Especially in residential settings, the customer is dealing with a potentially large outlay of funds and may be in a stressful situation—like a burst pipe or a broken heater. You want your sales staff to act with empathy and understanding.
What not to do when trying to close sales
Here are big mistakes you can make when try to close sales in the HVAC business.
- Don’t: Try to upsell the customer on equipment or services they don’t need or want.
- Don’t: Rush through the sales process and assume that quantity is greater than quality.
- Don’t: Ghost your customers and forget to follow up after providing a proposal.
- Don’t: Tell customers to “just trust you” instead of showing them why they should.
Take what you’ve learned from sales in the field and transfer that knowledge to your sales manager, who needs to empower your sales staff to treat customers right and close sales. For many residential customers, a call to an HVAC company can be frightening as they consider the high cost of heating or cooling their homes. Both residential and commercial HVAC companies also need to be able to demonstrate their value to potential customers by addressing needs, transparently discussing pricing, and maintaining professionalism.
Action item: Evaluate your sales performance and audit your processes to see if there are areas for improvement.
Why it matters: Without a strong sales team, there are no jobs to bring in revenue for your business. Making sure that your sales staff is well trained is a crucial part of running a successful HVAC business.
4. Market your business where your customers already are
Growing an HVAC business in 2022 requires that customers know who you are and how to find you. Having a recognizable brand, strong online presence, and an easy-to-use website are vital for growth.
According to Findstack, 72% of people use Google reviews to find businesses, and businesses with at least 200 reviews generate, on average, twice as much revenue. As an HVAC business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for repairs or installations for furnaces, AC units, heat pumps, and more.
Determine your marketing spend
In general, your marketing spend should be a percentage of sales rather than a fixed number, because you need your marketing budget to increase as your sales increase. Many HVAC businesses spend anywhere from 5 to 20 percent of their sales on marketing.
Focus on search engine optimization (SEO)
Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “HVAC company in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers.
You can have your business to show up in Google Reviews and on Google Maps by signing up for a business profile.
Build an excellent and easy to use website
Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.
Create a recognizable brand
Beyond optimizing your website and working toward better rankings in Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier—and make it easier for your business to spread by word of mouth.
If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your HVAC business as the best solution to their needs.
Action item: Take a close look at your current branding and your online marketing efforts to find areas for improvement.
Why it matters: The majority of your customers are looking for you online, so making sure you stand out there is critical for business success.
5. Optimize your operations to keep things moving smoothly
Strategic thinking is valuable, but a lot of business takes place in the weeds—in the tasks that your employees undertake over and over again. As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.
Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. What does that look like in practice?
Build great processes
Take all that you’ve learned about HVAC, sales, and more—and add in knowledge from your employees. Use all of this accumulated experience to standardize how your team handles calls, talks with customers, and manages repairs and installations.
You need to have clear, written instructions for every company process. This has three purposes: it keeps everyone on the same page, it saves supervisors from having to repeat information, and it ensures that wisdom isn’t lost when you have employee turnover.
Trust your employees
Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation.
In the end, your business is a collection of many different processes—from complicated HVAC installations to simple phone greetings. Having coherent, unified processes for every aspect of your business improves productivity and prevents knowledge from disappearing when employees leave your company.
Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your business.
Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations.
6. Create an amazing team of technicians and support staff
Your employees are the face of your HVAC business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Forbes reports that highly engaged employees are up to 21% more profitable, while disengaged employees cost the economy more than half a trillion dollars annually.
How can you keep employees engaged?
You’ll need to improve at every stage: hiring, training, benefits, and development. If you take steps in all three of these areas, you’ll grow a better team that will be more engaged.
Hire great employees
Look at your job postings through the lens of a potential employee: What will you offer them? Too often, business owners focus on what they need instead of what they’re offering. Keep the interview process short and focused, but make sure potential employees demonstrate competency—regardless of whether you’re hiring a technician, a salesperson, an accountant, or anyone else.
Focus on training and onboarding
Create onboarding procedures for every position. It’s especially important to standardize HVAC technician training and identify areas where new hires need improvement. Make sure your onboarding period orients new employees to skills as well as company culture.
Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your HVAC business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.
Offer as many benefits as you can
The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment.
As the business owner, you may be doing more work than ever before—but you’re also interacting with your customers much less than your employees do. Hiring, training, and developing an excellent team is the best investment you can make in growing your business.
When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high.
Action item: Look at your processes for hiring, training, and development to identify areas for improvement.
Why it matters: Your employees are your business’ single greatest asset. Treat them accordingly.
7. Grow as a leader by building on your existing knowledge
Becoming a strong leader for your business is the most important step you can take if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow. A study in the Economist shows that more than half of organizations fail to move from strategy to execution—all because of a lack of leadership. Don’t let your HVAC business suffer because you aren’t growing as a leader.
But how do you grow as a leader?
Many HVAC business owners started out as technicians and supervisors—and that may be true for you, too. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural born leaders, and working as a technician doesn’t always offer the opportunity to develop leadership skills.
So start working on becoming a better leader right now.
Always keep communicating
As the business owner, it’s easy to get stuck in your silo—but it’s a mistake. Your technicians, salespeople, customer service representatives, accountants, and more are at the front of your business and have information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?
Stay open to feedback
It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team.
Never stop learning
Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.
The success of your business starts with your own success as a leader. Build from your strongs and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be.
Action item: Make a plan to become a better business leader this year.
Why it matters: Your business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth.
Make 2022 the year your business thrives
Whether your HVAC business is relatively new or you’ve been at it for years, there are always ways to make things better.
Starting from the top, develop yourself into a more capable business leader with the vision to navigate the uncertain economy. Make sure that you surround yourself with an excellent team as well as streamlined processes. Stay on top of your business’ financials and cash flow statements to grow sustainably. Train a competent sales staff, and market your company based on all of the strengths you’ve created.