Running a Contracting Shop is Really Hard
I hate to say it, but honestly, the contractors are kind of right
I’m not doing an economics PhD, but sometimes it feels like it1. If that’s the case, then at some point I’m going to write a dissertation, and it may as well be about how this entire industry (really, all of construction) prices things, and why it seems like prices are so high.
I don’t have that dissertation for you today. But what I do have is a year’s experience in running what is essentially a lightweight HVAC contracting business, and based on that, I can tell you right now that
It’s actually pretty hard to run an HVAC business
I’m starting to get the sense why contractors charge so much for what they do
Read on to find out why it’s so hard to price things, the cost of uncertainty, the impact of seasonality, and ultimately, why I kinda think it’s justified to charge high prices for complex, multi-step installations.
Defining New Ductwork
It is difficult to price out ductwork. By nature, it’s not discrete; 5 supply branches that are 3 ft each on average is very different than 5 supply branches that are 10 ft on average, which may be the case if the house is sufficiently large.
Ductwork in the basement have to be suspended on the ceiling, which is different than attic ductwork, which can simply lay on the ground. You may have pipes from steam boilers that you may want to remove (if you’re replacing the boiler with a heat pump) & plaster on the ceiling which you’ll have to chip away to access the bays.
Perhaps you’ll need 2 returns, instead of just 1, because the floor plan of the 1st floor divides the layout into 2 separate sides and having 2 returns will be more effective than 1 for comfort.
Perhaps you are insisting on ductwork in a tight attic space that will require more time and effort to maneuver around.
Perhaps it is the middle of summer and the attic is simply unbearably hot, and the crew will take 50% longer to complete the attic ductwork because of how stuff it is up there.
Perhaps you are planning to finish your attic or basement, and therefore you don’t want ductwork in particular locations.
Perhaps you are worried that the basement will get too cold (will my pipes freeze?), and you want to add some sort of supply to the basement to keep that above freezing.
Perhaps you are opting for a full-sized air handler, which has a more powerful fan that pushes air through your 2nd floor when it’s closed, instead of a medium-static (pancake) air handler, which is probably better sized for smaller homes.
Perhaps the air handler you are installing in the basement will require a specialized plenum underneath the air handler itself, which takes an extra day to procure because the only supply house that has it is actually pretty far away from your installation site.
Perhaps you’re requesting for a humidifier to be installed as a part of that ductwork, or for dampers that can give you zoned control of the ductwork.
Perhaps you’re looking to install ductwork for an ERV
Variations for existing ductwork:
Perhaps the previous ductwork is in bad shape, and needs to be replaced. How much will it cost, though?
Perhaps the existing air handler in the basement has refrigerant lines that run through the walls, which means that extra general contracting work would be required to cut open the space and patch it back up again.
Perhaps you don’t have enough space in a shorter-than-usual basement (e.g. ~6 ft) for an air handler that requires a supply plenum at the bottom, because it doesn’t have a side supply opening.
As you can see, there are any number of ways you can design ducted systems. And they’ll all modify the material cost, and the labor cost it takes to do it.
Pricing ductwork accurately here assumes that a contractor (or whoever’s handling system design) has enough knowledge to recognize things that may trip up an installation crew. If this person is an experienced former HVAC tech with decades of experience and knowledge of all local construction techniques, they’ll be able to accurately price the job even for complex installations.
Those people are in short supply, because the trades shortage is most acute when it comes to experienced, seasoned professionals.
Therefore, reasonably often, the person scoping out a project to create an initial estimate may not be familiar enough to make a go/no go call. And so, they end up adding several thousand dollars to the quote to hedge their bets (and if they don’t, the contracting company will likely add an uncertainty premium on all of their installations, no matter how simple, as a form of insurance against cases where they take a hit due to unexpected complexities).
For us, in 2026, we will only consider new ductwork in homes that have:
Unfinished attic space with standing room
4 smaller bedrooms (that would make mini-splits not very feasible)
and perhaps very, very rarely a Cape house with an open basement & no wall space.
Related article:
The Unanticipated Service Upgrade
Suppose, dear reader, you are faced with an electrical panel that is half full of tandem breakers, which are breakers that take up only half the space of the typical breaker. Like so:
Why is the panel full of tandem breakers? I don’t know, maybe you just bought the house and it came that way.
In any case, you have an existing (central) air conditioner that is taking a 35 amp breaker, and you’re expecting to replace that air conditioner with a heat pump that will reuse that same breaker. Is this okay? It’s a like-for-like replacement, right? Does that negate the fact that this panel seems awfully full for a house with 100 amp service? How close do you think you’ll cut it to the 100 amp service in a hypothetical load calculation, and what’s the local inspector’s threshold for passing/failing the electrical work?
These are all considerations that an HVAC contractor may have to make when they show up at your house, and you may end up in 1 of 3 scenarios:
The contractor has enough electrical background to know that you should not have tandem breakers for half of your panel.
The contractor assumes (incorrectly) that a like-for-like replacement is sufficient reasoning to assume that you’ll pass inspection, regardless of anything else.
The contractor either rejects the job out of uncertainty, or otherwise adds a few extra thousand dollars just to be safe.
