How to make money in heating and air conditioning business?

This article was written by our expert who is surveying the industry and constantly updating the business plan for an air conditioning company.

Who wrote this content?

The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the air conditioning company market.

What services bring the highest profits to HVAC businesses?

System replacements and new installations generate the highest profit margins in the HVAC industry, typically ranging from 50-70% gross profit on equipment and labor combined.

Full system replacements for air conditioners, heat pumps, and furnaces command premium prices because customers understand these are major investments that will last 15-20 years. Your air conditioning company can charge $5,000-15,000 for a complete residential system replacement, with commercial installations often exceeding $50,000. The key is positioning these as energy efficiency upgrades that will save money long-term, not just equipment swaps.

Emergency repair services represent another highly profitable revenue stream, with many HVAC companies charging 2-3 times their standard rates for after-hours, weekend, or holiday calls. Customers facing a broken AC in 100-degree heat or a failed furnace in winter will gladly pay premium rates for immediate service. Smart air conditioning companies maintain dedicated emergency crews to capture this high-margin work.

Indoor air quality (IAQ) services have exploded in profitability since 2020, with homeowners investing heavily in air purifiers, UV lights, humidity control systems, and advanced filtration. These add-on services typically carry 60-80% margins and can be easily bundled with routine maintenance visits or system installations.

You'll find detailed market insights about profit margins for each service type in our air conditioning company business plan, updated every quarter.

Which customers should HVAC companies target for maximum revenue?

How can air conditioning companies optimize pricing without losing customers?

Flat-rate pricing builds trust and increases profitability by eliminating haggling and encouraging technicians to work efficiently rather than padding hours.

Your HVAC business should develop a comprehensive flat-rate price book that includes labor, materials, and overhead costs plus your desired profit margin. This transparent approach helps customers understand exactly what they're paying for while protecting your margins. Studies show flat-rate pricing can increase gross profits by 15-25% compared to time-and-materials billing.

Implementing tiered service packages—typically "good, better, best" options—allows you to capture value from different customer segments without appearing to gouge anyone. Present the middle option as your recommended choice, knowing that 60-70% of customers will select it, while 20% will upgrade to premium and only 10-20% will choose the basic option.

Dynamic pricing based on demand helps maximize revenue during peak seasons. Charge 10-20% more for AC installations in summer and heating work in winter, when customers have urgent needs. Conversely, offer discounts during shoulder seasons to keep crews busy and cash flow steady.

This pricing strategy framework is one of the core components we outline in the air conditioning company business plan.

What upselling techniques boost revenue for HVAC contractors?

The most effective upselling happens when technicians present solutions to problems customers didn't know they had, backed by visual evidence and clear value propositions.

Train your technicians to perform comprehensive system evaluations during every service call, using digital tools to show customers photos of dirty coils, worn parts, or efficiency readings. When customers can see the problem themselves, they're 3x more likely to approve additional work. Successful air conditioning companies report that properly trained techs can generate $200-500 in additional revenue per service call through ethical upselling.

Bundle complementary services to increase average tickets while providing genuine value. For example, when replacing an AC unit, offer a complete comfort package including a new thermostat, air purifier, and first year of maintenance for a bundled discount. This approach can add $1,000-2,000 to each installation while improving customer satisfaction.

Create urgency without being pushy by educating customers about manufacturer rebates, utility incentives, and tax credits that expire soon. Many HVAC companies successfully use tablets to show real-time rebate calculations and energy savings projections, making the financial benefits tangible and immediate.

Which maintenance plans generate the most recurring revenue?

Well-designed maintenance agreements create predictable monthly income while reducing marketing costs and increasing customer lifetime value.

Residential maintenance plans should include bi-annual tune-ups (spring for AC, fall for heating), priority scheduling, and 10-20% discounts on repairs. Price these at $15-25 per month or $150-300 annually, targeting a 60% gross margin after accounting for service costs. Successful HVAC companies maintain 30-40% of their customer base on maintenance agreements, generating stable revenue even during slow seasons.

Commercial preventive maintenance contracts offer even higher revenue potential, with monthly fees ranging from $200-2,000 depending on system size and complexity. These contracts should include quarterly inspections, filter changes, belt replacements, and detailed reporting to help facility managers justify the expense. Many air conditioning companies find that commercial maintenance contracts account for 40-50% of their total gross profit.

Consider offering tiered maintenance plans—basic, premium, and VIP levels—to capture different customer segments. VIP plans might include annual duct cleaning, no overtime charges, and even some repair coverage, commanding $40-50 monthly fees while building incredible customer loyalty.

What marketing channels deliver the best ROI for HVAC businesses?

• Google Business Profile optimization: Free to set up and maintains 24/7 visibility in local searches. Companies with complete profiles including photos, reviews, and regular posts see 5x more calls than those with basic listings.
• Email marketing to existing customers: Generates $42 for every $1 spent on average. Send seasonal reminders, maintenance tips, and exclusive offers to your database monthly.
• Strategic Facebook and Instagram ads: Target homeowners by age, income, and interests within your service area. Video ads showing before/after installations perform especially well.
• Local SEO and content marketing: Create location-specific service pages and blog posts answering common HVAC questions. This organic traffic converts at 14.6% vs 1.7% for traditional advertising.
• Referral partnerships with complementary businesses: Establish relationships with realtors, home inspectors, and property managers who can send steady referrals in exchange for preferred pricing or commissions.

