Sometime about 15 years ago, I was walking into a distributor first thing in the morning to set up for a quality installation class. Coming out of the front entrance was their first customer of the day, a small HVAC contractor I had known for several years, and he was excited. You see, that Summer was HOT, great for business and the phone never stopped. Also, the warm conditions in the Northeast attics made for tough working conditions. This guy was picking up his job for the day, a two-zone ductless mini-split, and had a smile from ear to ear. In passing he mentioned, “You know what Chris? If I could sell and install these systems daily, I would be happier and make more money!” Of course, my reply was, “Why not?”. The contractor’s response was laced with fear about his existing customers, what people ask for on sales calls, and I could tell he really didn’t trust heat pumps as a sole source of heat. Fear of the unknown kept this contractor from growing his business, making more profit, and being happy.
Don’t worry, I am not putting on my ductless heat pump hat and selling some dreams today! I want you to consider the limitations your small business has with labor; the trend in your market towards variable speed heat pumps, and job costing.
Labor Issues
Even with a slower than normal start to Summer in 2025, there is still a higher demand than most contractors are able to meet when it comes to every aspect of the profession. Not having enough installers impacts the ability to respond to sales leads since the team is scheduling so far out. Service Technicians are busy taking care of the existing customer base, so taking on new customers can be challenging. Of course, inventory of parts and equipment was a challenge over the past several of years, so not having something readily available really increases the risk to the business as well. This will tie up capital otherwise used to help the business grow, like for marketing or training.
Residential HVAC U.S. Trend
There is no doubt that with the quick implementation of some of Utility’s heat pump rebates, state carbon reduction plans, and tax incentives, the focus in the HVAC industry has shifted fast to variable speed, cold-climate heat pumps. Leading up to this point, the rate of adoption of cold-climate heat pumps to heat your home across the U.S. could have been considered ‘early adopters’. Although some pockets of the North saw quick industry growth due to utility incentives and proof of performance, there were many objections from homeowners when it came to the indoor unit’s look and location.
An interesting thing happened during the COVID-19 pandemic, people started working from home and realized their rooms were not as comfortable as they hoped. The indoor air quality took a higher priority, the costs of oil and gas soared, and what something looked like on the wall was no longer that important. An intriguing shift in what customers were asking for has taken place, and now variable speed heat pumps have almost reached the mainstream.
Sell Higher Profit Jobs
Selling high-ticket jobs may be great if you are paid on the gross amount, but if the job has a low net profit margin, then how do you suppose the company will be able to grow?
High ticket jobs tend to be many-day, large ducted systems, that require high technical skill and tend to run over on man hours (well, at least this is my experience and what I see in the Northeast). Since this is the model, and a lot of contractors compete on price with these commoditized systems, any hiccup in the job loses a high percentage of the profit.
Contrast this with a ductless heat pump system installation. These jobs tend to be very standard with labor, pricing, and materials. The weather has less of an impact on technician installation performance, and the risk is greatly lowered when it comes to net profit. Yes, this ticket could be higher or lower, but if you are selling blocks of time and do not have to worry much about job overages, then this lower-risk, higher-margin option is better for the business and the salesperson. The real metric you should be looking at is net profit per man-hour.
I don’t think it is a coincidence that the businesses that have sold in the Northeast over the last several years were heavy in ductless heat pump sales, with premium manufacturers.
These businesses were able to standardize their offerings, processes, and labor.
By doing so, and advertising for these particular jobs, they became the local experts and could charge any amount they felt was reasonable. Customers would wait months for their installs if needed, and there is no suitable substitution in the minds of their customers. This made the business owners very successful, and thus very rich when selling.
Guess what? That guy I mentioned at the start focused on these exact things about 8 years ago, and sold his company for millions. What an opportunity right now in our industry!
