How to Grow Your HVAC Business: Strategies for Maximum Profit

If you’re running a commercial HVAC company, you’re operating in one of the most promising sectors of the construction industry. As of 2024, the global HVAC systems market is valued at approximately $249B and is projected to grow at a compound annual growth rate (CAGR) of 7.5% from 2025 to 2030. (For a fun comparison, the HVAC industry is nearly as large as the entire global coffee market—except it's growing 40% faster.) In commercial and industrial HVAC sectors, the market is driven by the rising demand for cost-effective, energy-efficient cooling and heating systems.

With growth like this, the question isn’t whether opportunities exist—it’s whether your business is positioned to capture them. We’ll help you understand where your company stands today and share proven strategies on how to grow your HVAC business. 

Understanding HVAC Business Profitability and Value

To run a successful HVAC company, you need a clear picture of where it stands financially. This means understanding both your operational profitability and your overall business value—two critical metrics that, together, reveal your company’s financial health and growth potential.

How to Calculate Your HVAC Profit Margins

Calculating your HVAC business’s profit margin is straightforward once you understand the formula:

1. Start with your total revenue—all the money earned from services and sales over a specific period. Then subtract your total expenses, including labor, materials, overhead, insurance, and other operating expenses. This gives you your net profit.
2. Divide net profit by total revenue and multiply by 100 to get your net profit margin (as a percentage).

For example: 

1. $600,000 total revenue – $475,000 expenses =  $125,000 net profit
2. $125,000 net profit / $600,000 total revenue x 100 = 20.8% net profit margin

By all accounts, this is a very healthy net profit margin. In general, HVAC contractors should shoot for 20% net profit in their business, though anywhere between 10% and 20% would be considered healthy. 

For a more detailed profit margin breakdown, we’ve aggregated data from multiple industry sources (here, here, and here) to see where HVAC companies typically fall:

• Struggling companies: 1-2% or less net profit
• Below-average companies: 3-7% net profit
• Average performers: 8-12% net profit
• Above-average companies: 13-19% net profit
• Top performers: 20% or more net profit

Keep in mind that these ranges can vary depending on whether you’re focused on service work, new construction, retrofits, or a mix of residential and commercial projects. Your local market conditions will also be a factor.

How to Value Your Heating and Air Conditioning Business

Knowing your profit margin gives insight into your business’s operational efficiency, but knowing its overall value provides a deeper understanding of your company’s worth and growth potential.

Beyond preparing a business for a potential sale, a valuation can also be helpful in:

• identifying growth opportunities, 
• making strategic decisions about expansion or diversification, 
• securing financing, or 
• bringing on partners or key employees through equity arrangements.

Two critical components determine the value of your heating and air conditioning business:

1. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): This measures your HVAC business’s core operating performance and cash generation capability. Think of it as your net profit plus the non-cash expenses and financing costs that don’t reflect your day-to-day.
2. Multiple: This is the factor applied to your EBITDA based on the industry, business size, growth trends, and market conditions. According to this valuation firm, “EBITDA multiples for HVAC companies range from 3.4x - 7.8x.” 

Here’s how it works: If your HVAC company generates $200,000 in annual EBITDA and similar businesses in your market are selling at a 4x multiple, your estimated business value (a.k.a. your asking price if selling) would be $800,000.

To calculate your EBITDA, start with your net profit and add back interest payments, taxes, depreciation on equipment and vehicles, and amortization of any intangible assets. For most HVAC contractors, the biggest add-backs are typically equipment depreciation and vehicle depreciation.

If your numbers come out below where you want them, don't panic. The strategies we cover next will help you learn how to grow your HVAC business and climb to the top tier of performers.

How to Grow a Heating and Air Conditioning Business

Alright, onto the good stuff—tips for running an HVAC company that not only survives but thrives in this ever-changing market. 

1. Define your growth goals.

Successful HVAC companies don’t typically grow by accident—they set goals that keep them moving in the right direction.

Start by defining what growth looks like for your company. Are you aiming to double revenue within three years? Expand into a new market? Secure 10 new contracts in the next 12 months? Whatever they are, your goals should be specific and measurable so that you can track progress and make adjustments when needed.

Then, break this big-picture goal into smaller (quarterly or monthly) targets. For example, if you want to add $1M in annual revenue, that means roughly $250,000 per quarter or about $83,000 per month. This makes the goal feel more achievable, and it gives clear benchmarks to measure against.

