Why HVAC Contractors Owners Should Care
For HVAC contractors, current ratio determines if you can survive the seasonal cash flow swings. Summer AC season = flush with cash, winter heating season = okay, but spring/fall = crickets. You might do $80K in July and $25K in October, but trucks, insurance, and overhead don't take months off. You need 2.0+ ratio to bridge the gaps, or you're borrowing every slow season.
Industry Benchmarks
1.8-3.0
Healthy Range
1.2-1.79
Warning Zone
Below 1.2
Danger Zone
Industry context: Seasonal contractors need 2.0-3.0 (must survive 2-3 slow months). Year-round commercial work: 1.5-2.0 sufficient. New contractors: 2.5+ for first 2 years. Below 1.5 and seasonal swings will crush you.
Source: Contractor financial management standards, 2025
How to Calculate Current Ratio
Formula
Current Assets / Current Liabilities
In plain English
How many dollars you have available for every dollar of bills due soon
Example: Comfort Zone HVAC
Cash Saved from summer season | $45,000 |
Accounts Receivable Recent installs (net-30) | $42,000 |
Parts Inventory Common parts stock | $8,000 |
Total Current Assets | $95,000 |
--- | $0 |
Accounts Payable Equipment suppliers | $12,000 |
Payroll Due Next payroll | $18,000 |
Vehicle Loans (current) Due within 90 days | $8,000 |
Total Current Liabilities | $38,000 |
Calculation
Current Assets: $95,000 / Current Liabilities: $38,000 = 2.5
At 2.5 ratio in September (post-summer), this contractor is well-positioned. They banked cash from busy season. Even if October-November are slow ($25K/month revenue), they have $45K cash to cover 2-3 months of $35K expenses until winter heating season hits.
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Get My Free ScoreCommon Problems in HVAC Contractors
Symptom
Ratio is 2.8 in August, 1.1 by November because spent summer profits
Impact
November-December become scramble months. Using credit lines or delaying supplier payments. Should maintain consistent 2.0+ ratio year-round by saving summer cash.
How to Improve Your Current Ratio
How to do it
June-September: set aside 30% of revenue in separate "Slow Season" account. If summer revenue is $250K, save $75K. This covers October-December when revenue drops 60-70%.
Expected impact
Maintain 2.0+ ratio year-round instead of boom-bust cycle. Avoid credit card debt, maintain supplier net-30 terms. Peace of mind.
Key Takeaways
What it measures
How much money you have available to pay bills due in the next 30-90 days
Healthy range for HVAC Contractors
1.8-3.0
Formula in plain English
How many dollars you have available for every dollar of bills due soon
Most common problem
Not banking cash in busy season for slow season
Fastest fix
Build seasonal reserve - save 30% of busy season revenue
Related Financial Metrics
Other important metrics for HVAC Contractors
Burn Rate
How much cash you're spending each month to run your business
Days Sales Outstanding (DSO)
How long it takes customers to pay you after you invoice them
Gross Profit Margin
How much money you keep from each sale after paying direct costs
Current Ratio in Other Industries
See how current ratio compares across different business types
Cleaning Companies
Cleaning company current ratio should be 1.5-2.5. Commercial targets 1.5-2.0, residential 2.0-2.5, seasonal needs 2.5+. Check if yours is safe.
Salons & Spas
Salon current ratio should be 1.5-2.5. Booth rental models run 1.2-1.8, commission/employee 1.8-2.5, product-heavy salons need 2.0+. Compare yours.
Restaurants
Restaurant current ratio should be 1.5-2.5, but most operate at a dangerous 1.1-1.3. New restaurants need 2.5+ to survive. See where you fall.
Marketing Agencies
Marketing agency current ratio should be 1.8-2.5. Project-heavy agencies need 2.0-2.5, retainer-heavy 1.5-2.0, new agencies 2.5+. Check yours.