With more than 105,000 heating, ventilation and air conditioning companies in the U.S. alone, HVAC owners and managers may face some stiff competition when recruiting talent and establishing a customer base.1 Fortunately, there are a few steps HVAC company owners may take to develop financial confidence. Here are some tips and tricks that may help HVAC company owners and supervisors manage profit margins and potentially save more tax-advantaged money for retirement.
Managing Your HVAC Company's Profit Margin
The more your HVAC company earns and the lower your company's overall expenses, the more money you may have to reinvest in your business, recruit more staff or manage your paycheck. Some ways that might help you manage cash flow include:
· Promoting recurring servicing agreements that provide customers with a discount if they have an annual tuneup or other preventive maintenance services.
· Periodically increasing pricing to remain competitive with other local HVAC companies.
· Evaluating your marketing plans and having specific metrics to see how effective certain marketing strategies are performing. Over time, you may be able to focus your marketing dollars on effective strategies.
· Adding value to the services you already provide. For example, you may be able to pick up new customers by offering free or low-cost extended warranties or free emergency services during peak hours.
Savings Options for HVAC Company Owners
As a company owner, you may not have access to a traditional 401(k) plan. Moreover, individual retirement accounts have relatively low contribution limits of $6,000 for the 2022 tax year or $7,000 if you are 50 or older.2 However, there are several other types of retirement plans you may enroll yourself, or your employees in that may allow you to contribute at a higher rate to possibly shield even more income from federal and state taxes.
Some of the plans that may be available include:
Simple Individual Retirement Account
The Savings Incentive Match Plan for Employees IRA allows both employers and employees to contribute to their traditional IRAs. The Simple IRA has a lower startup cost than many other employer-sponsored retirement plans and requires the employer to make either a match of up to 3% or a non-elective contribution of 2% to all eligible employees' IRAs.3
Simplified Employee Pension IRA
The Simplified Employee Pension IRA, like the Simple IRA, allows employers of any size to contribute to their employees' SEP IRAs. Business owners may also contribute to their own SEP IRAs, putting aside up to 25% of total compensation or $61,000 per year for 2022, whichever is lower.4
Contributing to these plans on your employees' behalf may help you keep good employees, may also manage your overall tax burden and may allow you to set aside pretax funds for your retirement.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. 1 https://www.hvac.com/blog/top-hvac-companies-across-country/ 2 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits 3 https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan 4 https://www.irs.gov/retirement-plans/plan-participant-employee/sep-contribution-limits-including-grandfathered-sarseps
This article was prepared by WriterAccess.
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