How should HVAC companies manage online reputation for growth?

A strong online reputation directly correlates with higher close rates and the ability to charge premium prices in the HVAC industry.

Implement an automated review request system that sends follow-up emails or texts 24-48 hours after job completion, when satisfaction is highest. Include direct links to Google, Facebook, and relevant trade sites. Air conditioning companies using automated review systems collect 10x more reviews than those relying on manual requests. Aim to maintain at least a 4.5-star average with 100+ recent reviews to build trust.

Respond to every review within 24-48 hours, thanking positive reviewers by name and addressing concerns professionally in negative reviews. Your responses are public and show potential customers how you handle both praise and problems. When addressing negative reviews, acknowledge the issue, apologize if appropriate, and invite further discussion offline.

Showcase your best reviews strategically by featuring them on your website, social media, and even vehicle wraps. Create video testimonials for your highest-value projects and use them in advertising campaigns. Studies show that displaying reviews can increase conversion rates by 270%.

Which operational improvements cut costs without sacrificing quality?

How can HVAC businesses minimize inventory costs effectively?

Smart inventory management can free up tens of thousands in working capital while ensuring technicians always have necessary parts.

Negotiate annual purchasing agreements with 2-3 primary suppliers to secure 10-20% volume discounts and extended payment terms. Many air conditioning companies don't realize they can negotiate net-45 or net-60 terms once they establish good payment history, dramatically improving cash flow. Focus on standardizing equipment brands to reduce SKU count—carrying parts for 3 AC brands instead of 7 can cut inventory investment by 40%.

Implement a two-tier inventory system: keep high-turnover parts (filters, capacitors, contactors) on every truck while maintaining less common items at a central warehouse. Use historical data to set minimum/maximum levels for each part, automatically reordering when minimums are reached. This prevents both stockouts and excess inventory.

Consider joining a buying group or cooperative to access better pricing typically reserved for larger companies. These groups can reduce equipment costs by 5-15% while providing training, marketing support, and business resources. The savings often far exceed the membership fees.

What compensation structures motivate profitable technician behavior?

The right pay structure aligns technician interests with company profitability while attracting and retaining top talent in a competitive labor market.

Implement a base salary plus performance incentive model where technicians earn bonuses for meeting key metrics: revenue generated, customer satisfaction scores, maintenance agreement sales, and callback rates. Top HVAC companies typically structure compensation as 60-70% base pay and 30-40% performance-based, ensuring stability while rewarding excellence. High performers in this system often earn 20-40% more than straight hourly wages.

Create clear advancement paths with corresponding pay increases: apprentice, journeyman, senior tech, field supervisor, and service manager. Each level should require specific certifications, experience, and performance achievements. This structure gives ambitious technicians a reason to stay and grow with your air conditioning company rather than job-hopping for small raises.

Offer spiffs (immediate cash bonuses) for specific behaviors you want to encourage: $25-50 for selling a maintenance agreement, $100 for a successful IAQ upsell, or $200 for generating a replacement lead. These immediate rewards create excitement and drive the behaviors that boost profitability.

Get expert guidance on structuring these compensation plans inside our air conditioning company business plan.

Which partnerships generate steady referral business?

• Real estate agents: Provide free or discounted pre-listing HVAC inspections in exchange for referrals to buyers needing repairs or replacements. One active realtor can generate 10-20 leads annually.
• Property management companies: Offer 24/7 emergency service and volume discounts to become their preferred HVAC vendor across multiple properties.
• Home warranty companies: While margins are lower, these partnerships provide steady work during slow seasons and opportunities to upsell non-covered repairs.
• General contractors and builders: Establish relationships for new construction and renovation projects, often leading to ongoing service agreements for completed properties.
• Local hardware stores: Place business cards and brochures at locations where DIY homeowners realize they need professional help, offering the store a referral fee.

What financing options help close more high-ticket HVAC sales?

Offering multiple financing options can increase close rates by 40-60% on system replacements by removing the immediate financial barrier.

Partner with 2-3 financing companies to provide options for different credit profiles, including same-as-cash promotions for qualified buyers and longer-term loans for budget-conscious customers. The most effective air conditioning companies present financing as the default option, showing monthly payments rather than total prices. For example, position a $8,000 system as "$89/month with approved credit" to make it feel affordable.

Consider offering in-house financing for smaller jobs ($1,000-3,000) that don't qualify for third-party programs. While this requires careful credit management, it can capture sales that would otherwise be lost. Some HVAC businesses successfully offer 3-6 month payment plans with 50% down, maintaining high collection rates while boosting revenue.

Promote special financing events during slow seasons, partnering with lenders to offer limited-time rates like "0% for 24 months" or "No payments until 2026." These promotions create urgency and can pull forward demand from future months, smoothing revenue cycles and keeping installation crews busy year-round.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. Hook Agency - Most Profitable Home Services
2. Jobber - HVAC Industry Trends
3. Research and Markets - HVAC Market Report
4. Jobber - HVAC Profit Margins Guide
5. ServiceTitan - HVAC Marketing Strategies
6. ServiceTitan - HVAC Reputation Management
7. BuildOps - HVAC Pricing Strategies
8. Payzer - HVAC Profit Margin Analysis
9. FieldEdge - HVAC Upselling Strategies
10. ServiceTitan - Maximizing HVAC Profits