How to start a heat pump installation business

As green energy becomes increasingly important, there is a growing demand for eco-friendly and energy-efficient home and office heating options.

Air source heat pumps (AHSPs) are the frontrunners for reducing carbon emissions and promoting cleaner, more sustainable heating options.

With the government pushing to increase heat pump installation to 600,000 per year by 2028, now might be the perfect time to start a heat pump installation business.

Whether you are already installing air source heat pumps and considering starting your own business or you are a heat engineer currently working with gas boilers and are interested in branching out, we’ve put together this guide explaining how to start a heat pump installation business.

Qualifications for heat pump installers

Installing heat pumps is a technical job that requires the proper knowledge and training.

Here are four key qualifications that you may want to consider obtaining:

• NVQ Level 2 Diploma in Plumbing and Heating
• NVQ Level 3 Diploma in Plumbing and Heating
• Level 3 Diploma in Gas Utilisation Installation and Maintenance
• T Level in Building Services Engineering for Construction.

You may also want to consider completing the Accredited Microgeneration Certification Scheme (MCS) since heat pumps are low-carbon products, and this certification could help foster customer trust.

A Renewable Energy Consumer Code (RECC) membership may also be a worthwhile business investment.

This membership adds credibility to your services by demonstrating to customers that you comply with high customer protection standards relating to small-scale renewable energy systems.

Learn more about environmental and sustainable accreditation schemes.

Skills for running a heat pump installation business

To run a successful heat pump installation business, you’ll need:

• technical knowledge – it’s crucial to understand the mechanics of heat pumps and their installation, including knowledge of HVAC (heating, ventilation, and air conditioning) systems, electrical wiring, and plumbing
• regulatory knowledge – familiarity with local building codes and safety standards could help to ensure legal and reliable installations
• project management skills – effective planning, scheduling, and coordination skills could help in delivering projects on time and within budget
• customer service expertise – excellent communication skills are needed to explain complex technical information to clients and build strong customer relationships
• business management skills – running a business can also require financial management, marketing, and strategic planning skills. Understanding market trends and customer needs will help you position your services effectively
• problem-solving expertise – the ability to troubleshoot and quickly resolve installation challenges could lead to high-quality installations and satisfied customers.

What equipment do I need for heat pump installation?

You’ll need the right tools for efficient and professional service, including:

• heat pumps
• electrical tools, such as power drills and screwdrivers
• spanners
• pump pliers, pipe cutters, and pipe benders
• cable ties
• olive removing tool
• tape
• levels
• PPE (personal protective equipment) such as thick gloves and eye protection.

You may also need a secure, reliable means of private transport to travel between jobs with your equipment.

As your business grows, you may need to find a fixed, secure location to store your tools.

How to start a heat pump installation business

Market research and business planning

To give your heat pump installation business the best chance of success, consider carrying out market research.

This involves collecting information about your target market and customers – including the market size and need, competitor offerings, and what customers are willing to pay.

This information could help you determine whether there is a market for heat pump installation services in your area and what you can do to make your business stand out.

Your target market may be residential, commercial, industrial, or a combination of all three.

Remember, each market could have its specific requirements.

You can conduct market research in several ways, including surveys, desk research, and networking.

Read our guide to market research techniques to discover more.

After researching the market, you could use your findings to create a business plan.

A business plan is a written document describing your core business objectives and how you plan to achieve them over a set period.

A robust plan could also help you secure funding for your heat pump installation business.

Read our guide to how to write a business plan.

A business plan typically contains:

• your business objectives
• a roadmap to achieving your goals
• timeframes
• market opportunities
• details of your main competitors
• marketing strategies
• financial projections
• an indication of what funding will be used for.

Download our free business plan template.

Choose a business structure

You will need to choose a business structure for your heat pump installation start-up.

There are several options, including becoming a sole trader or limited company.

You may need to research each type of business structure, as each has its own tax and administrative requirements.

The simplest structure to choose is a sole trader – here, the business is owned by just one person.

As a sole trader, you have complete control over the business but are also personally liable for any debts or legal actions.

You report your business income on your tax return and pay income tax and National Insurance Contributions (NICs) based on your profits.

This business structure is straightforward but may offer less protection for any personal assets you may have, like a property.

A limited company is a separate legal entity, providing the advantage of ‘limited liability’.

This means your personal assets are protected if the business incurs debts or legal issues.

Taxation is also different for limited companies. 

Profits are subject to Corporation Tax, and any salary or dividends you take are taxed accordingly.

While this structure can offer tax efficiencies and credibility, it could also involve more admin, including filing annual accounts and compliance with the Companies Act.

