How to Make Millions in HVAC
The HVAC industry is a lucrative one, projected to reach nearly $368 billion by the year 2030, with an annual compounded growth rate (CAGR) of 3.9% (Statistica, 2022).
It is also a hyper-competitive industry, with more than 105,000 HVAC companies employing over 344,000 technicians across the US (Bureau of Labor Statistics).
Those with an HVAC business have started to feel the pinch of encroaching competition, rising costs, global logistics and shipping issues for parts, etc. While others contemplating starting a new HVAC business are wary of jumping into the fire without a solid plan to grow the business.
In this guide, we lay out the foundation and groundwork for growing an HVAC business, including the best model and structure for the company.
With proper planning, strategy, and execution, savvy HVAC business owners will be able to outpace and outperform the competition for years to come.
An Introduction to the HVAC Industry
Across the US, 87% of homes have air conditioning. This stat virtually mirrors that of heating (apart from the southernmost states). Each year, most households spend nearly $2000 or more on energy bills, with at least half of that spent on heating and cooling costs.
As you can see and likely already know, a home or business’s HVAC system is essential, keeping property, assets, and inhabitants safe and comfortable all year round.
This also makes HVAC technicians and contractors a vital part of the home services, maintenance, and repair industry, jumping to aid at a moment’s notice to fix a broken down heater or air conditioner.
If you’re interested in how to grow your HVAC business, this guide will help you remain agile in these trying times, giving you the tools and resources to adapt and perform no matter the market.
How to Run an HVAC Business: Learn from the Experts to Grow your HVAC Business in 2022 and Beyond
Plan to Win, Not Fail – the Right Strategy Makes All The Difference
There is wisdom in the old saying, ‘For a ship with no destination, no winds are favorable.’
To steer your HVAC business toward growth and prosperity, you need to model it after the final result you hope to achieve.
Don’t Reinvent the Wheel, Just Make it Work Better
You don’t need a revolutionary concept, new invention, or shiny marketing gimmick to propel your HVAC business to the stratosphere. Chasing after these things is often a big part of why many HVAC owners always search for the next big break that will transform their business.
In reality, there are already battle-tested, market-proven business models and strategies employed by HVAC companies that have achieved the level of success and growth you aspire to attain.
Imitation is the Best Form of Flattery
Following and emulating successful business models is a surefire way to put your HVAC business in the best position possible for growth and success. Companies much larger than yours have paved the way to success with their own blood, sweat, tears, and often millions of dollars. You can learn from their pitfalls, avoiding costly bottlenecks while discovering similar opportunities to seize the day.
Competitive Intelligence – Make Better, Data-Driven Decisions
Here is a fun fact. Nearly 80% of ALL franchises are successful, while more than ½ of all ‘other’ businesses go under within the first five years? Why?
Franchises follow a WINNING formula. They don’t go off the beaten path but rather follow along a nicely cleared trail paved with the efforts of others who have come before them.
As an HVAC business, you too can capitalize on this strategy, taking all the good from competitors while sidestepping all the mistakes they had along the way.
Clearly Define Your Goals
Know what you’re aiming for. For example, are you interested in expanding to new locations or simply filing up the pipeline with consistent work?
Do you see yourself running a large HVAC business with a massive fleet and dozens or hundreds of workers, or are you happy with a small but profitable HVAC operation? You might even want to run your company as a one-man HVAC business.
Once you’ve identified your short, medium, and long-term goals, find one or more businesses utilizing a model that you want to emulate.
Scope Out the Competition
Your goal at this point is to complete a competitor deep dive, uncovering what makes them work so well and what fueled their growth over time.
A SWOT analysis, standing for Strengths, Weaknesses, Opportunities, and Threats, is a valuable tool in business, helping you identify what areas a company is doing well and where it may be lacking.
It also enables you to take an objective look at potential threats and opportunities and whether or not those same threats and opportunities may apply to your own HVAC business.
HVAC Business Structure and HVAC Business Model
There isn’t one right way to run an HVAC business. Consider the following when mapping out a business model that is in alignment with the growth you have in mind for your HVAC business:
- Key Activities
- Value propositions
- Cost structure
- Customer base
- Market segmentation
- Marketing, sales, and growth channels
- Revenue streams
People, Processes, and Product – The Winning Formula for any HVAC Business
Systems and Processes: Streamline Operations for Expansion
Every company looking to grow experiences growing pains. Often, these ‘pains’ result from inefficient processes or a lack of systemization.
A well-defined operating system includes:
- Meticulous detailing of processes
- A clear organizational chart
- Operating manuals
- Employee handbook
- A set of checks and balances for each department
- Accountability checkpoints
- Automation when and where possible
- Customer relationship software
- Logistics and inventory software
- And more
When executed correctly, this operating system ensures your HVAC business runs effortlessly with as little friction as possible. Fine-tuning this system can extract operational efficiency while addressing bottlenecks in a meaningful way.
