For a lot of HVAC companies, September and October are the awkward months.
Cooling season is winding down, but heating season hasn’t really started yet.
It’s shoulder season.
Seasonality is one piece of a bigger problem. Cash flow for home service companies is the full version, and shoulder season is where it bites hardest.
This is something I’ve been talking about with my HVAC clients lately because the summer months can create a false sense of comfort.
June is good. July is good. August is good.
Revenue is strong. The phones are ringing. Technicians are busy. There’s cash in the bank.
Then the weather changes.
Revenue starts coming down, but a lot of the expenses don’t.
Payroll is still payroll. Trucks are still sitting in the driveway. Insurance, software, rent and debt payments are still there. The expenses that felt perfectly manageable during a strong July can suddenly feel pretty heavy when revenue drops in September or October.
And none of this should really be a surprise.
We know shoulder season is coming.
The exact timing depends on where you operate. In some parts of the country, heating season starts early and November can be a very good month. In warmer climates, the slowdown can last longer.
But the basic financial issue is the same.
A seasonal business has to make financial decisions based on where the business is going, not just what happened over the last 30 days.
That’s why I think the end of summer is such an important time for HVAC owners to look ahead.
Here are five things I’m talking about with clients right now.
1. Know What It Actually Costs to Run the Business Each Month
I’m always surprised how often I ask a business owner what their monthly break-even number is and they don’t really know.
They usually have an idea.
Maybe they know payroll runs around $150,000 a month. They know what the building costs. They know approximately what they spend on trucks.
But that’s different from knowing what it actually takes to keep the business running each month.
This becomes much more important when you’re heading into a slower period.
Start with the obvious expenses.
Payroll and payroll taxes. Rent or mortgage. Vehicle payments. Insurance. Software. Phones. Utilities. Debt payments. Office staff. Marketing. All the other overhead that continues whether you run 500 calls that month or 300.
Then look at the costs that move with revenue.
Materials, equipment, commissions, credit card fees and other direct costs.
You don’t need a complicated financial model to start getting useful information from this.
I want an owner to be able to say, “At roughly this level of revenue and gross profit, we cover our operating expenses.”
That gives us something to manage against.
It also changes the conversation.
If October revenue is forecast at $500,000 and you know the business needs closer to $650,000 at its current cost structure, now we have something to talk about.
Do we expect November to make some of that back?
Do we have enough cash to comfortably absorb the difference?
Should overtime come down?
Do we delay hiring?
Do we adjust marketing?
Those are much better questions than waiting until the bank account gets uncomfortable and then trying to figure out what happened.
2. Be Careful With the Cash You Built Up Over the Summer
This is probably the biggest thing I watch with seasonal businesses.
A strong summer can put a lot of cash in the bank.
And when an owner sees a large bank balance, it’s natural to start thinking about what to do with it.
Maybe it’s time for a distribution.
Maybe there’s a truck you’ve been wanting to buy.
Maybe you want to pay down some debt.
Maybe you’ve been putting off a major purchase and now finally feels like the right time.
Any one of those decisions could be perfectly reasonable.
The problem is looking at the bank balance by itself.
If there’s $600,000 sitting in the bank, that doesn’t necessarily mean there’s $600,000 available to spend.
The first question I want to answer is: What does the business need that cash for over the next few months?
Some of the cash generated during cooling season may need to carry the company through shoulder season until heating demand picks up.
There may also be tax payments coming.
There may be equipment purchases already committed to.
Debt payments aren’t going away.
Neither is payroll.
This is one of the reasons I don’t like managing a business by bank balance.
The bank balance tells you where you are today.
It doesn’t tell you where you’re going.
A business can have a great bank balance on September 1 and still have a cash problem coming in October.
That’s a very different situation from having excess cash that truly isn’t needed in the business.
Before taking a large distribution or making a major purchase, I’d rather look forward a few months and make the decision with that information in front of us.
3. Build a Simple 90-Day Forecast
When I say “forecast,” some owners immediately picture a giant spreadsheet with 14 tabs and 200 assumptions.
That’s not what I’m talking about.
For shoulder season, even a simple 90-day cash forecast can be extremely useful.
Start with revenue.
What do you reasonably expect to do in September?
October?
November?
Don’t automatically use the same number every month. Look at what actually happened during these months last year. Think about current call volume. Look at your maintenance base. Think about the weather in your market and when heating season normally starts.
Then look at expenses.
What will payroll likely be?
What major payments are coming?
Are there quarterly tax payments?
Insurance premiums?
Equipment purchases?
Debt payments?
Bonuses?
Anything unusual?
Now put the two together and see what happens to cash.
That’s really the point.
I’m not looking for a forecast that perfectly predicts the bank balance on November 30.
It won’t.
The weather could change. A cold snap could hit two weeks earlier than expected. Revenue could come in stronger or weaker. A truck could die.
Forecasting isn’t about predicting everything perfectly.
It’s about seeing the range of what could happen before it happens.
Maybe the forecast says everything looks fine.
Great.
Maybe it shows that cash could get tighter than you’re comfortable with in October.
That’s useful too, because now there’s time to do something about it.
I’d much rather see a potential cash problem 60 days ahead than discover it when payroll is due.
4. Think Twice About Big Purchases
Busy season has a way of making things look affordable.
You just had a $900,000 month.
Cash is up.
The sales rep calls and has the truck you’ve been waiting for.
The monthly payment looks manageable.
So you buy it.
Again, maybe that’s exactly the right decision.
But before signing anything, I want to see that purchase through the lens of the next few months, not the last few months.
What does the cash balance look like after shoulder season?
How much additional monthly overhead are we adding?