This is, of course, a close cousin to the panel that is just close enough to needing a service upgrade. Or, alternatively, the panel that has only 2 breaker slots available but we’re not 100% sure if we’ll go with 2 outdoor units or 1. And somewhat related to the I have no idea how the electrician will wire to this panel through a finished basement, but it doesn’t look easy..
It’s not unreasonable for contractors decide that they either don’t want to do it, or need to bake in some safety margin. And that’s how you end up with a price increase - or sometimes, a contractor who simply won’t bother sending you a quote.
Seasonality & Cash Reserves
Starting a business requires capital, and a part of that is the cash reserves in the bank so that you don’t immediately go out of business the moment you hit the slow season. And considering how seasonal the HVAC businesses is, you really need a healthy amount of reserves.
For us, we anticipate having 4 people on the payroll in 2026. I’d feel comfortable with about $250k on reserves. Search online & you’ll have recommendations ranging from 3 months (minimum) to 6 (ideal).
Suppose you have an HVAC business of a similar size - 4 people - with the owner handling sales & system design, two technicians handling installations & service calls, and someone managing operations & logistics. Each employee makes, on average, about $65,000 (the typical annual salary based on BLS data) and the owner makes $80,000. That’s $275,000 annually for salaries, and half of that is $137,500. After that, you’ve got vehicles, fuel, office space (if you have one), warehouse/storage, business insurance, taxes, advertising, marketing, service (which is free under the 1 year labor warranty). Add all that together and you’re looking at anywhere from $250k to $400k in reserves.
HVAC is seasonal, we all know that. You can see from the data above, but also based on logic: it’s just a lot harder to install heat pumps (or any other system) in the freezing cold or during a heat wave in a hot attic. And as a result, you’ll need to be able to ride out long periods (potentially months) where you don’t make a lot of money, and charge enough during high season to make up for it & replenish reserves ahead of the end of the year. Bigger HVAC shops may have service plans during the off-season to even things out, but smaller shops that make up the majority of contracting businesses may not have the luxury of those ongoing contracts.
Expansion
I think we can all agree here that we like businesses that do a good job at a good price. Shouldn’t there be more of them?
Well, if you want more of them, they’ll need the cash reserves to hire more people. And that cash reserve is nontrivial, particularly in the 5-to-10 people range when coordination becomes difficult & you need to make an operations hire.
Suppose you have 4 people, and you want to expand to 6 or 7 in a year because business is great. That’s 3 more people, and you’d need to accordingly raise probably $200k+, if you’re reasonably cautious like me. Business is risky; what if the economy slows down? What if federal tax credits go away? What if the next slow season is extra slow because the federal tax credits go away?
To get $200k more beyond what it takes to replenish cash reserves requires either
Borrowing money from a bank/taking out a business loan
Charging customers more for installations to save up enough to hire someone else (bootstrapping)
Selling the company to a private equity investor, who will give you money in exchange for buying out your business. But then they’ll raise the price
As a consumer, you can see why it’s challenging to find more affordable contractors in the market: it’s simply harder for them to expand.
Are difficult installations worth it?
I’m writing this at the end of the most complex installation we’ve ever project managed. It involved coordinating:
Service upgrade from 100 amps to 200 amps
Electric panel upgrade
Radiator removal (that said, not scheduled on our end)
Boiler removal (I helped for a second - that thing is HEAVY)
Oil tank removal
Heat pump water heater
Ductwork in the basement with 2 returns & 6 supplies
Plaster on the basement ceiling, which makes it hard to secure supplies
Mini-splits in the upper bedrooms
Mounting branch boxes on a wooden board constructed on the side of a wall
It took us a week. And it was tough. I’m proud of the team, but it does feel a bit like we just climbed Mt. Everest, particularly as I had to project manage a separate installation the same week that required making some quick system design changes (which ultimately ended up going okay). And now we’re quickly moving on to deal with 2 more installations the next week, and 2 or 3 per week every week after that. And we’ll have to file for the Mass Save rebate, and warranties, and follow up to ensure that the sheet metal inspection is scheduled so that we can close out the permit.
For me, this is unsustainable at scale with our existing team of 3. And if we want to continue driving down the overhead cost of heat pump installations, we’ll need to find a way to do more installations without hiring a ton of people. (Because that’s what overhead is - partly software & tools, but mostly people/salaries.)
The only way we can do that is by tackling straightforward installations without a lot of complications. And that means that, after the busy season (May & beyond), we will mostly either recommend ductless setups, or setups swapping furnaces/ACs for heat pump air handlers for homes with existing ductwork.
Everything else requires a degree of customization that we cannot scale. And as much as I would like to be the friendly local neighborhood electrification expert forever, it’s tough to do on a $42,000 salary and we’ll need to evolve beyond a cool neighborhood blog at some point.
If you have a complex home..
The best time for you to work with us is during the 2026 spring bulk deal. This is the slow season, and we’ll have enough capacity and bandwidth to actually focus on more complex installations.
After that, no more. Simple installations only. And you know what? I’ve spent 2 years of my life on this “PhD” at this point. I just turned 30. After 2026, I need to make money (like, more than $42,000) & we’ll chart a path to that.
I’ve been paying myself $42,000/year (which is what my BU PhD friend makes). Honestly, shoutout to the PhDs out there, I don’t know how y’all do it for 5 years