This mentor has forty years experience in this industry first as a technician and then as a business owner after he purchased the company he work for when he was only 23. He successfully grew the business from one with 3 employees and a few hundred thousand dollars in sales to a business with 13 employees and over two million in sales. In his Mentor Article he tells you how to become a licensed journeyman, what the trade involves and things you can do to prepare yourself while you are in high school. He also explains what is required to successfully run a heating and air conditioning business. As you will see in his article, this is a skilled trade with compensation levels equal to or greater than many careers requiring college degrees. It also has the advantage found in many skilled trades for those of you with entrepreneurial ability to be able to start your own company after you gain experience in the trade.
Becoming a Heating and Air Conditioning technician is a good career to consider for anyone with mechanical ability. The trade involves installing and servicing furnaces, air conditioners, flue piping and ducts. This work is done in existing homes and buildings where equipment is worn out and needs to be replaced or where your customers want upgrades and add-ons as well as installing systems in newly constructed homes and building. HVAC usually is installed once the building is framed and the roof, siding and windows are installed. So not all the work is done outside. You are mostly in the elements when you install outside air conditioners, heat pumps and ventilation piping.
HAVC has been an enjoyable trade for me. You are always learning new things because the technology is constantly changing. The improvements brought about by applying this new technology has allowed the efficiency of heating and air units to tripled over the last thirty years. Efficiency is expected to improve even more in the future. So there will always be something new to learn in this trade.
Another thing I like about HVAC is that you work with a lot of interesting people in other skilled trades like plumbers, electricians and carpenters. Over the years I have made many good friends and learned a lot about trends in all parts of the building industry. I have also developed strong, long-term relationships that extend beyond the business with many of my customers who come from a variety of backgrounds. So there are always interesting people to interact with everyday.
The one thing that concerns some people who are looking at becoming an HAVC technician is the accident rate. It is a little higher than some of the other construction trades. But I have not experienced this myself. We do not cut corners and follow installation guidelines. We also take normal precautions when handling dangerous chemicals like some refrigerants. Our experience has been that you can avoid most accidents if you do things right. Make sure you work for a company that does not cut corners.
How to Get Started
To become a fully licensed journeyman takes two years of classes at a technical college and costs $1,500 to $2,000 per year in my state of Oklahoma. You then must pass a State-licensing exam. You will have to renew your license every four years and take continuing education classes required by the licensing board.
It is also possible to start by working as an apprentice and attending a technical school at night so you can earn some money while you are going to school. This makes the training program very affordable compared to most four-year college degrees. Yet a fully licensed HAC journeyman can expect to earn as much or more that many people with a four-year college degree.
I began working as an apprentice at my Dad’s heating and air conditioning company when I was twelve during the summer and holiday breaks, something the new labor laws would not allow you to do today until you are sixteen. After I graduated from high school, I attended a local college and received a two-year associates degree. I then went back to work at my father’s business full time while I attended technical school at night and was able to graduate and get my journeyman’s license in two years.
There are three basic journeyman’s licenses in the HVAC trade. To maximize your earnings potential you should have all three.
The first is a serviceman’s license. As the title says, this license allows you to service equipment and also install new equipment. The journeyman has to determine the most efficient size furnaces and air condoners for a particular building and be able to determine the right fan size as well as duct size. This requires the journeyman be able to do the mathematical calculations and measurements required to design an efficient system. Because it is the serviceman who normally goes to customers to repair equipment, the person with this license also has the opportunity to earn sales commissions when they sell a customer either a replacement unit or an upgrade. The commissions I pay my servicemen run from 4% to 6% depending on the type of equipment that the customer buys. Their bonuses are paid each month and on average add ten to fifteen thousand dollars to their salaries.
The next journeyman’s license is sheet metal. This is involves constructing ductwork for the house or building. Most of this material is fabricated in our shop from galvanized steel sheets and then taken to the site for installation. The sheet metal journeyman must know how to construct and install these ducts based on blue prints and diagrams and needs to lean how to cut, shape and join sections of ductwork.
The third is a mechanical journeyman’s license. This one covers more aspects of the business like running steel pipes to furnaces for natural gas transmission and installing water lines for chilled water and refrigeration systems.