Regardless of the business structure you choose, you’ll need to register your business with HMRC.

Sole traders register with HMRC for Self-Assessment tax purposes, while limited companies have additional registration requirements, such as registering with Companies House.

You may want to consult with an accountant or financial advisor before making your decision so you can select the business structure that best suits your needs.

Read our guide to start-up business structures.

Initial funding and investment

Considering your start-up costs when planning to launch a heat pump installation business is a good idea.

Initial costs may include:

• purchasing equipment, such as heat pumps and installation tools
• buying or hiring vehicles for transportation
• investing in staff training to ensure compliance with industry standards
• allocating funds for marketing to attract clients.

Several funding options might be available for your start-up.

Traditional bank loans can provide the necessary capital but these may require collateral and a trading history.

Grants, particularly those supporting sustainable and green energy initiatives, might be available from governmental or environmental bodies, offering non-repayable funds to boost your new business.

You could initially use loans from friends and family or your savings to fund your start-up.

You might also consider a personal loan from Start Up Loans, which is available up to £25,000 with a fixed 6% interest rate.

Once you have your funding, efficiently managing your start-up’s cash flow could be essential for its ongoing success.

A detailed financial plan could help you to track expenses and forecast revenue.

Implementing smart accounting practices could make it easier for you to pay suppliers and staff on time while reinvesting money into your business.

Plus, with a healthy cash flow, you could be more likely to overcome operational challenges and make the most of growth opportunities.

Learn more with our guide to small business bookkeeping tips for success.

Get trade licences and insurance

To legally start a heat pump installation business, obtain necessary trade licences and insurance for protection.

Trade licences and regulations

You must secure a number of trade licenses and follow regulations to operate safely and legally.

Heat pumps use F-gases as refrigerants, so you must legally be F-gas certified to install them safely.

It’s necessary to fully understand and adhere to UK Building Regulations to operate as safely and as efficiently as possible.

Insurance requirements

Although it’s not a legal requirement, getting business insurance for your heat pump installation start-up could be a wise business move in case of an incident.

You may want to secure two types of business insurance as soon as your business is operational – professional indemnity and public liability.

Professional indemnity insurance protects you from breach of contract, such as if an unhappy client does not want to pay for your services.

Public liability insurance will protect your business and cover the costs in case a member of the public makes a claim against you.

You may also want to secure tools and income protection insurance.

Both can protect you and your business if something prevents your business from operating, such as tool theft or injury.

Learn more with our guide to self-employed insurance for start-up businesses.

Source equipment and suppliers

Sourcing equipment and suppliers is pivotal in establishing a successful heat pump installation business.

You could begin by identifying reliable suppliers who offer high-quality heat pump systems and components.

You might also look for manufacturers and distributors with a strong reputation for quality, efficiency, and after-sales support.

Building strong relationships with manufacturers and distributors is crucial.

Regular communication could help you secure competitive pricing and stay informed about new technologies and product improvements.

Establishing long-term partnerships could lead to favourable terms, priority access to new products, and potential discounts.

It’s equally important to evaluate your supply chain and logistics.

Consider factors such as delivery times and shipping costs to minimise downtime and ensure project completion on time and on budget.

When considering equipment costs, you may also want to include the total cost of ownership, including energy efficiency and maintenance needs, alongside the initial purchase price.

Marketing and customer acquisition

Marketing your heat pump installation business could be the key to transforming it from being relatively unknown to busy and thriving.

Firstly, a strong brand identity could help you differentiate your business from its competitors.

This could involve developing an eye-catching logo and colour scheme and defining your unique selling points (USPs).

To get the word out about your start-up, there are several effective marketing methods you could consider:

• build a website – a professional website can act as your digital storefront, providing potential customers with everything they need. You may want to make it as user-friendly and mobile-responsive as possible and fill it with essential information about your services, certifications, and contact details. You could also include customer testimonials and case studies to enhance your credibility.
• digital marketing – use digital channels to communicate directly with customers and reach a wider audience – try social media and online ads. You may also want to implement search engine optimisation (SEO) tactics to improve your website’s visibility and attract potential customers.
• networking and referrals – attending industry events and local business gatherings could help you connect with potential customers. You could even encourage satisfied customers to refer your services to others by offering them incentives or discounts. Networking could also help you as a small business owner.
• partnerships – consider forming partnerships with contractors and developers who can recommend your services to their clients. Collaborating with other professionals could lead to a steady stream of installation projects and increase your market presence.

As the demand for sustainable, eco-friendly solutions increases, starting your own heat pump installation business could be your chance to do your bit to help save the planet while being your own boss.