Secret Life of Inventory

How to Start and Scale Your Own HVAC Business

• inFlow Inventory • Season 1 • Episode 9

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Are you thinking about starting your own HVAC business or taking your current one to the next level? In this episode, we dive deep into the strategies and steps you need to know to build a thriving HVAC company. From understanding the essentials of starting an HVAC business to how to effectively manage inventory and scale, this podcast covers it all.

Stay tuned for more episodes on entrepreneurship, business growth, and industry insights!

0:00 - Teaser
0:16  - Intro
1:08 - What is HVAC Inventory Management?
1:50 - What are examples of poor inventory management? How does that impact business operations and customer satisfaction?
5:38 - What are the best practices for effectively managing HVAC inventory?
12:52 - HVAC industry growth
14:21 - How do you start your own HVAC business?
19:50 - What are your top recommended solutions for starting an HVAC business?
23:00  - Outro

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They can take a look at, you know. Oh, I see that technician A is the closest to that job. I'll send them over. Right. But if you're not tracking your things properly, you could send them over. And they don't actually they don't have what they need. Right. Nevermind. I can't do this job. Exactly right. Hello everybody I'm Jared. Hi, I'm Melinda, and welcome back to The Secret Life of Inventory. This is a show where we talk about all things inventory related. And in today's episode we are going to be talking about HVAC inventory management, specifically how to start a successful HVAC business and some solutions that you can use to make your life easier. If you guys didn't know HVAC stands for heating, ventilation, and Air Conditioning. I only recently learned that too, and it's actually a very complex industry when it comes to inventory tracking, because these technicians are spread out across so many different job sites, and if even one component goes missing, it can bring an entire job to a stop. That's very true. And, you know, even though that there's so much at stake, you'd be surprised at how many HVAC businesses let inventory management take a backseat. So today we are very excited to talk about all things HVAC, inventory management. And if you guys are interested in learning more about inventory management and how it affects our modern world, be sure to subscribe to stay tuned for more. So before we get into it, could you explain to our listeners what is HVAC inventory management? Of course. Yeah. So HVAC inventory management essentially is, you know, anything to do with your physical items such as components, equipment, anything that you need to kind of conduct your business. So that includes like stocking, procurement, tracking, even like things like maintenance, planning, budgeting, compliance, all that stuff. So what are some examples of poor HVAC inventory management and how does that impact business operations or customer satisfaction? Yeah, the biggest one I would say would be negligent tracking. Right. And what does that mean? I mean, obviously it means that you're you don't really know where things are. You're losing track of items either. They're getting lost, they're getting damaged, they're getting stolen, things like that. Um, so if you're not really able to keep an eye on things, you're going to you're not going to have those key components when you're out on the jobsite. You mentioned before that HVAC technicians are kind of scattered all over the place, so they kind of need to make sure that they have what they need when they're on the job. If they don't have what they need, they're not going to be able to complete that job, right. So it's really, really important that you have what you need, the equipment you need, the components that you need. You know, where you need them when you need them. Essentially, it's something. Also to keep in mind is HVAC businesses. They're also dealing with, you know, things that are sometimes, you know, toxic, dangerous chemicals like like coolants and things like that. Right? So you have to make sure that you know where those things are. And they're not just like, you know, in the fridge somewhere next to your lunch or something, right? You need to make sure that you know where they are, how much of it you have. I mean, a lot of the times you have to keep up with compliances for that stuff. So of course, tracking that and negligent tracking of those things is, you know, very, very bad, dangerous, dangerous, not just bad but dangerous. And there's of course, there's there's poor forecasting. Right. So like with any business there's going to be seasonality involved. HVAC is no different. So, you know, for example, if you're running an HVAC business, you might notice that you sell a lot more air conditioning units in July and August during the. When it's super hot, obviously that makes sense. And you're going to be selling more furnaces during the winter. And then in the fall and the spring, you know, people have the windows open or whatever. They're not really using their systems. You're not going to sell as much. So having a good idea of like when you kind of need more of certain things is really, really important. So poor forecasting is, you know, if you're just continuously ordering the same amount all year round, you're going to find you're getting an influx of your inventory, you're going to be carrying a lot more. You're going to have less cash flow at certain times when you can, when you don't really need it. So having poor forecasting is a big thing that comes up a lot. If you have poor inventory management and it kind of what comes along with that is under stocking and overstocking. So of course under stocking is when you're, you know, you're running out of those components that you need, those integral components that you need in those in those moments. Yeah. Making people wait is never good. Never good for business, right? People want things now. Yeah. So yeah, if you're running out of those key components, you're out on jobsite. You're you're, you know, you definitely have