All these licenses require you to be able to be able to do basic mathematics including algebra. It will help you when you start technical school if you take algebra in high school as mathematics are part of the first course work in trade school. The tests to get your licenses also include math questions where you will need to be able to show that you know how to properly size equipment. It is also a good idea that you take chemistry in high school. A HVAC journeyman works with a number of chemicals used in air conditioning systems and uses various kinds of lubricants. Many of the injuries that occur in the trade are from improper handling of chemicals. So knowing how to properly handle and use these chemicals is an important part of your training. High school chemistry will help you with the course work when you enter trade school where the right ways to handle and use these kinds of materials is taught as part of the course work.
What is Expected of a HAC Journeyman
One of the keys to being successful in this trade is being able to make your customer happy by doing a good job the first time. I give bonuses to my technician who do a job we rate as A that is done in the allotted time, when there are no call backs and the customer surveys show they are satisfied. Customer satisfaction means that you not only will retain customers, you will also get customer referrals, which is the best way to get new business. Having to go back several times to correct problems with an installation can also eliminate the profit margin that was put into the job when it was originally bid. Your employers will not keep you unless your customer satisfaction ratings are consistently above 95%. Lower ratings not only hurts business profits, it also can affect the relationship with the equipment suppliers. Many name brand equipment suppliers will not sell equipment to HVAC companies if the surveys they also send out to the customer come back with a satisfaction rating less that 94%. So the industry standards are high.
People also need their heating and air conditioning working at all times. It is not only a comfort factor but also a heath factor for many people who could be sick and particularly for the elderly who lives can be at risk if they get exposed to excessive heat or cold. This kind of equipment can break at any time including weekends, evenings after business hours and holidays. So my company has a phone that is answered 24/7 where a customer can call and get a technician if they need one immediately. We rotate the people who are on call for after hours work. But you should know that as part of your job you would be required to take your turn on after hours standbys.
Because customer satisfaction is so important, I also like to hire people who present themselves well to my customers. I have some introverted people who work mostly in the shop and prefer not to be around the customers. This is possible for some parts of the trade. But most journeymen do have to interact with customers or other tradesmen on job sites like plumbers and electricians. So it is important to me that they listen well, are polite and have a good appearance. I have my technicians all wear uniforms with the company logo and their name on their shirt or jacket so the customers can talk to them on a first name basis. (Do they pay for them and do you clean them or are they responsible for cleaning them?)
What Can You Expect to Earn
YPNG has put government pay scales at the end of this article. There are obviously regional differences in pay bases on the wide salary range in the government statistics. My journeymen in Tulsa, Oklahoma initially earn in the range of $45,000 to $55,000. When they have all four licenses their salaries are higher and are in the range $70,000 to $85,000 including commissions.
Managing a Heating and Air Conditioning Business
Choosing an Equipment Supplier
You have to decide what brand of equipment you are going to represent. I found that it is important to my customers that my supplier has an equipment and parts warehouse close by so that if I need something in a hurry to keep my customer’s home or business comfortable I can pick it up that day and get their system running quickly. Some national brand suppliers only have regional warehouses. You can wait a day or two for both equipment and original manufactured (OM) parts you might need for repairs. As I mentioned earlier, customer satisfaction is key in this competitive business. For this reason, I believe it is important that your supplier has a local warehouse that is well stocked so you can promptly take care of your customers.
Once you choose a supplier, you have to continually evaluate their product versus the competition. Product quality can change over time if the company lags behind in technical innovation or the quality of their manufacturing changes.
You also want a supplier who will help you with your advertising. Advertising is expensive and most suppliers have programs where they allocate advertising dollars to HAC companies based on their sales.
Another advantage of name brand suppliers is that they send out their own satisfaction survey that give us additional customer feedback about our service and the performance of the equipment we sold them. A supplier will work with us to help solve a problem that might develop with their equipment. Because they also want to protect their brand’s reputation, most national name brand companies will drop a HVAC company if their satisfaction survey results go below 94% being satisfied.