Ideally, HVAC companies should be employing a means to track, document, and analyze any data point that is relevant and important to operations.
Doing so can reveal opportunities and potential threats as the company expands and help leadership make better-informed decisions based on data, not hunches.
Human Capital – People Are Your Best Asset
It’s the people that make or break your business. People are the backbone of any HVAC company, from sales and customer service to technicians.
Top performing businesses all have one thing in common: they are committed to investing time, energy, and resources into their people.
Hire slow and fire fast might be a catchphrase, but it certainly has some merit. It often takes going through several toads until you find a prince or princess, so to speak.
Out of every ten people hired, you might have one rockstar, 1-2 above average, 1-3 average, and 1-2 that need to be shown their way out the door.
Talent acquisition should never be treated as a ‘one and done’ endeavor. The most successful HVAC companies plan for churn (lost employees) as well as for expansion to meet increased demands.
Establishing a well-defined hierarchy and chain of command is critical early on. So is forecasting how that organizational hierarchy might change as you continue to grow.
For example, at what point will you need more sales reps, and when might that expanding sales team need a new manager?
Training isn’t just about making sure a process is carried out in a specific way. It’s about reinforcing brand culture, increasing employee loyalty, paving the way for career paths, and supporting people in both their professional and personal goals.
All of which has a marked impact on the bottom line.
Performance-Based Pay and Incentivization
Developing a performance matrix that embodies your company’s values, mission, and goals can be an impactful motivational tool. This matrix should assign point values for both hard and soft skills and be reviewed monthly, quarterly, and yearly with employees.
Soft Skills: Written and verbal communication, problem-solving, teamwork, etc.
Hard Skills: Sales, response times, and other KPIs
Achieving certain marks should be aligned with pay increases, bonuses, prizes, extra time off work, or any other ‘award’ or goal that employees find valuable.
Paving a Career Path
Each position should have a clear path forward for those who are hired. While some positions may be capped in terms of upward or lateral movement, others have the potential for helping employees see how their future can be a part of your future for the mutual benefit of both parties.
How to Grow an HVAC Business
Marketing is the lifeblood of every organization, not just HVAC companies. Get HVAC marketing right, and you’ll be drowning in business. But mistakes in this department can be costly, taking up valuable time, energy, and money, while the competition scoops up service calls that could have been yours.
When it comes to advertising in the HVAC industry, digital channels like Google Search and Facebook Ads reigns supreme. Gone are the days when phone book ads, billboards, mailers, and radio spots brought in new business in spades.
Today, research shows that more than 80% of ALL purchases made across all industries are influenced by a search engine search. And when it comes to search engines, Google is the 800lb Gorilla in the room, owning more than 92% of all market share.
According to Google’s own data:
- 74% of consumers who purchase in-person will research online before going to a local shop
- 59% of consumers use Google to analyze a purchase to make sure they chose the right provider
Revenue Generating Website
Never underestimate the impact of a high-performance website. An HVAC website is more than an advertorial or digital brochure for the company.
Your website is your number one employee. It never takes a day off, it is available to assist customers day and night, rain or shine, and it performs flawlessly without fail.
Creating a Lasting Impression: Your website is an opportunity to craft and deliver a memorable digital experience while differentiating your HVAC business from the competition. From building trust to establishing a rapport with the customer, your website is an invaluable asset.
Providing Value: Quality HVAC websites do more than ‘sell’ potential customers; they act as a valuable resource giving educational guides, how-to’s, troubleshooting info, and more. All of which build trust and help to establish your HVAC brand as a reliable, authoritative service provider in your area.
A Key Component of the Sales Cycle: With more than 80% of purchases influenced by a search engine query, your website and digital properties are key components of converting a prospect to a buyer.
Driving Conversions: Conversion rate optimization can transform a poorly performing website into a lead and phone call generating machine. Giving sales representatives more opportunities to close deals and drive revenue.
Capturing Market Share: Think of digital assets like your website and Google Business Profile as digital real estate. Like any real estate, location matters.
And when it comes to Google, that means ranking higher in search results for relevant queries from prospective customers. Doing so will enable your business to scoop up market share from the competition.
Search Engine Optimization
With more than 80% of all buying decisions being influenced by a search query, and between 59-74% of consumers directly searching for validation on Google before making a purchase, SEO is more important than ever before.
50-80% of all potential HVAC customers are searching online for an HVAC business when they need help. With 68% of clicks going to the first three results on Google (90% to page one), if you’re not first, you may as well be last.
Worse than that, if you don’t show up online when customers need and expect you to, the competition is more than happy to take your place, stealing customers that would have otherwise been yours.