poor forecasting. You're not tracking your things properly. And then the flip side of that is, of course, overstocking. Maybe you're like, oh, I keep running out of this, this, you know, fan unit or this AC unit. Like I'll just order a bunch. Yeah. You know, I'll just order a tower. Yeah. Tower of these things. But I mean, that's obviously not a great thing because you're, you're eating up into your, your cash flow and you're also eating up into your carrying costs as well. People think that holding on to things is going to be free. It's not you know, it costs money to have that warehouse space. You have to pay the rent and utilities and all that. You could be storing other things instead. Right? So you might even have to find yourself, oh, I need more warehouse space because I have all of these components I need to store. But in reality you're just ordering more than you need, right? So keeping that balance is really, really important. It's something that comes up a lot for, you know, companies that aren't managing their inventory properly. So another another big thing that kind of it's it's kind of what all of those things that I mentioned kind of comes into. It's an efficient workflow. Right. So if you're not tracking your things properly, you don't know which technician has what equipment or what components. You don't know how much of the things that they have. You're going to have a really poor workflow and with with the field service, you know, businesses, they need to kind of be kind of flexible, right? So if they get a call from a customer who needs a specific, you know, job done, they can take a look at, you know, oh, I see that technician A is the closest to that job. I'll send them over. Right. But if you're not tracking your things properly, you could send them over. And they don't actually they don't they don't have what they need. Right. Nevermind. Can't do this job. Exactly. Right. So if you're tracking things really, really well, you can, you know, you'll get that call. And instead of saying I'll send the closest technician over, you can say, well, who has the component that I need? Oh, this person actually has. How close are they? Okay. They're not as close as Truck truck B, but I'll send them over because they have what they need to actually complete the job. Right. So having a really good, efficient workflow is going to be indicative of having good inventory management. That makes sense. So what are some best practices for effectively managing HVAC inventory. Yeah. So I always start with this one. No matter the industry that you're in cycle counts. It's really important. Everyone hates them. I say that all the time because everyone hates them. but they're very, very important. Some people think that if they're using software that they don't need to do cycle counts because, hey, it's all being updated in the software. It should have. Exactly right. So why bother? You know, it's got the software. That's what I'm paying them a good money for. But regardless of how you're managing your inventory, you need to be doing cycle counts. And they don't have to be daunting. Um, I kind of recommend especially for field services. Um, they kind of do it in sections, right? So if you're doing a cycle count, maybe just do truck 1 one day, do truck 2 the second day truckload. Yeah. Divide it into different days and then warehouse on a separate do it all in separate days. That way you don't have to. Yeah. Not just overwhelming, but like you don't have to stop your business, you know, like, you obviously want to keep the ball rolling. You want to keep the customers happy, keep the jobs going. And you can't really do that if you have to, like, uh, stop everybody. We've got a counter inventory to make sure we have what we, we actually have in our system. We actually have those things. Right? So yeah, it's all about, um, kind of separating it, making it more manageable. Another big one, of course, is, uh, setting strict reorder points for items. We talked about how components are just very important to have. I mean, for everything. But for HVAC businesses, especially because you need to make sure you have those components to, to to do the job right. So if you want to make sure that you're not running out of those, um, components, you want to make sure that you have those data points in place. And what does that mean? That means that you basically you set a number like for example, you know, that you have ten AC units, and once you hit ten, you need to order more, right? So whatever system you're using, make sure that it alerts you, uh, so that when you hit that ten, you know, it's time to order more. Yeah. Because it gives you time because it's not just about like one. Oh, I got, you know, zero left order. It takes time for these things to get to you. Reorder points factor in things like lead time, things like safety, stock factors, all those things in to make sure that you're never going to run out of stuff no matter what if you order them at that point. So they're very, very important. Another big one for HVAC companies would be a mobile jobsite workflow. Of course, we talked about again everyone's located all over the place. Big service area. You're going to people's houses. You're going to stores, you're going to factories. Wherever the job needs to be done, you need to go to that place. Right? So if you have a mobile job site workflow, it's kind of a great way for you to plan those those job routes better for your technicians. And also make sure that all your technicians have the equipment they need. They have the components that they need. So what a mobile job site actually is. Essentially, it's setting up each of your trucks and your warehouse is kind of a separate locations. So all of your trucks will have like their set inventory and their components and all that. And then they would go around and they would do their jobs, and then they would go back to the warehouse and just kind of replenish their stock as needed. So the warehouse kind of acts as like a central hub. Yeah. Essentially analyzing historical data, of course, is really, really important for, you know, demand forecasting, knowing what you need when you need it. We