How Much Do HVAC Companies Make?
Most HVAC company owners decided to start their own business because they wanted a chance to make more money, they wanted to execute their own visions for HVAC, they were provided an opportunity to acquire or grow a business, or some combination of these reasons. Many employees think that owners of a company make much more than their employees. While this can often be the case, it does take time to reach that level. In the beginning, however, HVAC company owners sacrifice a lot to have their own business, taking hits to their paycheck for larger payoffs later on. Some never see the large payoff later on because they don’t effectively strategize or set up smart systems in the beginning. Some may have unrealistic expectations as to the income of HVAC business and are left wondering, “How much do HVAC companies make?” The answer to this question is that it depends on the company! Some one-man HVAC businesses take in only $50,000 in profit, while larger companies can earn several millions of dollars, all divided amongst the various employees.
The Breakdown of HVAC Earnings
In a typical residential HVAC company, the owner pays most of every dollar earned to his employees, equipment costs, marketing, utilities, and other expenses before paying himself anything. Usually this leaves about 6% of earnings to the owner. For a company that brings in $1 million, the owner would get $60,000 in take home pay. This doesn’t sound like much, especially if the goal of owning a business was for financial freedom. Plus, this 6% is after the few years it took to build the business and not taking an income as the owner. However, this 6% usually isn’t the end goal. HVAC business owners should strive for 10-15% by cutting costs in some areas or increasing their profits while keeping costs the same in all other areas.
To save on costs, owners can find deals on equipment through buying used, looking for online deals, and trading. Business owners may also need to evaluate flexible costs such as utilities, office supplies, and advertising to see where they can restrict spending. This may be a simple as regulating the thermostat, or as complicated as analyzing your marketing plan. You may already know the areas that can handle some cuts, or you may need to hire a third party to analyze your finances. It will be worth it if it means you can take home more at the end of the day.
Salary of HVAC Owners
While the above figure of 6% of the earnings is average for HVAC business owners, many earn far less, and some earn far more. Besides figuring out where the business could cut unnecessary costs, the owner usually must evaluate the pricing of their services to earn more. While your low prices may attract more customers than your competition, it doesn’t mean much if you aren’t profiting from those transactions. The average income for HVAC owners is between $35,000 and $75,000. Few earn more than $100,000, but the ones who do are earning that much because they are employing effective systems in their business, analyzing every aspect they can, and increasing the efficiency of their work.
Many HVAC business owners don’t realize they need different pricing schemes for different services that their company offers. For instance, residential HVAC installation should be priced differently from commercial HVAC installation, and an HVAC service should be priced differently from duct cleaning. If you are offering more than one service, you should separate these into different departments, as if they were their own separate business.
Compartmentalization such as this allows business owners to see the profit margins in each category and know which ones are making or losing the most money. From here they can strengthen what is working and focus on the parts of their business that are doing well, while either changing or discarding the parts that are draining the company. If you aren’t sure where to start in these evaluations, a business coach or mentor in the HVAC company can help evaluate your company and recommend various actions.
When a business compartmentalizes like this, it can further increase efficiency, cut unnecessary costs, and increase profits. When you do this, you should be able know what the sales are in each department, what the cost of sales and overhead expenses are in each department, and what the net profit is for each department. From here you can implement systems that allow you to take home more income at the end of the day.