Guide To HVAC Business Owner Salaries & Ways To Improve Your Profit Margin
Let’s talk money! In this piece, we’ll look at the typical owner and tech salaries for residential and commercial HVACR companies and ways to boost your profit margin and, with it, your take-home pay.
How much should you be bringing home?
According to a
the average HVAC business owner’s salary in the U.S. is $598K a year while the median salary is just $75K
. The average salary is skewed by a couple of business owners
making 3 to $20M a year
. The survey is also made up of companies that focus on commercial repair, building equipment contracting, and property management. These are not residential HVAC businesses.
Success Group International, a consulting firm for the trades, estimates that the average income for an HVAC owner is
— usually about 6% of the overall revenue of the company. If you do some math, this means the average HVAC company is bringing in between $580K and 1.25M a year.
The good news is there are many examples within the residential and small commercial HVAC industry of companies surpassing the $2M mark and beyond. Per SGI, the owners bringing in over $100K a year (meaning their businesses are bringing in over $1.7M, are doing so because “they are employing effective systems in their business, analyzing every aspect they can, and increasing the efficiency of their work.”
Instead of asking what your salary should be now, we recommend asking what your ideal salary is, then using that to figure out what your revenue needs to be to meet that goal.
HVAC Technician Salaries
Per our research, the average salary for an HVAC tech in the U.S. is $24.57 per hour or around $55K a year, but this average varies greatly from state to state. See the
What should you be paying your techs? For starters, this depends on the revenue of your company, the tech’s level of experience, and your area’s cost of living, etc.
Salaries also vary based on whether or not you’re offering a straight salary or a performance-based program. (We outline why you should consider bonuses based on revenue goals in our
We also want to call attention to the story of
. While many HVAC businesses struggle to find qualified employees, seasoned HVAC techs are
to work for Jason Julian’s company. This is based on his reputation for doing good work, but his pay doesn’t hurt either. Julian pays the most of any HVAC company in the area and, as a result, his team is loyal and does good work that brings in great reviews and referrals.
So how do you bring more in to pay both yourself and your team a higher salary? Let’s look at that next.
Boosting Your Profit Margin By Knowing Your Numbers
Boosting your profit boils down to two options: increase revenue or reduce costs. And an essential part of doing either is knowing your numbers.
You have to know exactly how much money you have coming in, how much is being spent, and how your costs break down. Using a home service business managing tool like Housecall Pro makes it easy to keep tabs on your cash flow, customers, invoices, and profit margins.
Plus, you can accept credit card payments with our mobile app, which means you get paid before even leaving the job site. That means no more overdue invoices or time spent chasing customers for payment – which is great for your bottom line.
is the all-in-one solution to manage and grow your HVAC business. Joining Housecall Pro also gives you access to a private HVAC community of your peers and other valuable resources.
Boosting Your Profit Margin by Increasing Revenue
In this section, we’ll look at common strategies to do both.
1. Raise Your Prices
One straightforward way to bring in more money is to raise your prices, but is it a good idea? Risks include losing existing customers and outpricing new ones. But one of the risks of
raising your prices is appealing to price shoppers instead of customers looking for the best quality job.
Here are three questions to ask yourself when you’re considering raising your prices.
1. How Healthy Is Your Brand?
If you’re known for providing quality HVAC services, people will expect to pay more for it.
Signs of a healthy brand:
You’re getting consistent referrals
You have a good number of return customers
You’re showing up in the top 2 or 3 on Google for HVAC companies in your area
You have one of the highest ratings on Google, Yelp, etc than other companies in your area
If these are true, you may be underselling your services. If you’re known for being one of the top HVAC businesses in your area, it’s quite okay to be one of the most expensive businesses in the area, as well. You’ve earned it.
2. How Effective Is Your Sales Team?
Can your estimators and sales reps explain why your quotes or services might be higher than the competition? Can they sell the value of paying more? If not, then you might consider more sales training or hiring more experienced sales reps before raising your prices.
3. Are You Breaking Even?
This is by far the most important question. If you’re not breaking even, you need to raise your prices.
If you don’t know, start by figuring out your break-even point. That is, what’s the absolute minimum amount you need to charge to cover your expenses? Once you have this baseline figure, you can use it to help set your rates and optimize your margins.
Here’s how to
for any HVAC job.
First, add up all of your monthly costs for running the business, including bills, rent, licensing, and equipment. Then, divide the total by the average number of jobs you do per month.
Next, estimate how many hours each job requires and multiply it by the hourly cost of your HVAC technicians and other staff members. This should include hourly wages as well as any additional benefits you offer, like health insurance.
Calculate the costs of all materials and equipment required to complete the job.
Add these numbers together to calculate your break-even point. If you were to charge a customer that exact amount, you’d recover all your expenses – but wouldn’t make a cent of profit.
Now that you know your break-even point, you need to factor in your desired profit margin and markup costs accordingly.
2. Increase Your Marketing Spend
A lot of HVAC companies don’t do much marketing because they haven’t needed to. They get referrals, they’re found online, so they don’t see the need. But you can’t truly grow from just referrals.
“Referrals are a huge part of our business — those loyal customers — but how do you get that customer to begin with? Matt Mauzy, owner of
, explained on an
“A lot of times it doesn't come from a referral, you've got to market, and I would encourage people to develop a marketing plan and just get behind it, take that leap, take a loan out to put together a marketing program.”
One year, he decided to invest 7% of what he believed they would gross the following year on marketing. And the return was amazing, so they spent 7% the following year and then went up to 10% which Matt calls “aggressive growth mode.” Through this and other strategies, he grew his business to over $20 million a year in sales.
3. Promote Recurring Service Agreements
Sell your customers on the merits of consistent service and add new income month after month. You increase the lifetime value of each customer and increase loyalty.
Option #2: Cut Costs
1. Minimize the Cost of Acquiring New Customers
Customer acquisition cost is the amount you have to spend on advertising and sales to get one new paying customer – and it’s often a significant cost that can eat into your profit margins. In fact, one report found that acquiring a single new customer costs between $200 and $300.
Minimize costs by:
Knowing your acquisition costs for each marketing strategy you use, reviewing these numbers regularly, and cutting out services that are more expensive.
Trying out new free or cost marketing strategies until you find a couple that stick. Things like direct mail, strategically using Facebook, etc.
When you find a type of advertising that works more effectively than others, shift more of your marketing budget and time towards those efforts.
2. Add Value Instead of Offering Discounts
There’s a time and a place for providing discounted services – for instance, during a serious lull in the off-season or to reward customers who give you referrals. However, most of the time, you should try to avoid lowering your rates – especially if you’re looking to boost your average HVAC profit margin.
If you want to attract new customers without cutting into your profits, add more value to your existing offer. So, rather than promoting a 10% discount for first-time customers, focus on communicating added value instead. That could mean throwing in an added bonus that won’t cost you anything, like beefing up their warranty or priority service in the case of an emergency.
You can also use direct mail and email marketing to keep your company top-of-mind for existing customers during slow months. This is effective because it not only fills up your schedule during the off-season, but it also frees you up to service new customers who are more likely to contact you during the busy season. Housecall Pro offers
. Choose when to send them (for instance, 2 or 6 months after a job), choose what to say, and Housecall Pro will send them automatically.
is rated the #1 software to run your HVAC, Plumbing, Electrical, Carpet Cleaning and other home service businesses. Our features allow you to schedule and dispatch jobs, get booked online, send invoice and receive payment within minutes whether if you are in the office or out in the field. Join all the other successful home service businesses who have already started and