How to start a heating and air conditioning company: your guide

Starting a heating and air conditioning company is a rewarding venture that combines technical skill with business savvy. The industry pulls in hundreds of billions of dollars annually, driven by steady demand for climate control in homes, offices, and commercial buildings.

This guide will take you through the practical steps of securing funding, obtaining necessary licenses, acquiring equipment, and building supplier relationships to help you launch a successful heating and air conditioning company in the U.S.

Step 1: Plan your business and validate the market

First, define your service area. You can use U.S. Census Bureau data to understand local household incomes and housing age. Also, talk to local real estate agents and property managers. They offer direct insight into what homeowners and landlords currently need.

With your market defined, analyze your competitors. Use Google Maps to find HVAC companies in your zone. Many new owners just compare prices, but you should also look at their online reviews on Angi or Yelp, their website's professionalism, and their listed response times.

Estimate your startup costs

Your initial investment requires careful planning. While costs vary by location, you can expect a startup budget between $22,000 and $50,000. This range covers your most significant initial purchases and administrative fees.

• Vehicle: A reliable used work van typically costs $15,000 to $30,000.
• Tools and Equipment: Expect to spend $5,000 to $10,000 for essential diagnostic tools, gauges, and hand tools.
• Licenses and Insurance: Set aside $1,000 to $5,000 for initial business registration, state licensing, and liability insurance.
• Initial Marketing: A basic website, business cards, and local ads can run from $1,000 to $3,000.

Here are three immediate steps to take:

• Identify three target zip codes and pull their demographic data from the U.S. Census Bureau.
• Create a spreadsheet listing five local competitors, their services, and average customer review scores.
• Draft a startup budget based on the cost estimates for a vehicle, tools, and licensing.

Step 2: Set up your legal structure and get licensed

You might want to consider a Limited Liability Company (LLC). This structure protects your personal assets if the business faces a lawsuit. For tax purposes, profits pass directly to you, which simplifies filings when you start out.

With your business structure decided, you can handle federal requirements. You will need an Employer Identification Number (EIN) from the IRS, which is free to obtain online. Also, anyone who handles refrigerants must have an EPA Section 608 Technician Certification.

State and local rules are where things get specific. Your state's contractor licensing board dictates requirements, which often include an exam and proof of experience. Expect to pay between $500 and $2,000 for state licensing, with processing times of two to four months.

You will also pull local permits for most installation jobs. A mistake some new owners make is working without a license to save money. This can lead to heavy fines and prevent you from getting future permits, so always stay compliant from day one.

Here are four immediate steps to take:

• Register your business as an LLC with your state's Secretary of State.
• Apply for a free Employer Identification Number (EIN) on the IRS website.
• Find a local testing center and schedule your EPA 608 certification exam.
• Check your state contractor board's website for its specific license application.

Step 3: Secure your insurance and manage risk

Protecting your new business from day one is non-negotiable. You will need several types of insurance to cover the specific risks of HVAC work, from property damage to employee injuries. A single uncovered accident can easily bankrupt a new company.

Key insurance policies and costs

Your insurance package should be comprehensive. A mistake some new owners make is to get a basic policy, which often leaves them exposed to common HVAC-related claims like accidental water damage or electrical fires. Expect to budget between $3,000 and $7,000 annually for a solid policy package.

• General Liability: Get $1 million to $2 million in coverage. This protects you if you damage a client’s property.
• Commercial Auto: You need at least $1 million in liability coverage for your work van.
• Workers’ Compensation: This is required in most states if you hire employees. It covers medical costs and lost wages from on-the-job injuries.
• Professional Liability: Also called Errors & Omissions, this covers claims of faulty work or incorrect advice.

With these policies in mind, you can approach insurers. You might want to consider providers like The Hartford, Hiscox, or Next Insurance, as they specialize in contractor trades. A general agent may not understand your specific risks and could sell you an inadequate policy.

Here are 4 immediate steps to take:

• Request quotes from three insurance providers that specialize in contractor trades.
• Ask for a sample policy to review for exclusions related to refrigerant handling or water damage.
• Inquire about bundling your general liability and commercial auto policies for a potential discount.
• Verify that your chosen coverage amounts meet your state contractor board’s minimum requirements.

