February 21, 2024
・
5 mins
Business
Thomas Lee
CEO & Co-Founder
In the HVAC industry, the path to business growth often seems straightforward: more calls, more jobs, more growth. Yet, many small HVAC contractors are caught in a cycle where increased jobs don’t necessarily equate to increased profits or personal freedom. Intuitively, they may sense that certain services like installations are more profitable than repair and maintenance calls. However, they’re left uncertain about where to focus their efforts without concrete numbers to back up these instincts. Moreover, even when identifying their most profitable services, they often lack a clear strategy for pivoting their business model to capitalize on this insight.
HVAC contractors offer a wide range of services, from repairing and maintaining furnaces, boilers, air conditioners, and heat pumps to installing these units, including ductless mini splits, hot water tanks, and tankless water heaters. While the demand for repair and maintenance is consistent, fueled by a steady stream of referral-based leads, these services don’t typically translate to the highest profitability. The average service call might bring in about $300 with a gross margin of 40-50%, which doesn’t leave much room for growth, especially after marketing costs.
Contrast this with installations which can offer the same gross margins of around 40-50% but at a significantly higher ticket, often $5,000 - $20,000, depending on the type of installation. The difference in profitability between these two types of services is stark. Still, many contractors continue to focus on servicing and repairs due to the volume of work and the nature of referral leads. This preference for service jobs over installations is a missed opportunity for significant business growth.
Consider the net profit margin ofyour typical service call versus an installation’s. At Mom’s Heating &Cooling, the average heat pump installation is $17,000, and takes a crew of twoto finish in two days. On the service side, an average ticket is $400, maxingout at 4 calls on a typical day. With two people over the course of two days,that is $3,200 in servicing revenue. On the surface, it shows thatinstallations bring in 5x more revenue than service calls, using the sametimeframe and human resource. But below the surface, after taking intoconsideration operational and marketing costs, you’ll find one installation canbring in the same profit as 30 – 50 service calls. This revelation iseye-opening for many contractors who recognize that installations are where themoney is but find themselves bogged down in the day-to-day of servicing.
The tendency to focus on repairs and servicing stems from the immediate need these referral leads represent. However, this focus is often at the expense of more profitable installation jobs. Many contractors believe they’re bound to servicing because that’s what their leads demand, not realizing the potential to generate leads for installations through targeted marketing efforts.
This is where strategic marketing comes into play. By pinpointing the type of service you wish to offer and building your business around that, you can significantly increase your profit margins and, consequently, your business growth. Targeted marketing allows you to attract installation jobs that bring in more revenue and provide a higher return on your marketing investment.
At HyperPop, we specialize in helping HVAC contractors like you pivot your business towards more profitable services. Through tailored marketing strategies that focus on generating high-value installation leads, we can help transform your business model from one dependent on low-margin service calls to one that thrives on the profitability of installations.
For small HVAC business owners, recognizing and acting upon the profitability of different services is crucial for sustainable growth. By focusing on installations and leveraging targeted marketing strategies to attract these high-margin jobs, you can position your business for success. If you’re ready to make the shift but need help figuring out where to start, HyperPop is here to guide you through this transition, helping you maximize your profitability and achieve the business growth you’ve been striving for.
CEO & Co-Founder
As a serial entrepreneur and co-founder of HyperPop, Thomas finds fulfillment in bringing his creative and professional ideas to life. Since 2010, he has founded and grown several businesses across multiple industries in Hong Kong and Vancouver. He has over a decade of experience in marketing, eCommerce, manufacturing, and logistics.
