Benefits of light commercial HVAC for your business
Offering light commercial HVAC equipment and repair services could be the solution to boost business in slow seasons. But what is light commercial and how can it benefit your business?
Discover how you can grow your bottom line by diversifying your service offering through light commercial HVAC.
What is light commercial HVAC?
By light commercial, we mean 3- to 25-ton, three-phase split systems and rooftop units for restaurants, retail strip centers, office buildings, gyms and more. Light commercial can also be assisted living or condo complexes as well as other applications that some view as residential but are truly commercial buildings.
These systems are critical. Business owners rely on them to maintain comfort, support operations, and avoid lost revenue. This makes light commercial an attractive expansion opportunity for residential contractors because while the equipment is typically larger and the applications differ from single-family homes, many of the same HVAC fundamentals apply. Also, the need for repair or replacement of a business unit always has a sense of urgency — a lack of heating or cooling can mean a decrease in foot traffic for any restaurant or retail business.
By starting with smaller light commercial projects and gradually expanding to larger projects, you can gain steady business, among other benefits.
Benefits of expanding to light commercial HVAC
A primary advantage of expanding to light commercial is that it can make your service offering more dynamic. Phil London, a contractor in Davie, Florida, has been working in the light commercial market for about 35 years.
“I call it the bridge between residential and commercial,” London said.
“True light commercial really expands on the term HVAC. It’s not only heating and cooling. It’s ventilation, it’s air quality, it’s energy management. It really encompasses our industry.”
By becoming more dynamic in your service offering, your business can grow in a number of ways.
1. New income streams by diversifying your services
Offering light commercial HVAC services can allow you to gain new types of customers and, therefore, new income streams throughout every season.
“The field offers a great opportunity to expand business for any contractor,” London said.
To take advantage of these opportunities, however, many contractors first need to expand their view of what the light commercial definition entails.
While this might not sound like it meets the light commercial HVAC definition, London points out the water-source heat pumps installed during construction were considered commercial units. There are plenty of other types of equipment used in residential applications that fall in the definition of light commercial.
Diversifying your service offering to include ductless systems, VRF, ERVs, fresh air ventilators and indoor air quality solutions can help you expand into the light commercial HVAC market.
“There is a tremendous amount of work available to you,” London said. “Why pass that up?”
There are plenty of clients in any town that meet the light commercial HVAC definition. Tersh Blissett, a contractor in Savannah, Georgia, started out on the residential side and now runs a commercial firm expanding its light commercial segment.
In order to find new customers, Blissett recommends visiting the local industrial or office park because some of these provide hundreds of acres of potential light commercial HVAC clients.
“There are so many businesses behind businesses,” he said. “You don’t even realize they’re back there.”
Blissett also recommends establishing a relationship with a local property management company. Besides helping you grow the residential service side of your business, they provide a lot of light commercial HVAC work.
Unlike residential where few homeowners truly put money away for HVAC upgrades or repairs, many property management and ownership groups include upgrades, repairs and maintenance costs in their yearly budget so the funds are allocated specifically for HVAC.
London agrees that light commercial opportunities are all around for most contractors, regardless of whether they currently limit themselves to residential or commercial clients.
Pro tip: Few contractors are heavily involved in light commercial. This means there is less competition in this space, which can increase margins and, if done right, can separate you from the other competitors.
2. Make the most of your existing equipment and licenses
The assumption that contractors need to buy new equipment or seek additional certifications or licenses in order to offer light commercial service is not always the case. Blissett said light commercial HVAC systems can get down to less than five tons.
This means many residential contractors have both the necessary skills and licensing to work on units that meet the light commercial HVAC definition. Blissett agrees light commercial HVAC is a good add-on to either residential or commercial business.
With that said, it takes a different mindset than either residential or heavy commercial.
“It’s a mindset of its own,” Tersh said. “Once you’ve figured it out, you can make a lot of money and build a lot of relationships.”
With these relationships and trust, you potentially will receive recommendations from friends and fellow business owners on the quality of work you did. With that trust you will also have opportunities to capitalize on high margin add-on solutions like indoor air quality and energy management solutions.
Pro tip: If you’re already offering smart HVAC products to grow your residential service business, consider offering it on the light commercial side as well. There is a significant increase in demand for products such as, connected devices, filtration, ventilation, purification and humidity control in light commercial, much like the residential market over the last few years.
3. Opportunities for ongoing maintenance work
HVAC contractors who offer light commercial service in addition to residential or commercial service enjoy repeat business.
Blissett works with a lot of fast-food restaurants. His firm is the preferred local provider for light commercial HVAC services for several national chains. Providing light commercial HVAC services to these operations opens a range of opportunities for regular appliance maintenance.
“If you can be that one stop shops for you, where they call you for their HVAC, refrigeration and appliances, then they are loyal to you,” Blissett said.
Pro tip: Is your HVAC business selling service contracts to your customers on service calls? If not, you’re missing an opportunity to increase revenue. Learn why service contracts matter to your HVAC business.
4. Start small and build your light commercial business strategically
One of the biggest misconceptions about light commercial HVAC is that expanding your business requires an all-or-nothing approach. Many contractors successfully make the transition by starting with smaller projects that closely align with the skills, tools and equipment they already use.