Step 4: Set up your shop and buy equipment

You will need a small shop space, around 500 to 1,000 square feet. Look for properties zoned for light industrial or commercial use. This gives you a place to store your van, equipment, and any parts inventory without violating local ordinances.

When you negotiate a lease, you might ask for a shorter initial term, like one or two years. This provides flexibility as your business grows. Some new owners get locked into five-year leases and regret it when they need more space sooner than expected.

Stock your van with the right equipment

Your initial equipment purchase is a large part of your budget. You can save significantly by purchasing quality used items. Focus on what you need for the first six months of service calls, not every possible job.

• Refrigerant Recovery Machine: $500 - $1,200
• Vacuum Pump: $300 - $800
• Manifold Gauge Set: $150 - $400
• Leak Detector: $200 - $500

With your equipment list ready, open accounts with wholesale suppliers. Places like Johnstone Supply, R.E. Michel Company, or local Carrier distributors are your go-to sources. They will ask for your business license and EPA certification to set up an account.

Here are 4 immediate steps to take:

• Identify three available commercial properties between 500 and 1,000 square feet.
• Ask a leasing agent about one- or two-year lease term options.
• Create a shopping list for your core equipment and compare prices for new versus used.
• Contact a local HVAC parts distributor to learn their requirements for opening a wholesale account.

Step 5: Set up your payment and billing systems

Establish clear payment terms from the start. For large installations, it is standard to require a 50% deposit to cover equipment costs, with the balance due upon completion. For smaller service calls, payment is typically collected immediately after the work is finished.

A mistake some new owners make is relying only on checks, which can slow down cash flow. You should accept credit and debit cards. Be aware that many payment processors have high monthly fees and complex rates, so look for a solution with transparent, low transaction fees.

Choose your payment solution

For accepting payments on-site, a mobile solution is a game-changer. For heating and air conditioning companies that need to accept payments on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone - just tap and done.

At just 1.99% per transaction with no hidden costs or extra hardware needed, it's a strong offer. Other providers often charge 2.5% to 3.5% plus monthly fees. It's particularly useful for collecting a deposit for a new AC unit right in the client's home.

• Get Started: Download JIM app for iOS
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers

Here are 3 immediate steps to take:

• Define your payment terms for installations versus service calls.
• Compare mobile payment solutions, focusing on transaction rates and hidden fees.
• Download the JIM app to test its payment flow on your smartphone.

Step 6: Secure funding and manage your finances

You might want to look into an SBA 7(a) loan, which can provide up to $50,000 for new businesses. Lenders typically look for a credit score over 680 and a detailed business plan. Interest rates often range from 10% to 13%.

Another path is equipment financing. Companies like Currency or Ascentium Capital can fund your van and tools. Since the equipment acts as collateral, these loans can be easier to obtain. Approval can take just a few days, which helps you get started quickly.

Plan your first six months of cash flow

You will need about $15,000 to $25,000 in working capital. This covers fuel, insurance, and marketing before your jobs start to generate steady income. A mistake some new owners make is to underestimate this, leaving them short on cash while they wait for invoices to get paid.

Here are 4 immediate steps to take:

• Contact your local Small Business Development Center (SBDC) for free help with an SBA loan application.
• Request an equipment financing quote from a lender that specializes in trade vehicles.
• Calculate your estimated operating expenses for three months to set a cash reserve target.
• Open a dedicated business bank account to keep your finances separate from personal funds.

Step 7: Hire your team and set up operations

Your first hire will likely be an experienced HVAC technician. This person handles installations and service calls. Expect to offer a salary between $50,000 and $70,000, depending on their experience level and certifications.

At a minimum, any technician you hire must have an EPA 608 certification. You might also look for candidates with NATE (North American Technician Excellence) certification, as it shows a higher level of expertise and commitment to the trade.

Streamline your daily workflow

A mistake some new owners make is trying to manage jobs with a paper calendar. This leads to scheduling conflicts. Instead, use a field service software like Jobber or Housecall Pro from day one to manage dispatch, invoicing, and customer history.

With your systems in place, you can set performance goals. A good benchmark for a lean operation is to aim for $150,000 to $200,000 in annual revenue per service truck. This helps you gauge profitability as you grow.

