How To Start a Successful HVACR Business

By: Gary B. Xavier

The demand for HVACR professionals has never been greater than it is today. According to the United States Department of Labor, “employment of heating, air conditioning, and refrigeration mechanics and installers is projected to grow 5 percent from 2021 to 2031…about 40,100 openings for heating, air conditioning, and refrigeration mechanics and installers are projected each year, on average, over the decade.”

This demand will, of course, lead to many new business startups by both seasoned professionals and newly trained technicians who desire to become their own bosses. However, the term ‘be your own boss’ is seriously misleading. The reality is that business owners, whether their business is a one-person one-truck operation or a major company with many employees, work for their customers.

Remembering that a business is only as good as its customers is the first thing that anyone thinking of starting a service business must keep in mind.

Starting Small

Many experienced tradespeople, be it electrical, plumbing, or HVACR, often perform ‘on the side’ work for family, friends, and neighbors outside of their full-time employment. These side jobs may be lucrative and act as a bonus to the regular income of a technician or installer.

A common mistake, however, is thinking that one might survive on side jobs alone and leave their full-time employment to start their own business. Unfortunately, this usually ends poorly. When ‘side jobs’ that seemed so plentiful when done only on evenings and weekends are soon completed, the professional can be left with little work and no steady source of income.

Starting small is not bad, but it must be planned properly.

Adding HVACR

Existing companies, whether they are service companies such as plumbing or electrical, or sales companies like wholesalers and distributors, may consider adding HVACR services to their offerings.

Again, a common mistake can be overestimating the amount of this work available, so care must be taken to properly judge the consumer demand, competition, added capital expense, and overall operation of this additional group before investing time and money in what might be a futile venture.

Planning is Everything

Proper planning, whether for a brand-new small start-up or incorporation of HVACR work into an existing business, is critical to a business's success. As the adage goes, “plan your work and work your plan.”

These are some of the avenues that need addressing during the planning stage:

What will be the scope of the business?

Will it be sales, installation, and service of new HVACR systems and equipment? If so, what brand or brands will be sold? Will it service existing equipment? Will it service both residential and commercial systems or just one market? What geographic area will the business cover?
Where will the business operate?

Will it be necessary to purchase or lease office and shop space?
What tools and equipment are required to start the business?

A service van? A delivery truck? Refrigerant handling equipment, hand tools, ladders, personal protective equipment?
How about personnel?

What employees will be required? Office staff, technicians, installers, delivery people?
What will all of this cost?

Where will the money come from? And don’t forget licensing, insurance, and legal help!

Licensing

Depending on the potential business location, the local jurisdiction — state, city or county — may have rules regarding the licensing of the HVACR service businesses and professionals. Licenses may be required for the business as well as the individual technician, or both.

On the Federal level, the United States Environmental Protection Agency (USEPA) states in part that anyone who “installs, maintains, services, repairs, or disposes of appliances containing regulated refrigerants must be certified under Section 608 of the Clean Air Amendments of 1990 to purchase and use those refrigerants.”

Insurance

Though some residential customers might ask for proof of insurance, commercial customers require it. Necessary insurance coverage may include liability insurance, worker’s compensation and job completion.

Legal Help

Starting a business without consulting legal advice is the same as buying an air conditioner with no idea of who might service it when it fails to run properly. The time to consult an attorney is before the business has started.

According to Brent Xavier, Esq., co-founder and partner of Pact Legal, LLC, potential business owners should consider the following things before turning the first wrench.

Startup Companies: Avoiding Key Legal Mistakes Checklist

Select the Appropriate Type of Legal Entity Early in the Company’s Development
Choose the type of legal entity that best supports achievement of the company’s and founders’ goals from legal, tax, and early-stage investment perspectives.
Clear and Protect the Use of Brand Names, Logos, and Domain Names Before Creating Value in Them
Clear the rights to the company’s business and brand names, logos, and domain names while the business is still in the conceptual stage.
Clearly Agree on and Properly Document Founders’ Roles and Responsibilities
Formalize relationships between the company’s founders and avoid acting through casual business relationships (even among friends and family).
Develop and Implement a Comprehensive IP (Intellectual Property) Strategy to Ensure that the Company Has and Retains Essential IP Rights
A comprehensive IP strategy should cover IP creation, acquisition, and protection and anticipate business growth and expansion.
Comply with Securities Laws When Raising Capital
Be aware that federal and state securities laws and regulations apply to all offers and sales of securities, including to friends and family.
Comply with Labor and Employment Laws
From the outset, comply with state and federal wage and hour laws for all employees.
Properly Structure Any Equity Plan for the Benefit of Executives and Employees of the Company
Decide whether to use some form of equity (for example, options, restricted stock, or stock appreciation rights) to compensate employees when developing a compensation strategy.
Institute a Policy for Social Media, Data Collection, and Other Online and Mobile Activities
Do not assume that because of the casual nature of social media and other online and mobile applications that these activities cannot cause significant harm.
Properly Document Customer, Supplier, Employee, and Other Key Third-Party Relationships
Do not rely on oral arrangements with customers, suppliers, and employees, even with friends and existing business contacts.
Ensure Adequate Insurance Coverage for Operations
Ensure that the company purchases and maintains adequate insurance to cover its business.

Plan for Success — Not Failure!

According to a recent study by Fundera, 20% of small businesses fail in their first year, 30% in their second year, 50% by year five and 70% by year 10. In my opinion, the most common cause of business failure — in any business — is a lack of proper planning and implementation of that plan. Another issue that cripples start-ups is a lack of funding. Any HVAR business start-ups that implement proper planning will ensure there is sufficient capital available to keep the business operating for many years.