How to write a business plan for an HVAC equipment maker?

Putting together a business plan for an HVAC equipment maker can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.

We will explore why writing one is so important in both starting up and growing an existing HVAC equipment maker, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.

Without further ado, let us begin!

Why write a business plan for an HVAC equipment maker?

Having a clear understanding of why you want to write a business plan for your HVAC equipment maker will make it simpler for you to grasp the rationale behind its structure and content. So before delving into the plan's actual details, let's take a moment to remind ourselves of the primary reasons why you'd want to create an HVAC equipment maker business plan.

To have a clear roadmap to grow the business

Running a small business is tough! Economic cycles bring growth and recessions, while the business landscape is ever-changing with new technologies, regulations, competitors, and consumer behaviours emerging constantly.

In such a dynamic context, operating a business without a clear roadmap is akin to driving blindfolded: it's risky, to say the least. That's why crafting a business plan for your HVAC equipment maker is vital to establish a successful and sustainable venture.

To create an effective business plan, you'll need to assess your current position (if you're already in business) and define where you want the business to be in the next three to five years.

Once you have a clear destination for your HVAC equipment maker, you'll have to:

• Identify the necessary resources (human, equipment, and capital) needed to reach your goals,
• Determine the pace at which the business needs to progress to meet its objectives as scheduled,
• Recognize and address the potential risks you may encounter along the way.

Engaging in this process regularly proves advantageous for both startups and established companies. It empowers you to make informed decisions about resource allocation, ensuring the long-term success of your business.

To get visibility on future cash flows

If your small HVAC equipment maker runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your HVAC equipment maker's future cash flows.

So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.

The good news is that your HVAC equipment maker business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.

To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.

By diligently monitoring your HVAC equipment maker's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.

To secure financing

A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your HVAC equipment maker.

Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.

At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.

This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your HVAC equipment maker and the terms of the agreement.

Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your HVAC equipment maker's potential for high growth, profitability, and consistent cash flow generation over time.

Now that you recognize the importance of creating a business plan for your HVAC equipment maker, let's explore what information is required to create a compelling plan.

What information is needed to create a business plan for an HVAC equipment maker?

Writing an HVAC equipment maker business plan requires research so that you can project sales, investments and cost accurately in your financial forecast.

In this section, we cover three key pieces of information you should gather before drafting your business plan!

Carrying out market research for an HVAC equipment maker

Before you begin writing your business plan for an HVAC equipment maker, conducting market research is a critical step in ensuring precise and realistic financial projections.

Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.

In the course of this research, you may stumble upon trends that could impact your HVAC equipment maker.

Your market research could reveal that your HVAC equipment may be more popular among contractors who specialize in commercial construction projects, as opposed to residential. Additionally, your research could indicate that customers may be interested in increasingly energy-efficient models of HVAC equipment.

Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.

By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your HVAC equipment maker.

Developing the marketing plan for an HVAC equipment maker

Before delving into your HVAC equipment maker business plan, it's imperative to budget for sales and marketing expenses.

To achieve this, a comprehensive sales and marketing plan is essential. This plan should provide an accurate projection of the necessary actions to acquire and retain customers.

Additionally, it will outline the required workforce to carry out these initiatives and the corresponding budget for promotions, advertising, and other marketing endeavours.

By budgeting accordingly, you can ensure that the right resources are allocated to these vital activities, aligning them with the sales and growth objectives outlined in your business plan.

The staffing and capital expenditure requirements of an HVAC equipment maker

Whether you are starting or expanding an HVAC equipment maker, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.

Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.

A HVAC equipment maker might incur staffing costs such as hiring engineers, technicians, and administrative personnel, as well as covering their salaries and benefits. Equipment costs might include purchasing tools, materials, and supplies, as well as investing in machinery and technology to produce the HVAC equipment.

In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.). 

Once you have all the necessary information to create a business plan for your HVAC equipment maker, it is time to start creating your financial forecast.

What goes into your HVAC equipment maker's financial forecast?

The financial forecast of your HVAC equipment maker's business plan will enable you to assess the growth, profitability, funding requirements, and cash generation potential of your business in the coming years.

The four key outputs of a financial forecast for a HVAC equipment maker are:

• The profit and loss (P&L) statement,
• The projected balance sheet,
• The cash flow forecast,
• And the sources and uses table.

Let's look at each of these in a bit more detail.

The projected P&L statement

The projected P&L statement for an HVAC equipment maker shows how much revenue and profits your business is expected to generate in the future.

Ideally, your HVAC equipment maker's P&L statement should show:

• Healthy growth - above inflation level
• Improving or stable profit margins
• Positive net profit

Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established HVAC equipment maker. And similarly, an established company should showcase a higher level of profitability than a new venture.

The projected balance sheet of your HVAC equipment maker

The balance sheet for an HVAC equipment maker is a financial document that provides a snapshot of your business’s financial health at a given point in time.

