The demand for HVAC technicians and contractors is expected to grow due to increases in housing and construction requests. In fact, the HVAC market has experienced a 2.9% growth in revenue and a 3.2% growth in the number of businesses over the last five years.
If you’re beginning your HVAC business or hoping to expand your current services and offerings, there are huge opportunities. But, it’s essential to create a business plan that anticipates the industry’s growth and keeps your business on course. This article is going to teach you how to form a new business HVAC plan and give you the knowledge you need to start a successful HVAC business.
How to structure an HVAC business plan
If you are looking to start an HVAC business, you will first have to create a plan. A business plan serves to guide your HVAC business through the challenges of the seasonal shifts in HVAC demand. If your business specializes in air conditioning, you’re raking in the revenue during the summer months, but may be using lines of credit to pay employees in winter and fall.
This needs to be accounted for.
Anticipate how you will operate your business and the expenses it will incur. Then, plan accordingly. When you start to create your business model, you’ll want to consider two factors:
- The objectives of your company
- How to achieve those goals
Business plans are also an effective way to generate investments in your business. A structured and coherent plan will tell investors that your company is goal-orientated, profit-minded, focused, and will warrant financial returns on their investment.
As your business grows, you’ll want to periodically revisit and update your business plan to analyze how and if your goals are being met, as well as account for any internal or external changes within the industry.
According to the U.S. Small Business Administration (SBA), an effective business plan must outline the costs and pitfalls of each company decision and should include the following categories:
- Executive summary – Outline the basics, including the name and location of your business and information on the company’s leadership, employees, and operations. Also, include a mission statement that defines the values of your company and the goals you wish to achieve. As a whole, only talk about your business at a high level—you’ll get into the details later.
- Company description – This is where you can get into the nitty-gritty of your company’s operations. Give a brief description of your company, then outline the challenges your company faces and what you plan to do to overcome them. You’ll also want to detail what types of consumers you’re targeting and any competitive advantages you believe your business has over the other HVAC businesses in your area. Think of answers to questions like, are your technicians NATE certified? Will you provide emergency services? Are you a woman-owned firm?
- Products and services – Lay out each product or service your company offers, including pricing models, product lifespan, and the benefits your services provide to your customers. If applicable, you can also include manufacturing and buying processes, as well as potential certifications, demographic-specific discounts, or qualifications, such as being able to service all brands.
- Market analysis – First, document your research and understanding of your target market—homeowners in need—and analyze your competitors through thorough market analysis. What are they doing that you’re not? What are you doing that they’re not? You’ll also want to look for prevalent themes within the HVAC industry to help shape your business model and marketing strategy, such as the industry’s projected growth or how seasons play a part in industry profits. You can use this information to define your HVAC marketing strategy.
- Marketing strategy – When approaching your marketing strategy, determine who you want to target, and what you want to tell them about your company’s values or services. Then determine how you’ll do it. Will you create social media accounts to share updates and promotions? Or will you opt for a Nextdoor Business Page to target homeowners in local neighborhoods? There’s no right or wrong answer, but you’ll want to choose a strategy that reflects your industry insight and company goals.
- Organization and management – When writing your business plan, let your potential partners and investors know who will run the company and how it will be structured. Use a chart to identify each individual’s duties and responsibilities within the company, as well as the specific expertise they bring to the table. Consider including CVs and resumes as well. Generally, HVAC contractors are sole proprietors or family-run. Most operate using a lean governance structure—meaning there’s usually one owner and a handful of employees. But, the structure is up to you. If applicable, you’ll also want to include the legal structure of your business. LLCs, for example, is an affordable way to maintain legal separation from your company.
- Financial planning – Completing this section is two-fold. You’ll want to note financial projections and establish funding requests. Be sure to add your current financial portfolio, including income statements, balance sheets, and cash flow statements within the last five years. Then, include your forecasted financial statements, including projected expenses, income statements, and budgets. If you’re requesting funding, outline the amount you request, what you’ll be using the money for, and why you need it per your business model.