Every day that goes by with your company not ranking near the top of Google is another day of lost market share to the competition. Competition that now has more business, more revenue, and more resources to continue to dominate your area.
How Can you SEO Optimize Your Site?
Google looks at more than 200 constantly evolving factors to determine what web pages should show up for which search queries and in what order.
While business owners can often handle SEO basics on their own, the digital landscape for HVAC companies is a competitive one, dominated by SEO providers and agencies working on behalf of other HVAC companies.
The best course of action for HVAC businesses is to work with an SEO Agency or Digital Marketing Agency with a strong track record of helping HVAC companies grow month over month.
HVAC Market Intelligence
Having the right market intelligence is a key operational advantage that can position your HVAC business for growth and sustainability now and in the future.
Market intelligence brings together a wide range of data sources to create a broad picture of your HVAC company in the context of the local markets it operates in. This type of intelligence can help you identify and even forecast shifts in market dynamics that could significantly impact your HVAC business.
For example, anticipating customer demand for a particular HVAC system or service could help you get a head start on the competition. While anticipating rising costs of parts or equipment might enable you to make more savvy purchases now, saving you big later on.
Generally speaking, this process is carried out in four steps:
- Collection of information and data
- Validation and verification of data for reliability
- Processing and analysis of data
- Communication of data in a meaningful and actionable way
Sources of Internal Market Intelligence:
- Research and Development
- Sales and marketing data
- Trade shows
- And more.
Sources of External Market Intelligence:
- Client meetings
- Dealers and Distributors
- Business associates
- Market research companies
- Government publications
- Market reports
- And more.
Cultivating the Right Culture at Work
A strong, purposely developed, and fostered company culture is paramount to long-term success. The right culture not only attracts top talent but keeps them there.
Employees who feel like they ‘belong’, are valued and that their voices are heard, are harder working and dedicated to always doing their best. This translates into a healthier workforce, higher productivity, improved morale, and better outcomes for customers and your bottom line.
Consider Conducting a Culture Audit
- Define your current company culture and your desired company culture
- Determine what you can do to foster the type of culture you desire
- Identify how your employees interpret the current culture and brand values
- Map a plan for leadership to take the reigns as living examples of the culture you want to see
How to Develop a High-Performance Company Culture
- Focus on employee wellness (mental, physical, spiritual)
- Tap into your brand’s values, mission, and beliefs
- Hire the people who fit into your vision
- Take every opportunity to give employees meaning and purpose
- Make sure employees feel valued and heard
- Establish and facilitate better inter-company relationships
HVAC Business Management
Ownership of business performance ultimately falls on management and leadership within the company. Talent and knowledge aside, even the best managers and leaders can lose focus on what matters the most.
Re-focusing on these key pillars of success creates a strong foundation for growth and prosperity.
Focus on the Right Things
Many businesses lack a clear and measured focus on what truly matters. Modern HVAC companies are increasingly complex, with a multitude of moving parts and departmental roles.
Because of all the ‘noise’, it’s easy to lose focus on the things that can have a big impact on the business.
Focus on People
Both internal to your organization such as employees, and external, including but not limited to customers, suppliers, distributors, and more.
Treating people right and providing them with the tools, resources, and information they need to make better decisions will help your business thrive.
Focus on Products (and services)
Many HVAC companies lose focus by trying to do too much. Focus on those products and services with the highest margins, as well as those products and services in high demand.
Consider cutting services and/or products with low margins, low demand, and/or those that are resource-heavy, taking up time and energy that could be better spent on the ‘easy money’.
Focus on Processes
Processes can streamline operations, improve efficiency, reduce costs, ensure quality standards, and set the stage for rapid growth. Expand with confidence, using battle-tested processes that are designed to scale with your business.
Focus on Filling Gaps in the Market
Product/Service market fit is essential. Continually evaluate and invest in those areas where your HVAC business can fill in gaps in the market, providing valuable services to customers while padding the bottom line.
The Best HVAC Business Model – Final Thoughts
Each HVAC business is as unique as the people who run it and the customers it serves. In the context of business models, there isn’t necessarily a ‘best HVAC business model’, but rather a model that is ‘best’ for you and your goals.
The best way to model your HVAC company is largely dependent on your short, medium, and long-term goals. For some, cornering the market in a city or county is sufficient. While others have aspirations of managing multi-state fleets of HVAC technicians.
Regardless of the business model chosen, the strategies and tactics in this guide are commonalities among those HVAC businesses thriving in 2022 and set to grow significantly in the years to come.
Interested in exploring high-performance HVAC business marketing strategies proven to scale profitably? Reach out to Scalebloom, ‘The Smarter Way to Scale Your Business’.