Rather than pursuing large office buildings or complex installations right away, consider focusing on smaller light commercial applications like retail spaces, restaurants, condominium complexes or offices with equipment under 10 tons. Many residential contractors are already qualified to service some of these systems and can build experience gradually before taking on larger projects.
Look for crossover opportunities
Your existing residential customers may already provide a path into light commercial work. Property management companies often oversee both residential and commercial properties, while business owners may own multiple buildings or know other local business owners who need HVAC services. Networking with local property managers and visiting nearby offices or industrial parks can help uncover opportunities that are often overlooked.
Invest in targeted training
Light commercial HVAC introduces new considerations like rooftop units, three-phase power, ventilation requirements and commercial building codes. Manufacturer training programs and local contractor associations can help bridge those knowledge gaps without requiring contractors to immediately specialize in heavy commercial systems.
Expand your service offering over time
The transition doesn't have to happen overnight. Many contractors begin by adding preventive maintenance agreements for small businesses before expanding into equipment replacements and more complex installations. Offering indoor air quality solutions, connected controls and remote monitoring can also create additional revenue opportunities while helping customers reduce downtime.
Pro tip: Don't wait until you're ready to service every type of commercial equipment before getting started. Light commercial is often called the bridge between residential and commercial HVAC because it allows contractors to grow their expertise one project at a time.
What to consider before expanding to light commercial HVAC
As with any area of the HVAC business, contractors considering entering the light commercial HVAC market need to take several factors into consideration. Here are some unique differences of working in the light commercial HVAC industry:
How light commercial HVAC equipment works
London said contractors need to understand how light commercial HVAC equipment works and how it impacts building occupants. There are usually more people in a light commercial building during the day than in any house.
Also, in most of these buildings, the occupants can’t just throw open the windows if it gets too hot or too stuffy. And businesses cannot stay open if the cooling or heating is not working, or if the air quality is too poor.
“Air conditioning is critical in those applications,” London said.
Different government regulations
There are specific rules local governments put in place for buildings designated as light commercial. London said contractors need proper training and education on these codes and requirements for projects that meet the light commercial HVAC definition.
Programs from sources like the Air Conditioning Contractors of America can help avoid missteps when starting in light commercial HVAC. Get involved with your local HVAC contractor association to stay updated with industry trends.
Bidding requirements
It’s normal for small businesses to face a certain level of financial risk when bidding a job. According to Blissett, some small businesses fail because they operate on low margins.
Contractors need to use caution when setting terms to avoid running a high balance of accounts receivable. These small business owners should try to control costs as much as possible.
To avoid financial problems, Blissett said contractors need to know their numbers and submit realistic bids for light commercial HVAC jobs.
“It can hurt you if you’re not on top of it,” Blissett said.
To limit your financial risk, partner with a commercial financing group that specializes in the HVAC industry. Look for one that allows you to get paid 100% up front to increase cash flow and remain in good credit standing with your distributor.
Another option is to take advantage of contractor management support that helps you build professional, accurate proposals that take into account the material cost, markup as well as labor. This can help to ensure you are bidding enough on the project and then clearing what you need to once the project is complete in order to stay profitable.
Customer expectations
Contractors entering light commercial HVAC must also be prepared for the demands of their new clients. A homeowner who loses air conditioning on a Friday night might accept going without it until Monday morning. A restaurant owner absolutely cannot. Blissett said most of his light commercial HVAC customers have his cell phone number.
“They know if we get a call at nine o’clock on a Friday night, we’re going to have a guy out there,” Blissett said.
The upside of the higher expectations of light commercial HVAC customers is that they understand the needs of a business and are willing to pay for the extra attention. Light commercial HVAC customers want to avoid paying fees for after-hours or emergency work, of course, and so they often sign maintenance contracts.
Blissett said this helps fill up his company’s schedule. For example, a tech might perform a maintenance check on a system and find that while it is still operating, a solenoid valve needs replacement.
“We never slow down because there is always something to do with a commercial client,” Tersh said.
Pro tip: Technology advancements have made it possible to monitor an HVAC system remotely, so you can identify a possible problem before it happens. Offering to install this type of technology for your light commercial customers can be a selling point.
Tax incentives
Another reason for HVAC contractors to get into the light commercial market are changes in the federal tax laws that have added incentives for business owners to invest in HVAC.
Specifically, Section 179D of the Internal Revenue Code provides an ongoing tax incentive for energy-efficient commercial building upgrades, making it a valuable opportunity for HVAC contractors serving the light commercial market. Deduction amounts can vary based on the year the property is placed in service, the level of energy savings achieved, and whether prevailing wage and apprenticeship requirements are met. For contractors, understanding these incentives can strengthen conversations with commercial customers by positioning high-efficiency HVAC systems as both an operational and financial investment.
Take advantage of light commercial opportunities
Light commercial HVAC fills the gap between residential and commercial HVAC. While there are some differences that should be taken into consideration before offering this type of service, expanding to light commercial HVAC can open the door to more business.
“You should get into it,” London said. “Light commercial HVAC definitely offers a lot of opportunity.”
Looking for other ways to boost your bottom line? Explore the Ideas & Learning Center to see how to grow your business and get more resources for heating and cooling professionals.