talked about seasonality earlier. So that kind of plays into that. So if you kind of understand that okay, last August I look at my historical data. I know that I sold 25 of these AC units for example, so you probably can guess. I'll probably need at least 25. You might want to factor in things like oh well, my business is actually grown by 25% since last year, right? So add that in, maybe get that 25 plus to 25% more, maybe even a little more wiggle room just in case because you don't want to run out, you know, and see how that goes kind of thing. So it's really important to kind of see what you've done to kind of, you know, influence. Yeah, influence what you're going to do essentially. Right. And something that, you know, we're biased of course, but using software. So using HVAC business software is really, really important. It's going to help with all the things that I mentioned right. Reorder points reorder points, cycle counts multiple locations. They're going to be able to do all of all of those things right. So of course if you're using software you're going to have real time tracking. So if you're scattered all over the place and you're doing things on a spreadsheet or manually, when those, you know, when those technicians are using those components, there's going to be no way for them to kind of communicate that to other technicians, right? It's not going to be updating in real time. It's going to be the end of the day when everyone consolidates. Then you're gonna be like, okay, we've used this, this and that. You know, for example, let's say you're out on a job and you need a specific component that you've just run out or whatever. So, you know, oh, well, there was some back at the warehouse when I left this morning. I'll just head back and grab more. So you go back and you go to pick up more, and then when you get there, you realize someone else, okay, someone else came during the day and grabbed all of the components. And then now you're now you don't have any of that. Now you've wasted the time to go all the way back, and now you can't even go back and finish the job like you promised you would, right? So if you have a real time tracking system, you'll be able to know that, you know. Oh, I ran out of this part. I'll go back to the thing. You can actually check to see the stock available at the warehouse and realize, oh, there's not even any at the warehouse. So you can, you know, act accordingly from there. Right. And these systems are also going to allow you to restrict access by user. And that's actually really important for field service people. Um, you know, if you're running a company something you don't know everyone that well. So hierarchy right. There's a hierarchy. Right, boss? You're the boss. And you know you can be trusted. But sometimes a lot of times you have. I'm not saying, you know, don't trust your technicians, but if you've just hired someone, they're, you know, they're with their brand new, they're greenhorn. They've only been there with their company for a few weeks. You might not want to give them full access to the systems. You can kind of restrict their access to either just like view only, or. It takes time to build trust, you know? Exactly. And once that trust is built, then you can give them, you know, instead of no access. You can give the view only. And then once they're fully trusted and you love them, give them full access to the system. And it's not just about like, you know, getting things stolen, but it's also just like if they're using the system improperly, then they're maybe they're not updating it properly. You can't trust them to even use the system how it's meant to be used. And then maybe you don't want to give them full access because they're just going to mess everything up for all the other technicians, right? So it's really important. And just in general, these systems are great for just automating menial tasks. Things like we talked about historical data, like if you have a system that has really great reporting features, you don't need to go through and manually look at the data and crunch the numbers. It's going to kind of give you that, that data just at a glance really quickly, really easily. Right. So I mean, inFlow is a great example of this. You know, we have reorder points. So that's great for obviously making sure that you're not running out of things. We have the real time data tracking. So everything's in the cloud. So you can kind of track who has what equipment, how much of it is on each truck, all of that stuff. We also have multiple jobs, multiple locations, so that you can set up that mobile jobsite workflow really easily. Um, we have a mobile app too, of course, that is really useful when you're out on super convenient. Yeah, bring your computer over the. Huge laptops and stuff in your truck. Obviously not ideal when you're out on the job. Um, we have a built in barcoding system as well, and you can even use the mobile app and use the camera to scan the barcodes, right? So you don't even need to scan or either it's all kind of the system all built into into the phone, which is great. So yeah. Um, that seems like a very seamless. Yeah, package. Very seamless package. And of course there's a reporting features which makes a historical data tracking and all that stuff on demand forecasting, all that stuff. Way, way, way. Easier to use. You don't have to use so much brainpower. Exactly. Who wants to do that? Nobody. So I heard that the industry has been experiencing a ton of growth in the last few years. Like by the end of 2024 it's expected to be valued at 281.7 billion USD. And by 2029, experts are predicting that it's going to exceed over 389 billion USD. So that's a compound growth rate of 6.7% annually. Yeah. That's huge. I mean, and it's it's really not shocking when you think about it. There's obviously there's population growth that goes into that. Right. So our population is growing with that is new buildings that need to be built, new houses, new stores. All that stuff is going to be required. But it's not just the population growth actually, but it's also people are really more interested in new technology, eco friendly solutions, things like