2. Track KPIs that will drive growth.

Beyond just revenue, establish key performance indicators (KPIs) that can help you get more granular into your business’s financial performance. These should include:

• Average project size: Helps spot trends and target larger opportunities
• Customer acquisition cost: Shows how much you’re spending to land each new client
• Profit margin per job type: Reveals which jobs/services generate the best returns
• Customer retention rates: Indicates client satisfaction and recurring revenue potential
• Client payment speeds: Tracks how quickly different clients pay out

Use this data to prioritize projects that are better for your bottom line. If your data shows that preventative maintenance contracts generate 25% margins while emergency repairs average only 12%, you can shift your focus toward securing more maintenance agreements. 

On the payment speed side of things, the same logic applies. While payment speed may not always impact profitability, it affects the working capital you need to operate smoothly. However, you might discover that your most profitable relationships on paper become much less attractive when you factor in extended payment cycles and carrying costs. 

Apply insights from these KPIs to your bidding strategy, adjusting pricing for lower-margin work and slow-paying clients. This will help you land more projects that are actually good for business.

3. Mitigate gross margin slippage.

While we covered tracking profit margins as a KPI above, gross margin slippage deserves special attention because it's one of the most dangerous—and preventable—threats to HVAC profitability. This is when a project appears profitable throughout most of its lifecycle, only to see margins suddenly evaporate as it nears completion.

Most gross margin slippage stems from one fundamental problem: teams aren't aligned on project costs. This is reflected in inaccurate initial estimates, field teams working without budget transparency, and unrealistic time projections. 

The fix is straightforward but requires discipline: create transparency and accountability throughout your organization. Get field teams, project managers, and office staff aligned on costs from day one, then implement regular project reviews that ask the hard questions:

• Are we tracking to our estimates? 
• Is this overtime budgeted? 
• Have we communicated schedule changes to everyone who needs to know?

For a deeper dive into identifying red flags and prevention strategies, check out our complete guide on monitoring gross margin slippage.

4. Diversify your service offerings.

Diversification isn’t necessarily about being everything to everyone—it’s about becoming indispensable to your current customer base. Consider expanding into complementary services that make sense for your existing customer base:

• Preventive maintenance contracts: Generate recurring revenue that smooths out cash flow fluctuations.
• Energy efficiency consulting: Help clients reduce operating costs while positioning yourself for upgrade projects.
• Building automation integration: As buildings get smarter, HVAC systems need to integrate seamlessly with existing systems.
• Indoor air quality solutions: Post-pandemic, this has become a major priority for commercial buildings.
• Emergency repair services: Respond to urgent HVAC needs, enhancing customer loyalty and increasing revenue.

The key is to expand into areas where you can leverage your existing expertise and relationships, rather than chase every possible opportunity. (Though these additional services can make you more appealing to new clients, as well.)

5. Strengthen your web presence.

Ensuring your business is both searchable and accessible online isn’t just nice to have—it’s critical for generating new work. Consider these numbers:

• 96% of people learn about local businesses, like construction companies, online
• 62% of customers will ignore a business without a web presence

Simply put, the key to connecting with new prospects is to meet them where they’re at: online. Your web presence is most people’s first impression of your company, so make sure it conveys your professionalism and expertise.

A great and easy first step to boost online visibility is creating a Google Business Profile. It’s 100% free—all you need is a Google account using your business’s email address (a simple fix if you don’t have one yet).

Here’s how to set up a Google Business Profile:

1. Go to the Google Business Profile website and sign in using your Google account.
2. If your business isn’t already listed, add your business and follow the prompts to enter your business name, address, phone number, category, and website.
3. Verify your listing via one of the provided options—postcard, phone call, or email.
4. Once verified, fill out all the sections of your profile, including business hours, photos, a business description, and other information (like your service areas).
5. Keep it up-to-date with new photos, responses to reviews, and any other key business changes.

Equally important is having a well-functioning website that your Google Business Profile directs people to. Your website should load quickly, work seamlessly on mobile devices, and clearly showcase your capabilities. Include detailed project portfolios, service descriptions, and easy ways for potential clients to contact you. 

6. Increase team efficiency.

Construction teams waste countless hours on manual paperwork, duplicate data entry, and chasing down information that should be at their fingertips. This is what’s called “work about work.” Of the estimated 90,000 hours the average person spends at work, 60% of it is spent on work about work. The right technology, however, can help you reclaim that time.