Here are 4 immediate steps to take:

• Draft a job description for an HVAC technician that lists EPA 608 certification as a requirement.
• Look up NATE certification courses to understand the skills they cover.
• Sign up for a free trial of a field service software like Jobber or Housecall Pro.
• Set an initial revenue target of $150,000 per service vehicle for your first year.

Step 8: Market your business and get customers

Start with your digital foundation

Your first move should be to claim your free Google Business Profile. Fill it out completely with your service area, hours, and photos of your work van. This is how most local customers will find you online, so treat it as your digital storefront.

A simple website is also a good idea. It just needs one page that lists your services, contact information, and license number. This builds credibility and gives potential customers a place to learn more about you before they call.

Launch your first campaigns

You might want to try Google Local Services Ads (LSAs). You pay per qualified lead, not per click, which can be more cost-effective. Expect to pay between $25 and $60 per lead. A common mistake is to jump into expensive pay-per-click ads without a solid reputation first.

Also, consider targeted offline methods. Door hangers in neighborhoods with homes over 15 years old can be very effective. A campaign targeting 2,000 homes might cost $300-$500 for printing and distribution, and a 1% response rate would yield 20 leads.

Here are 4 immediate steps to take:

• Claim and fully populate your Google Business Profile.
• Get a quote for a simple one-page website that lists your license number.
• Research the average cost per lead for HVAC on Google Local Services Ads in your area.
• Identify a neighborhood with older homes to test a door hanger campaign.

Step 9: Set your pricing and create service packages

You can choose between flat-rate pricing or time and materials. Flat-rate gives customers a clear upfront cost for standard jobs like a capacitor replacement. Time and materials works better for complex diagnostics where the job scope is unknown at the start.

A mistake some new owners make is to copy competitor prices without knowing their own costs. You must first calculate your own numbers. Add up your monthly overhead—insurance, van payment, software—and divide it by your expected billable hours to find your base hourly cost.

Determine your profit margins

Aim for a net profit margin of 20% to 30%. For parts, a common strategy is a 100% markup on items under $50 and a 50-75% markup on more expensive components. This ensures you cover your costs and generate a healthy profit on every job.

You can also offer preventative maintenance plans. For example, a bi-annual tune-up plan for $150-$250 per year creates recurring revenue. This helps smooth out cash flow during the slower shoulder seasons between extreme heat and cold.

Here are 4 immediate steps to take:

• Calculate your hourly billable rate based on your overhead and desired profit.
• Create a parts markup sheet with different price tiers.
• Design one preventative maintenance package with a clear annual price.
• Call three local competitors to get a quote for a standard furnace cleaning.

Step 10: Maintain quality and scale your operations

As you complete jobs, you need to track your performance. Two numbers matter most: your first-time fix rate and your callback rate. Aim for a callback rate under 5%. This shows your team is solving problems correctly on the first visit.

Establish your quality benchmarks

For installation work, you can use the quality standards from the Air Conditioning Contractors of America (ACCA). These provide detailed checklists for proper system installation. Also, continue to prioritize NATE certification for your technicians as a key quality indicator.

Know when to grow

A mistake some owners make is hiring a second technician too quickly, only to find their service quality drops because training was rushed. You should only scale when your systems can support it. Your field service software is perfect for tracking the metrics that signal it is time to grow.

When a service truck consistently generates over $200,000 in annual revenue, it is a strong sign you can support another vehicle. Another indicator is when a technician is consistently booked for more than 15-20 service calls per week. This means you have enough demand to bring on help.

Here are 4 immediate steps to take:

• Track your callback rate for one month and aim for a target below 5%.
• Download a quality installation checklist from the ACCA website.
• Review your revenue per truck to see if you are approaching the $200,000 benchmark.
• Analyze your weekly job reports to determine your average calls per technician.

You now have a clear path to launch your HVAC company. Remember that your reputation for quality work and fair pricing will be your greatest asset. The demand for reliable service is constant. Go build a business that lasts.

To help with cash flow, make payments simple. With JIM, your smartphone becomes a card reader. You can accept payments for a flat 1.99% fee with no extra hardware. Download JIM and you are ready to go.