that. So older buildings are going to be getting a lot of updates as well. So it's not just new buildings that you're going to be seeing potential business in, but you can also get potential business from older buildings getting those updates. So there's a lot of potential for HVAC. I know older businesses, I mean not older businesses. I know for older condos. Um, their AC units are like high, medium and low. And then they're just hot and cold and like there's like a adjustable thing where there's no like you can't see the number. It's just a. Yeah, see. It's very old. That has needs to be updated. And I think we're all so used to being able to set like exact temperatures, you know, like I'm more of a 71 person or a. What is that in Celsius? I don't know why I said that in Farenheit for all our. We're Canadian here. It's all for it's for the American viewers, you know. So yeah 22 to 20 degrees. So what if people want to start their own HVAC businesses? What are some tips that you would give them? Yeah of course I mean like we talked about there's a ton of growth going on. So if you're an HVAC technician you're experienced enough. Uh, you might want to actually just start your own business obviously. Right. So how do you do that ? Of course. It's pretty daunting. Um, what you need to start off with, first and foremost is looking at the legislation in your whatever region you're operating in, making sure that you register your business, and then obtaining any, you know, certifications, licenses, all of that stuff. A lot of places, depending on where you're located, they require you to actually have a university certificate to show that you've, you know, your skilled trades person and you can't just like be a random person being like, I'm going to start an HVAC business, you know ? Yeah, especially because we talked about you're dealing with hazardous materials sometimes like coolants and stuff like that. So it's important that you make sure you do all your research, make sure that you have all of those things in place. So all of your certificates, all of the registration licenses, anything, all the paperwork, essentially all the boring stuff, the paperwork, make sure that is done and in place before you even get started in anything else. That's the most important thing. Yeah. And then from there, once you have all of the paperwork, all of the boring stuff done, you can actually start planning a little more. And we recommend that you kind of hone in and choose, you know, a sector essentially. So the HVAC business is kind of it's separated into like three major sections. So there's like residential, there's commercial and there's industrial. So residential of course is going to deal with any like homes, condos, apartments, places where people live. Essentially. Right. Self-explanatory. Commercial is going to be like storefronts, shopping malls, things like that. You know, any retail things like that, spaces like that. And then industrial are more like, you know, factories, data centers, places that need like climate controlled locations, like if you have like indoor gardens where doing agriculture, things like that, those are obviously need to be climate controlled. Pharmaceutical companies often will have their labs need to be climate controlled. So those are like big projects, a lot more important. Um, and all of these, these different sectors kind of have slightly different requirements as far as components and equipment is concerned. So while you can kind of, you know, be the jack of all trades to, so to speak, we do recommend kind of honing in on specialty. Yeah. Having a specialty because it's more you know it's more appealing to the consumer as well. The people are more likely to hire you if they see, oh, this person has has had many successful jobs in residential. They can definitely do the job. They've done it before. You have a track record for it where they're going to be less likely to see, oh, well, we're not going to have this person do the HVAC system in our data center if they've never done anything. Like that can mess things up. Yeah. Very expensive. If you mess up a data center that's, you know, has all of these incredibly expensive equipment and whatnot, so they're not going to entrust you. They're probably going to go to someone who's done it before. So and it also helps in marketing efforts too. So we definitely recommend you kind of pick one and stick to it. Right. So once you've kind of decided on which sector, then from there you kind of create your business plan, right? So that'll look like things like looking at your startup costs, you know, what you're going to need for your trucks, your warehouses, all your components, your equipment, your payroll, all of the things. How much are you going to need for that, how much you have available is going to dictate how big of a business you can start to begin with? Right. There's also going to be things like doing competitor research at this stage. So looking at in your area what other HVAC businesses are doing as far as like marketing, you know, what are get some quotes from them even like might seem like it's a little shady, but it's not at all. And they would do the same, right? Yeah, it's totally okay to call around, get quotes, see what they're charging. That way you can stay competitive. Right? So and then once you have that business plan in place, then you can start procuring all of the things that you need. Right. So the equipment that you need to to do the jobs, the components that you're going to need to do, the jobs, the service trucks, you're obviously going to need those. You don't want to be carrying a backpack around with all of your components. That's not going to be a thing. And then, of course, you're probably going to need a warehouse more than likely. Um, the mobile job site workflow is great for minimizing the space needed for a warehouse, because your service trucks are going to kind of act like little mini warehouses, but you're still going to need some sort of central hub, some sort of space. Um, a lot of times you even might need even a storefront, right? So somewhere where customers can actually go if they if you, you know, want that not all