HVAC JOBS LOOK PROFITABLE. THE BALANCE SHEET IS STILL THIN.
HVAC subcontractors have no cash left for reasons specific to how the work is built and billed, on jobs that are making money. The three that cost the most in this trade are below, taken from HVAC contractor research. Most are at 75 to 90 days from finishing work to holding the money, and 45 days is achievable.
Cash and profit are measured on different clocks. Your profit and loss records revenue when you invoice and costs when you incur them, while the bank account only knows what cleared. Labour goes out weekly and collects 45 to 90 days later, minus retention. That distance is what a growing, profitable HVAC company funds out of pocket, and it widens as you grow. The specific things that widen it in this trade are what the rest of this page is about.
WHERE IT LEAKS OUT.
HVAC operates three businesses: service agreements (recurring, fast cash), replacement/retrofit (consumer-financed, weather-dependent, fast cycle) and new-construction subcontracting (pay apps, retainage, 51-day average waits). Most shops blend all three. Each has its own margin structure and cash curve, and now its own refrigerant economics: service on legacy R-410A reclaim pricing, replacement on A2L premiums.
Replacement demand spikes with heat waves and cold snaps. You staff for peaks you can't schedule and pay the bench through the shoulder seasons. Service agreements even out the year, the same annuity logic as paving's crack-seal and SWPPP's inspections.
WHAT MOVES MARGIN IN THIS TRADE.
The Regulator's Pen
The refrigerant rules changed twice in eighteen months. Each change repriced inventory, equipment and tooling decisions already made. Treat regulation as a financial risk: date your price bases, write escalation language, and size inventory to work either way.
The Certification Window
A2L-ready shops billed 18 to 30 percent labor premiums after a weekend of certification and a few thousand dollars of tools per truck. Doing the compliant work lets you charge more. The window goes to shops that tool up before enforcement makes everyone do it.
The Three-Book Blur
Service, replacement and new construction are three businesses. Each has its own cash curve and, now, its own refrigerant economics. One blended P&L prices all three wrong and doesn't show which one pays for the shop.
DAYS SALES OUTSTANDING.
Ninety days is weak, 45 is the target, 30 is strong. Nothing else moves cash faster.
| Position | Days | What it means |
|---|---|---|
| Weak | 90 days | Roughly three months of work funded out of your own pocket. |
| Target | 45 days | You can get here on the days you control. Bill on time, send complete paperwork, and follow up in week two. |
| Strong | 30 days | Takes work every month. It's the cheapest money you can get. |
Moving from 90 days to 45 frees roughly annual revenue divided by 365, times 45 days. At $4M that's about $493,000. At $8M it's about $986,000. That money costs no interest and needs no bank. So we fix billing and collections before we talk about financing.
HVAC BENCHMARKS.
HVAC subcontractors at $1M to $5M net 8 percent, against the CFOS net profit target, set at your trade's net profit average at your revenue plus 3.5 points, never below 10 percent, before taxes. The working capital target is 13 percent of annual revenue, and the monthly close should finish by day 10 so the numbers can still change a decision.
FREQUENTLY ASKED.
