HVAC Business Failure Rate: How Many New Contractors Survive One, Five and Ten Years

What is the HVAC business failure rate in the first five years?

About four in ten new building equipment contractors are gone within five years: 39.2% of the NAICS 2382 employer firms born in 2018 were no longer active in 2023, against 45.9% of all US employer firms.

The newest Census Business Dynamics Statistics release counts 11,725 NAICS 2382 firms aged zero in 2018 and 7,132 firms aged five in 2023. That is a five-year survival rate of 60.8%. For all US employer firms the same calculation gives 54.1%, and for construction as a whole 54.3% (Census BDS 2023).

The first year is where the gap starts. 81.3% of NAICS 2382 firms born in 2022 were still active in 2023, so 18.7% were gone, against 23.1% of all new employer firms. By ages two to four the 2382 gap over all firms widens to between 6.5 and 7.2 points.

BDS stops reporting single years after age five. Firms aged 6 to 10 in 2023 equal 52.8% of the NAICS 2382 firms born in 2013 to 2017, against 43.1% for all firms, a 9.7-point gap. Read that as average survival across ages six to ten, roughly the eight-year mark.

For an owner, the reading is simple: a contractor that has reached year five has already outlasted about four in ten of the employer firms that started the same year, and losses slow after that.

Survival has improved: firms born in 2018 outlasted every earlier birth year but one

Five-year survival for NAICS 2382 rose from 45.3% for firms born in 1978 to 60.8% for firms born in 2018. Only the 2014 birth year did better (61.1%), and every birth year beat the all-firm average.

The worst five-year record belongs to firms born in 2007, which met the housing crash in their first two years: 44.9% survived to 2012. Firms born in 2008 had the weakest first year on record, at 71.9%.

First-year survival has ranged from 71.9% to 81.3% since 1978, and NAICS 2382 beat the all-firm figure in 37 of 45 birth years. On five-year survival it beat the all-firm figure in all 41 birth years with data (BDS firm age by 4-digit NAICS).

Equipment contractors outlast most trades, and homebuilders trail

Pooling firms born 2014 to 2018, NAICS 2382 kept 60.2% of new firms for five years: third of 10 construction industry groups and 31st of 165 four-digit industries, ahead of 81.7% of the rest.

Only highway, street and bridge construction (62.8%) and utility system construction (60.9%) did better in construction, and both start far fewer firms. Foundation, structure and building exterior contractors, which includes roofers, kept 57.0%; building finishing contractors kept 55.9%.

Residential building construction (NAICS 2361), the largest source of new construction firms, kept 46.1% and ranks 139 of 165. Across the whole economy the range runs from 78.7% (architectural and structural metals manufacturing) to 28.7% (cut and sew apparel manufacturing).

The ranking uses five pooled birth years to damp single-year noise and drops 111 industries with fewer than 1,000 new firms and 12 with suppressed cells. The data do not explain why equipment contractors last longer; this report does not test causes. Margins are covered separately in HVAC business profit margins.

Closings are below the pre-2008 pace, but 2023 firm deaths rose

The NAICS 2382 establishment exit rate averaged 9.3% a year in 2000 to 2007, jumped to 11.7% in 2008 to 2011 and averaged 8.1% in 2016 to 2023. Firm deaths rose to 7.4 per 100 firms in 2023, a provisional figure.

The exit rate is the share of establishments that closed in the year to March, measured against the average count of establishments in the two years. For NAICS 2382 it was 9.0% in 2000, 12.8% at the 2009 peak, 7.7% at the 2016 low and 8.4% in 2023 (BDS 4-digit NAICS totals).

The pandemic year shows as a small bump next to 2009: the exit rate went from 7.9% in 2019 to 8.7% in 2020 and back to 8.3% in 2021. In 2023, the all-US establishment exit rate was 9.4% and construction's was 11.1%.

Firm deaths, which count a business only when every establishment it owns closes, reached 12,921 in 2023, or 7.4 per 100 NAICS 2382 firms a year earlier. That is the highest rate since 2011 (7.7) but below 2009 (9.1). Because 2023 is the release's final year, this figure is the one most likely to move.

Openings have outpaced closings in every year since 2012, which is why the group's firm count kept rising, from 149,278 in 2012 to 177,201 in 2023.

About four in ten construction establishments reach year ten

BLS establishment data put ten-year survival in construction at 41.7% for sites opened in the year to March 2016, against 34.2% for the private sector, a 7.5-point gap.

The BLS Business Employment Dynamics program follows every establishment that pays unemployment insurance from its opening year. Of 52,541 construction establishments opened in the year to March 2016, 21,933 were still operating in March 2026 (BLS BED Table 7, construction).

At shorter horizons the construction lead is smaller: 79.2% of construction establishments opened in the year to March 2025 lasted one year, against 78.9% for the private sector, and 52.8% of those opened in the year to March 2021 lasted five years, against 47.2%.

Construction was not always ahead. Ten-year survival fell to 24.7% for establishments opened in the year to March 2006, near the peak of the housing boom, and rose to 42.8% for 2014 openings. The private-sector rate stayed between 32.4% and 35.3% across 1994 to 2016 openings, and construction has been above it for every opening year since 2011.

