If you haven’t already, now’s the time to contemplate your budgets for the 2015 year. I realize the training required to be an HVAC technician/installer is different from being an accountant; however, since many contractors started their careers working with the tools before becoming a contractor, some rudimentary knowledge of accounting is extremely important. This is brought home to me each year as, for the last 25 years, I’ve taught a class at our sheet metal apprentice school on the business side of the business. The first question I ask of these second-year apprentices is how much net profit they feel their contractors make. The numbers invariably range significantly from 5 percent to 50 percent with 15 percent being about the norm. Given that all of the national studies show our contractors have an average of around 2-3 percent, there is an obvious disconnect between what the men in the field believe and reality. This partially explains why the average life expectancy of an HVAC contracting company is four years. It takes about three to four years to discover a lot of work and effort goes into making that 2-3 percent, if they are lucky.
Regarding the accounting required to prepare a basic budget, we developed a simple excel spreadsheet budget form, which I will be happy to send you if you email me at the address below my picture.