It shows three main components: assets, liabilities and equity:

• Assets: are resources owned by the business, such as cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: are debts owed to creditors and other entities, such as accounts payable (money owed to suppliers) and loans.
• Equity: includes the sums invested by the shareholders or business owners and the cumulative profits and losses of the business to date (called retained earnings). It is a proxy for the value of the owner's stake in the business.

Examining the balance sheet is important for lenders, investors, or other stakeholders who are interested in assessing your HVAC equipment maker's liquidity and solvency:

• Liquidity: assesses whether or not your business has sufficient cash and short-term assets to honour its liabilities due over the next 12 months. It is a short-term focus.
• Solvency: assesses whether or not your business has the capacity to repay its debt over the medium-term.

Looking at the balance sheet can also provide insights into your HVAC equipment maker's investment and financing policies.

In particular, stakeholders can compare the value of equity to the value of the outstanding financial debt to assess how the business is funded and what level of financial risk has been taken by the owners (financial debt is riskier because it has to be repaid, while equity doesn't need to be repaid).

The cash flow forecast

As we've seen earlier in this guide, monitoring future cash flows is the key to success and the only way of ensuring that your HVAC equipment maker has enough cash to operate.

As you can expect showing future cash flows is the main role of the cash flow forecast in your HVAC equipment maker business plan.

It is best practice to organise the cash flow statement by nature in order to show the cash impact of the following areas:

• Cash flow generated from operations: the operating cash flow shows how much cash is generated or consumed by the business's commercial activities
• Cash flow from investing activities: the investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.) either to maintain the business's equipment or to expand its capabilities
• Cash flow from financing activities: the financing cash flow shows how much cash is raised or distributed to financiers

Looking at the cash flow forecast helps you to make sure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.

Your HVAC equipment maker business plan will normally include both yearly and monthly cash flow forecasts so that the readers can view the impact of seasonality on your business cash position and generation.

The initial financing plan

The initial financing plan - also called a sources and uses table - is an important tool when starting an HVAC equipment maker.

It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).

Having this table helps understand what costs are involved in setting up the HVAC equipment maker, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).

Now that the financial forecast of an HVAC equipment maker business plan is understood, let's focus on what goes into the written part of the plan.

The written part of an HVAC equipment maker business plan

The written part of an HVAC equipment maker business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.

The written part of an HVAC equipment maker business plan is composed of 7 main sections:

1. The executive summary
2. The presentation of the company
3. The products and services
4. The market analysis
5. The strategy
6. The operations
7. The financial plan

Let's go through the content of each section in more detail!

1. The executive summary

The executive summary, the first section of your HVAC equipment maker's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.

To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.

Subsequently, provide an overview of your HVAC equipment maker's addressable market, highlighting current trends and potential growth opportunities.

Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.

You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.

Lastly, address any funding needs in the "ask" section of your executive summary.

2. The presentation of the company

The second section in your HVAC equipment maker's business plan should focus on the structure and ownership, location, and management team of the company.

The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.

The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).

When describing the location of your HVAC equipment maker, you could emphasize the potential for growth in the area. Mention that the region has access to a large consumer base and could be a beneficial option for investors looking for a lucrative opportunity. Explain that the area is well-connected through various transport options and has access to a skilled labor force. Additionally, you could highlight the potential for modernization and technological advancements in the region, which could make it an ideal place for the HVAC equipment maker.

Finally, you should introduce the management team. Explain each member's role, background, and experience.

It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.

3. The products and services section

The products and services section of your HVAC equipment maker business plan should include a detailed description of what your company sells to its customers. 

For example, your HVAC equipment maker might offer installation services to customers, ensuring that the equipment is installed correctly and safely. They might also offer repair and maintenance services, including tune-ups that help keep the equipment running in peak condition and prevent unexpected breakdowns. Finally, they might provide advice on how to use the equipment to maximize efficiency and extend its life.

The reader will want to understand what makes your HVAC equipment maker unique from other businesses in this competitive market.

When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through. 

4. The market analysis

When presenting your market analysis in your HVAC equipment maker business plan, you should detail the customers' demographics and segmentation, target market, competition, barriers to entry, and any regulations that may apply.

The goal of this section is to help the reader understand how big and attractive your market is, and demonstrate that you have a solid understanding of the industry.

You should start with the demographics and segmentation subsection, which gives an overview of the addressable market for your HVAC equipment maker, the main trends in the marketplace, and introduces the different customer segments and their preferences in terms of purchasing habits and budgets.

The target market section should follow and zoom on the customer segments your HVAC equipment maker is targeting, and explain how your products and services meet the specific needs of these customers.

For example, your target market might include homeowners who are in the market for a new HVAC system. These homeowners will likely have a moderate to high budget for a HVAC system and will value the performance and efficiency of the system. Finally, these homeowners are likely to have a general understanding of HVAC systems and be interested in the latest technologies the equipment maker has to offer.