- Budget – A budget should allot for how much money you want to spend on certain aspects of your business, such as HVAC equipment, transportation, and employee payroll. When creating your budget, include sections like staffing, development, manufacturing, and service expenses. In most areas, HVAC services are seasonal, operating only seven months of the year. As such, many contractors rely on lines of credit to cover their expenses during the slower months, like payroll. To grow your profit, create a model that builds a high gross profit margin on equipment, and limits labor.
Once completed, business plans are generally 15 to 20 pages long. Overall, distinguish your business as one that is trustworthy, organized, and experienced with detailed planning and realistic projections.
For more comprehensive and in-depth formatting, business owners can refer to the U.S. Department of Energy’s Better Buildings Neighborhood Program HVAC Contractor Business Model.
How to structure a lean HVAC business plan
If you’re looking to define your business quickly, consider a lean business plan. While this type of business model may not be beneficial to investors, it does provide a structured summarization of your business model, without the nitty-gritty details.
This is a viable option for those who want to redefine and revise their business plan, without changing the foundation. It may also help those who want to get their business off the ground quickly.
When developing your lean business template, include the following:
- Key partnerships – Will you be partnering with a construction company to install A/C units into each home or teaming up with a plumbing company to provide full-service home maintenance? Outline the partnership operations, as well as its advantages and challenges. Also, think about including suppliers and manufacturers if you’re buying and selling air conditioners and heaters.
- Key activities – What services is your company providing to the customers that give it a competitive advantage? What products specifically benefit your customers and their home maintenance needs? You can also include your selling models and what types of technologies your company plans to use during installation and repairs.
- Key resources – What creates value for your customers? Include your assets here, such as an employee with over 25 years of experience or patented technology that ensures that your customers are comfortable all year long.
- Value proposition – Outline your company’s values and objectives. Are you a family-owned business that strives to make connections with your neighbors? Or are you a no-fuss company that values quick and efficient services your customers can rely on? No matter your focus, make it known so that you can attract the right customers.
- Customer relationships – In the same vein, outline how you and your customers interact with each other. Do you send out monthly email newsletters that outline your services and promotions? Can your customers complete a feedback form to notify you of their customer experience? Is your communication automated or personalized? Make sure your communication style aligns with your values.
- Cost structure – What’s your company’s focus? Do you aim to increase revenue or improve customer satisfaction? Outline the value of each goal and the potential expenses that will arise as you achieve each of your objectives.
- Revenue streams – How will your company make money? Most HVAC companies earn revenue through direct sales. But, you should also list additional revenue sources, such as investors and benefactors. Additional revenue sources include job training courses and energy reduction consultations that provide value to your customers beyond installation and repair. This will also give you a competitive advantage in the HVAC industry.
How to choose your services and products
Generally, an HVAC business will be responsible for heating/cooling installation and repair services. But, with diligent planning and risk management analysis, you can also add a lot more services to your plate:
- Air conditioner and heater sales
- Energy reduction or air quality consultations
- Training classes for technicians
- Plumbing services
- System performance reviews
How to calculate your start-up costs
While a business plan is your business’s road map to success, your financial projections are the markers, billboards, and road signs that let you know you’re on the right path. By paying close attention to potential expenses, you can arrive at your destination without any detours down unrealistic funding avenues or collisions with semi truck-sized competition.
When calculating your forecasted expenses, consider the following:
- Brick-and-mortar office space
- HVAC equipment and supplies
- Contractor licenses and permits
- Transportation
- Utilities
- Communications
- Insurance
- Employee salaries
- Advertising and marketing
- Lawyer and accountant
Grow your HVAC business with Nextdoor
Starting your own HVAC business can be a daunting endeavor, from encountering a series of start-and-stop attempts to running into financial pileups. Making a business plan will help you to navigate those obstacles and arrive at your destination, despite the uncertainties along the way.
When you start your business, you can create a Business Page on Nextdoor to share your services with your neighbors and gauge customer satisfaction once you’ve made a few rounds around the block.
Nextdoor is your one-stop-shop for all the tools, communication resources, and information you need to drive your business to new heights.
Sources:
U.S. Small Business Association. Write your business plan. https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan
Better Buildings Neighborhood Program. Business Models Guide. https://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/pdfs/hvac_contractor_business_model.pdf
