HVAC contractors are in demand at all times given that most people are not able to properly service their own air conditioning, heating, and ventilation systems. These businesses are able to generate substantial gross margins not only from the installation of new HVAC systems, but also from the ongoing repair of the systems. The key strength is businesses that these businesses generate substantial and highly predictable streams revenue from maintenance services offered to the general public. These businesses often remain completely profitable and cash flow positive in any economic climate. The gross margins from service-based revenues typically ranges anywhere from 90% to 95%, while sales of new systems typically carry gross margins of 50%. Most financial institutions are willing to provide the necessary capital in order to develop these types of businesses. The average HVAC contracting business typically has a startup cost of around hundred thousand dollars.
As it relates to weaknesses, HVAC contractor tractors typically do have some decline in the revenue during times of economic recession given that people will hold off on installing new systems into their homes and properties. However, the ongoing streams of revenue from maintenance and repair allows these businesses to continually generate a positive cash flow. The operating expenses, especially as it relates to payroll insurance, are also somewhat high.
As it relates to opportunities, these businesses can readily expand by acquiring additional trucks, hiring additional HVAC personnel, and expanding their marketing reach. Once established, HVAC contractors can also expand by developing ongoing relationships with real estate developers that will use these businesses during the course of their new real estate developments. There are a myriad of ways in which a owner of an HVAC contracting business can expand their operations.
As it relates to threats, these businesses do face a substantial amount of competition in any given market. This is somewhat of a commoditized industry. As such, HVAC contracting businesses must compete on price while providing outstanding level of customer service to homeowners as well as commercial property owners. Economic recessions do have a modest impact on these businesses, but the vast majority are able to stay in business even during deleterious economic conditions.