Here are the most impactful areas to focus on:

• Project management and communication: Keep daily tasks, schedules, budgets, and communications in one place instead of juggling multiple spreadsheets and email chains. When everyone works from the same system, you eliminate the constant back-and-forth that wastes hours each week.
• Repetitive documentation: Much of the paperwork in HVAC work follows predictable patterns (i.e, payment applications, change orders, lien waivers). Smart automation handles the routine stuff while flagging items that need attention, freeing up your team in the process.
• Resource allocation and tracking: Solutions that offer real-time visibility into where your people, equipment, and materials are located can help you make smarter scheduling decisions, ultimately optimizing resource utilization.
• Cash flow forecasting: Real-time project data and payment tracking help you predict when money will come in and go out. This visibility lets you make smarter decisions about taking on new work, managing expenses, and avoiding cash crunches.

The payoff from these efficiency improvements compounds over time. Teams that can complete projects faster and with fewer errors naturally become more profitable, while also creating capacity to take on additional work without hiring more staff. If any of this hits close to home, check out our software selection guide.

7. Invest in your people.

In construction, your reputation rides on your team's performance. Every technician, project manager, and office staff member represents your company on job sites and in client interactions.

The most successful commercial HVAC companies understand this and invest accordingly:

• Ongoing training: Keep your team current on new technologies, codes, and best practices.
• Safety culture: Commercial sites demand rigorous safety standards—make it a core value.
• Career development: Create clear paths for advancement to retain your best people.
• Employee ownership: Some top mechanical contractors have implemented employee ownership models that align everyone's interests with company success.

Additionally, your ability to attract and retain skilled workers in a tight labor market becomes a significant competitive advantage—and a major cost saver. The expense of constantly recruiting, hiring, and training new workers can quickly erode your profit margins, with replacement costs averaging 20% of an employee's annual salary for workers earning under $50,000, and even higher for specialized roles requiring advanced training.

7. Dial in your marketing strategy.

A successful HVAC marketing strategy starts with understanding your target market and consistently positioning your company where potential clients will notice you.

Develop strategic relationships.

• Industry networking: Attend specialty trade shows, local contractor association meetings, and building owner events to connect directly with potential clients and stay visible in your market.
• Professional partnerships: Build relationships with architects, engineers,  general contractors (GCs), and other subcontractors you work alongside—electricians, plumbers, etc.—who can refer good business.
• Repeat business: Follow up with clients after successful projects to discuss future needs, upcoming expansions, or additional properties they manage.

Establish your expertise.

• Educational content: Share insights about energy efficiency, compliance requirements, and building performance through blogs, newsletters, or even speaking opportunities.
• Case studies: Document your successful projects with measurable results like energy savings and cost reductions to demonstrate real value.

Expand your reach.

• Targeted outreach: Send targeted mailers to property managers, facility managers, and building owners in your service area, especially before peak seasons. 
• Social media presence: Share project updates, team highlights, and industry insights on LinkedIn and other professional platforms to stay visible with commercial decision-makers.

8. Don’t leave any money on the table.

Revenue leakage is often the difference between a good year and a great one. Small hiccups in how you handle billing and payments can quietly drain thousands from your bottom line. Here are the most common areas where HVAC companies lose money—and how to plug those leaks:

Streamline change orders. 

Change orders are profit opportunities, but they can also be administrative headaches. Document and communicate changes immediately when they occur, rather than trying to reconstruct what happened weeks later from spreadsheets and emails. Better yet, use a system that tracks all change orders for you, compiles backup documentation, and reminds project managers to submit drafts.

Manage retention releases.

Don't let retention money sit indefinitely with GCs or owners. Track retention balances closely and create automated reminders for when retention periods expire. Maintain organized records of punch list completions that support your release requests.

Improve collection speed.

Late payments hurt more than just cash flow—they increase your working capital needs and can strain relationships with suppliers and employees. Create a systematic follow-up process with automated reminders and escalating actions to speed up collections and keep cash flowing consistently.

How Siteline Helps Grow Your HVAC Business

It's not usually technical skills that sink businesses. Most of you are incredibly skilled at what you do. The problem is cash management, and it's especially challenging in commercial work where project timelines stretch longer, payment terms extend to 30-90 days, and upfront costs hit your cash flow before revenue hits the bank.

That's where Siteline comes. We provide a powerful solution that helps commercial HVAC companies like yours gain crystal-clear visibility into every dollar, from bid to final payment. By automating invoicing, streamlining change orders, and proactively managing retention and collections, Siteline helps you safeguard your cash flow and accelerate revenue recognition. The result? You're not just growing your HVAC business; you're building a more financially resilient and profitable operation, month after month, year after year.

Interested in seeing how Siteline can help grow your HVAC business by getting you paid an average of three weeks faster? Schedule a quick demo here.