Then comes the competition subsection, where you should introduce your main competitors and explain what differentiates you from them.

Finally, you should finish your market analysis by giving an overview of the main regulations applicable to your HVAC equipment maker.

5. The strategy section

When crafting the strategy section of your business plan for your HVAC equipment maker, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.

The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.

For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.

In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.

Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.

Your HVAC equipment maker may face a number of risks. For example, a shift in customer preferences could result in decreased demand for your products, leading to decreased sales and profitability. Additionally, changes in regulatory requirements for HVAC systems could result in the need for additional resources to develop and manufacture compliant systems, which could be costly.

6. The operations section

The operations of your HVAC equipment maker must be presented in detail in your business plan.

The first thing you should cover in this section is your staffing team, the main roles, and the overall recruitment plan to support the growth expected in your business plan. You should also outline the qualifications and experience necessary to fulfil each role, and how you intend to recruit (using job boards, referrals, or headhunters).

You should then state the operating hours of your HVAC equipment maker - so that the reader can check the adequacy of your staffing levels - and any plans for varying opening times during peak season. Additionally, the plan should include details on how you will handle customer queries outside of normal operating hours.

The next part of this section should focus on the key assets and IP required to operate your business. If you depend on any licenses or trademarks, physical structures (equipment or property) or lease agreements, these should all go in there.

You may have key assets such as the designs of your HVAC systems and the IP behind them. This could include the technology used to manufacture the product, the software to control and automate the equipment, and any patents that protect your designs. Additionally, you might have trademarked logos, slogans, and other branding elements that help distinguish your HVAC equipment from competitors.

Finally, you should include a list of suppliers that you plan to work with and a breakdown of their services and main commercial terms (price, payment terms, contract duration, etc.). Investors are always keen to know if there is a particular reason why you have chosen to work with a specific supplier (higher-quality products or past relationships for example).

7. The presentation of the financial plan

The financial plan section is where we will include the financial forecast we talked about earlier in this guide.

Now that you have a clear idea of the content of an HVAC equipment maker business plan, let's look at some of the tools you can use to create yours.

What tool should I use to write my HVAC equipment maker's business plan?

There are two main ways of creating your HVAC equipment maker business plan:

• Using specialized business planning software,
• Hiring a business plan writer.

Using an online business plan software for your HVAC equipment maker's business plan

The modern and most efficient way to write an HVAC equipment maker business plan is to use business plan software.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

Hiring a business plan writer to write your HVAC equipment maker's business plan

Outsourcing your HVAC equipment maker business plan to a business plan writer can also be a viable option.

Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.

However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.

From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).

You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.

The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.

For these reasons, outsourcing the HVAC equipment maker business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.

Why not create your HVAC equipment maker's business plan using Word or Excel?

I must advise against using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write your HVAC equipment maker business plan. Let me explain why.

Firstly, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is highly technical and requires a strong grasp of accounting principles and financial modelling skills. It is, therefore, unlikely that anyone will fully trust your numbers unless you have both a degree in finance and accounting and significant financial modelling experience, like us at The Business Plan Shop.

Secondly, relying on spreadsheets is inefficient. While it may have been the only option in the past, technology has advanced significantly, and software can now perform these tasks much faster and with greater accuracy. With the rise of AI, software can even help us detect mistakes in forecasts and analyze the numbers for better decision-making.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Moreover, software makes it easier to compare actuals versus forecasts and maintain up-to-date forecasts to keep visibility on future cash flows, as we discussed earlier in this guide. This task is cumbersome when using spreadsheets.

Now, let's talk about the written part of your HVAC equipment maker business plan. While it may be less error-prone, using software can bring tremendous gains in productivity. Word processors, for example, lack instructions and examples for each part of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they don't handle formatting for you.

Overall, while Word or Excel may seem viable for some entrepreneurs to create a business plan, it's by far becoming an antiquated way of doing things.

Takeaways

1. Using business plan software is a modern and cost-effective way of writing and maintaining business plans.
2. A business plan is not a one-shot exercise as maintaining it current is the only way to keep visibility on your future cash flows.
3. A business plan has 2 main parts: a financial forecast outlining the funding requirements of your HVAC equipment maker and the expected growth, profits and cash flows for the next 3 to 5 years; and a written part which gives the reader the information needed to decide if they believe the forecast is achievable.

We hope that this in-depth guide met your expectations and that you now have a clear understanding of how to write your HVAC equipment maker business plan. Do not hesitate to contact our friendly team if you have questions additional questions we haven't addressed here.

Also on The Business Plan Shop

• How to write a business plan to secure a bank loan?
• Executive summary
• Definition of a business plan
• Key steps to write a business plan?
• Top mistakes to avoid in your business plan

Do you know entrepreneurs interested in starting or growing an HVAC equipment maker? Share this article with them!