Television advertising used to be effective for us. But as people now TiVo shows and can skip advertising, I am not sure it has been as good a value as it was previously although we still do television. What we have found is that a lot of our calls from new customers are coming from people doing an Internet search for a HVAC company. This means that a well designed web page and getting good placement on search engines is now important. We are also seeing more business being generated by using social media and are planning on doing more of this in the future.
But the most important kind of advertising doesn’t cost anything. We have always gotten the largest part of our new business from people who were refereed to us by satisfied customers. That is the primary way I have grown my business, building a reputation for doing a good job. We work hard at this. We always have someone go out and visit with a customer after a job is finished to make sure there are no problems and we always send out satisfaction surveys ourselves before the supplier surveys. We also give people who are considering a bid we have made a list of satisfied customers who have said they would take calls from people wanting to know about our company. I cannot emphasize how important good referrals are to building a HVAC business.
Because HVAC is primarily a service business, finding and retaining good people who are both good technicians as well as good at dealing with customers and your other company’s employees is critical to your long term success.
My management style is not to be confrontational or always be critical to get good work from my employees. Instead, I try to use positive ways to motivate them. I not only give them bonuses for sales they make, I also give them bonuses when we do what I call a “Happy Check” with the customer after the job is done. If the technician gets an A rating they get a bonus. This has generally worked well for me over the years and has allowed me to hire many experienced people from other companies who wanted to work for a company with these kinds of incentives.
Gross Sales Margins, Overhead and Cash Flow
Our gross margins, the difference between the cost of equipment and materials and the sales price, run 40% to 50%. Our overhead allocation for things like salaries, employee benefits, shop and office rent, etc. generally runs 35% to 40%. So our pre tax margins are not particularly high. You have to be sure to do credit checks and make certain your customers will pay because there is not much room for bad debts.
But margins are not the only thing you need to watch when managing a HVAC company, you also have to measure your cash flow. This is based on sales volumes. You can make more money and cover more overhead with a higher volume of sales and a 45% margin than you can with a lower volume of sales and a 50% margin. So it is important that you maintain your sales volumes. Many people who first get into the business after working as a journeyman for several years just focus on their margins and think that if they maintain a 50% margin they will be profitable. They ignore the fact that a lot of the overhead in this business is fixed and that there is a level of sales necessary to generate the cash flow you need to cover that fixed overhead that is critical to meet if you are going to generate a reasonable profit.
Until sales go over at least a million dollars, most of the owner’s compensation is in the form of the owner’s salary not from the distribution of profits after all the expenses are paid. And when you are growing the business most of this extra cash needs to be reinvested in new equipment and new hires. Still owning a good HVAC company with over a million in sales will allow you to earn something equivalent to many well paid professionals and other small businesses with these same levels of sales. It is a business that has provided a good living for me and my family and one that I am glad I pursued not just for the money but also for the interesting challenges the business provides every day and the long-term relationships I have been able to develop and maintain over the years.
US Bureau of Labor Statistics for Heating, Air Conditions and Refrigeration Mechanics and Installers
The median annual wage for heating, air conditioning, and refrigeration mechanics and installers was $43,640 in May 2012. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $27,330, and the top 10 percent earned more than $68,990.
Apprentices usually earn about half of the wage paid to experienced workers. As they gain experience and improve their skills, apprentices receive periodic raises until they reach the wage of experienced workers.
The majority of HVACR technicians work full time, with occasional evening or weekend shifts. During peak heating and cooling seasons, they often work overtime or irregular hours. Although the majority of technicians work for construction contractors, about 9 percent are self-employed workers who have the ability to set their own schedules.
Job opportunities for HVACR technicians are expected to be excellent, particularly for those who have completed training at an accredited technical school or through an apprenticeship. Candidates familiar with computers and electronics, as well as those who have developed troubleshooting skills, will have the best job opportunities as employers continue to have difficulty finding qualified technicians to work on complex new systems.
Technicians who specialize in installation work may experience periods of unemployment when the level of new construction activity declines. Maintenance and repair work, however, usually remains relatively stable. Businesses and homeowners depend on their climate-control or refrigeration systems year round, and must keep them in good working order, regardless of economic conditions.