Is the purchase necessary now?
Is it going to generate additional capacity or revenue?
Or are we buying it because the summer was good and the money happens to be there?
This applies to more than trucks.
It could be new office space, equipment, software, another management hire or almost any other commitment that adds to fixed overhead.
One of the easiest ways to create financial pressure in a seasonal business is to build your cost structure around your best months.
If July is your biggest month of the year, you probably don’t want to build a company that needs July revenue every month just to support its overhead.
I see the same issue outside HVAC.
Plumbing and electrical companies may not have the same weather-driven shoulder season, but they can still make permanent spending decisions based on a temporary period of strong revenue.
That’s why I like looking at big purchases in the context of the next 90 days.
The purchase may still make complete sense.
I just want the decision based on what we expect the business to look like going forward.
5. Make the Shoulder-Season Decisions Before Shoulder Season
The worst time to make financial decisions is when you’re under pressure.
When cash is good, you have options.
When cash gets tight, the choices usually get worse.
That’s why I want to talk about shoulder-season decisions before we’re deep into shoulder season.
What happens with overtime if call volume slows?
Are we still hiring?
What happens to marketing?
Are there positions we’ve been planning to add?
What distributions are we expecting to take?
Are there purchases that can wait?
I’m not suggesting that an HVAC company should automatically start cutting expenses every September.
Financial guidance for HVAC owners can provide valuable insights into managing operational costs more effectively. Evaluating contracts and vendor relationships should be a priority to find potential savings.
Additionally, investing in training for staff can lead to increased efficiency and better service, thereby enhancing profitability.
That can create its own problems.
Cut marketing too aggressively and you may make the revenue problem worse.
Stop hiring when you actually need technicians for heating season and you could be short-staffed when demand comes back.
The point isn’t to cut.
The point is to decide.
There’s a big difference.
If we expect a six-week slowdown and have plenty of cash to carry it, maybe we don’t change much at all.
If the forecast shows that cash could get uncomfortable, then maybe we make a few adjustments now.
Those decisions are much easier when they’re made with numbers in front of us instead of reacting to a bank balance that has already dropped.
Your Summer P&L Can Fool You Too
There’s one other thing I think is worth mentioning.
It isn’t just the cash balance that can create a false sense of security.
Your P&L can do it too.
If you look at July by itself, the business might look fantastic.
But HVAC is seasonal.
A company can have excellent margins during peak cooling season and still have a problem if the annual cost structure doesn’t work.
This is why I like looking at both monthly and trailing financial performance.
How did the business perform over the last 12 months?
How does gross profit look?
What happened to overhead as the company grew?
How much cash did the business actually generate over that period?
Did the company make enough during the busy months to support the slower ones?
Those questions matter more to me than whether one particular summer month looked great.
A seasonal business has to be managed across the whole year.
The great months help pay for the slower months.
That isn’t necessarily a problem. It’s simply part of the business model.
The problem comes when nobody plans for it.
Shoulder Season Shouldn’t Be a Surprise
I work with home service businesses as a fractional CFO, and a big part of my job is helping owners look forward.
Your CPA is probably focused on the tax return.
Your bookkeeper or accounting team should be making sure last month’s numbers are right.
Both are important.
But somebody also needs to be asking what those numbers mean for the next three, six or twelve months.
For an HVAC company coming out of summer, that conversation should be happening right now.
What does break-even look like?
How much of the summer cash should stay in the business?
What do the next 90 days look like?
Are we about to make any large purchases?
What decisions should we make now instead of waiting until cash gets tight?
None of this is particularly complicated.
And it doesn’t require predicting exactly when the first cold week is going to arrive.
It just requires recognizing the seasonality of the business and planning around it.
For a lot of HVAC companies, September and October are the months to watch.
Cooling season is ending. Heating season is coming. And somewhere in between is shoulder season.
You already know it’s coming.
The time to prepare for it is before the weather changes.
Need Some Help?
If you own an HVAC, plumbing or electrical company and some of these questions are harder to answer than they should be, that’s the kind of work I do with clients every month. We look at the financials, cash flow and what’s coming over the next few months so you can make these decisions before they become urgent. If you’d like to talk about your business and see if I might be able to help, you can schedule an introductory call here: Schedule an Intro Meeting
Frequently Asked Questions About HVAC Shoulder Season
Shoulder season is the period between peak cooling and heating seasons when demand for HVAC services can slow down. In many markets, the fall shoulder season falls around September and October, after summer cooling demand starts dropping but before colder weather creates consistent heating demand. The exact timing varies depending on where the company is located and the weather that year.
There isn’t one number that works for every company. I’d start by looking at monthly operating expenses, expected revenue during the slower period, upcoming debt and tax payments, and how long it normally takes for seasonal demand to pick back up. The goal is to determine how much cash your particular business needs rather than relying on a generic rule or percentage.
I think every HVAC company should be looking at least 90 days ahead, especially heading into a seasonal slowdown. It doesn’t need to be a complicated forecast. Expected monthly revenue, expenses, major purchases and your projected cash balance can tell you quite a bit about what’s coming.
Not automatically. Cutting marketing because revenue is down can sometimes make the slowdown worse. I’d look at which marketing is actually producing calls and revenue before making cuts. The goal shouldn’t be to spend less simply because it’s shoulder season. It should be to spend intentionally based on what the business needs and what is producing a return.
First, make sure it really is excess cash. Before taking a large distribution, paying down debt or buying another truck, I’d forecast the next few months and account for payroll, taxes, debt payments, upcoming purchases and the expected seasonal slowdown. Once you know what the business needs to keep, you can make a much better decision about what to do with the rest.