HVAC companies need that or want that. So it's not necessary. But sometimes you do need that. And in that case you can sometimes just get like a, a storefront that has a little warehouse in the back. So it kind of serves dual purposes. So things like that. And you're also going to like things like personal protective equipment, like basically anything that you need, you're going to have to procure all of these things. Like again, working with hazardous material, you're going to need certain things to keep your technicians safe. And then once you have all of the things, all of those physical things that you're going to be tracking, which we're talking about, you're going to need to find, um, trusted people, like finding a team that you can trust, finding technicians. And that's a really, really important thing that a lot of people just like, oh, I'll just hire somebody. I'll put it a thing on LinkedIn and get, you know, whatever. Super easy, right? Yeah. But with HVAC businesses, it's important to find people that are a good fit for your business because you got to make sure not only are they skilled in their trade and they can do the job required of them, but they're also the face of your company, right? So they're going to be the ones. Yeah. Like it's your reputation's on the line. They're going to be going and talking to the customers. They're going to be interacting and stuff. You want to make sure that they're good with customers, not just good with their hands and their tools skills. They need the people skills. Right? So yeah, they're going to be the ambassador of your brand essentially. So finding the right people that are the right fit that you can trust, that's really, really important. Yeah. Eventually you can give them full access. Yeah. If and then once you trust them they can get full access, but only not until then. So to wrap things up, could you summarize what are your top recommendations for people who want to start their own businesses? Yeah of course. So I mean, this is the one that I will always say no matter what is embrace technology, embrace, you know, not just the technology like the software solutions we talked about, but also the, you know, the smart technology, all of the advancements that we're seeing, the innovation that we're seeing in the HVAC industry adopt those as well. It's becoming way more popular among the consumer, and people are being more eco friendly and eco conscious. It's important to them. Right. So it's important that you actually adopt that technology. It's going to give you the edge over your competition or at least, you know, put you on the same level playing field, because chances are they're also adopting that technology. Yeah. But I mean, the software is a big one too, right? And it's not just, um, inventory software, of course, that's important. But other software solutions, you know, you can have like accounting software like QuickBooks online or zero, for example, customer relationship management software, CRM software. Um, so like House Call Pro is an example of that. Jobber is another example of that. Having those things in place is going to just make your life way easier and make running your business on the day to day way more simplistic. It's going to save you money, streamline it right, and choosing software that actually work well together as well. For example, inFlow works has an integration with QuickBooks online, has an integration with Xero . So you can have those two different pieces of software kind of working together. That kind of eliminates a lot of the, you know, double data entry you're going to have to do, you know, inevitably there will be some, but it's going to eliminate a lot of it. So it's just going to yeah, it's going to save you a lot more time. Right. So that's important for sure. And um, I guess going back a little bit to, you know, the technology and the eco friendly solutions and the innovation that we're seeing is, um, being sustainable, right? That's a huge thing. Customer sentiment is being sustainable. So finding those sustainable solutions is very, very important. Going green. You know, that's a big one. Um, for sure. And that kind of goes hand in hand with, you know, adapting to customer needs. Right. So I mean, things are going to change over time. Different customers are going to want different things. Making sure that you're kind of flexible and you're able to pivot. That's important. Obviously always be able to pivot to what your customer needs. It's not about you or what you want. You know, there might be you might think that a certain solution, a certain type of furnace or whatever is, you know, what this person would should use. They might not want that. So make sure that you're adaptable and that you're able to kind of give them what they need at the end of the day. And a big one two would be strengthening your supply chain. Uh, so something I think we talked about this all the time. Covid. Yeah. You knew what I was going to say. When we start talking about supply lines, it's like, oh Covid right. Yeah. So something that Covid taught everybody is supply chains are very precarious. Right. We cannot rely on them. So we always recommend that you, you keep kind of an open supply line with more than one supplier, right. Keep relationships up with a few different ones, 2 or 3 whatever and kind of maintain them over time. Maybe order one from one person, one from another person, kind of back and forth to maintain those relationships just in case there's a disruption in one. You have a backup, right? You're not just like, oh, I guess I don't sell jobs. For a while, you know, like. Yeah. So it's important to kind of keep maintain relationships with a few different people to keep your supply line running smoothly. All right. So that's it for this episode. Thank you guys so much for watching. We hope you enjoyed it. And if interested in learning more about inventory management in the future, make sure to subscribe for more. Yes! Thanks so much for watching and please leave us a five star rating if you enjoy this episode and stay tuned for more. Bye bye! Yeah, I think we covered everything. That's a wrap on Episode 9. That's it. Boom! Yay yay!