BLS publishes these tables for the construction sector only, so they cross-check the Census figures and do not isolate HVAC. The BLS first-year construction rate (79.2%) sits close to the Census NAICS 2382 first-year rate (81.3%).

Not every contractor that disappears has failed

Of 92,758 NAICS 2382 firms born 2010 to 2018, 37,542 were gone five years later. Census recorded 33,438 of them (89.1%) as firm deaths; the other 4,104 (10.9%) left the count without a recorded death.

Firm death (Census BDS): A firm whose establishments have all exited. Census states that legal entities ending through merger or acquisition are not firm deaths (BDS codebook).

Survival here is a count of firms still active, so a contractor bought by another company drops out of its birth cohort without being counted as a death. The 10.9% residual therefore includes acquired and merged firms, plus firms reclassified into another industry; the public tables cannot separate them. For the 2018 birth year alone, 4,181 of 4,593 missing firms (91.0%) were firm deaths and 412 were not.

Recorded deaths also include outcomes that are not failures in the everyday sense. Census defines an establishment exit as zero employees after a year with employees, so an owner who lets the last technician go and keeps working alone leaves the employer count (BDS methodology).

For readers comparing exits: a sale ends a firm's run in these tables as surely as a closure does, but in a different column. The site's main guide covers selling as a way out of a contracting company.

Where the '1 in 5 close every year' and '30% survive year one' claims come from

Two figures repeated in HVAC trade press do not match federal data for employer firms: a 20% annual close rate from a 2005 white paper and a 2021 column's claim that only 30% of HVAC startups make it past year one.

In 2005 trade magazines reported a Service Roundtable white paper finding an annual close rate of 20% among plumbing, heating and air conditioning companies, and 6% for contractors with five to nine employees. The report counted businesses without payroll, which it said were just over half the industry (Contractor magazine, 2005).

Census BDS covers employer firms only. In 2005 it recorded firm deaths equal to 7.0 per 100 NAICS 2382 firms a year earlier. The two numbers measure different populations, so the gap does not prove either wrong, but the 20% figure should not be quoted as an employer-firm closure rate.

A 2021 Contracting Business column said that only 30% of HVAC startups 'reportedly' make it past the first year, without naming a source (Contracting Business, 2021). The lowest first-year survival for any NAICS 2382 birth year since 1978 is 71.9%, for firms born in 2008.

What counts as an HVAC business in these numbers

Census does not publish business dynamics below the four-digit level, so HVAC companies are measured inside NAICS 2382, building equipment contractors, which also holds electricians and plumbers.

NAICS 2382, building equipment contractors: Establishments installing or servicing equipment that forms part of a building mechanical system. It covers 238210 electrical contractors, 238220 plumbing, heating and air-conditioning contractors (where HVAC firms sit) and 238290 other building equipment contractors (2017 NAICS descriptions).

Employer firm: A business with at least one paid employee in the pay period including March 12. One-person shops without payroll are outside BDS and BED.

Firm age: Years since the firm's oldest establishment first reported employees. A firm aged 0 is a genuinely new firm, so firms aged 0 are the birth cohort.

Survival rate (this report): Firms of age k in 2023 divided by firms of age 0 in 2023 minus k, times 100. The failure rate is 100 minus the survival rate and includes firms that were acquired.

Establishment exit rate: Establishments that closed in the year to March divided by the average count of establishments in that year and the year before, times 100 (Census definition).

The numbers in one list

1. 60.8% of NAICS 2382 employer firms born in 2018 (7,132 of 11,725) were still active in 2023 (Census BDS 2023).^[1]
2. 54.1% of all US employer firms born in 2018 were still active in 2023, and 54.3% of construction firms (Census BDS 2023).^[3][4]
3. 81.3% of NAICS 2382 firms born in 2022 (10,803 of 13,281) were still active in 2023, vs 76.9% of all US employer firms and 75.3% of construction firms (Census BDS 2023).^[1][3][4]
4. NAICS 2382 firms aged 6 to 10 in 2023 equal 52.8% of the firms born in 2013 to 2017, vs 43.1% for all US employer firms (Census BDS 2023, our calculation).^[1][3]
5. Five-year survival of NAICS 2382 birth cohorts rose from 45.3% (born 1978) to 60.8% (born 2018), with a low of 44.9% for firms born in 2007 (Census BDS 2023).^[1]
6. NAICS 2382 five-year survival exceeded the all-firm rate in 41 of 41 birth cohorts, 1978 to 2018 (Census BDS 2023, our calculation).^[1][3]
7. Pooled over 2014 to 2018 births, NAICS 2382 five-year survival was 60.2%, rank 31 of 165 four-digit industries; all US employer firms were at 52.6% (Census BDS 2023, our calculation).^[1][3]
8. Residential building construction (NAICS 2361) had the lowest five-year survival in construction at 46.1% for 2014 to 2018 births (Census BDS 2023).^[1]
9. The NAICS 2382 establishment exit rate peaked at 12.8% in 2009 and was 8.4% in 2023; the entry rate was 10.5% in 2023 (Census BDS 2023).^[2]
10. NAICS 2382 firm deaths reached 12,921 in 2023, 7.4 per 100 firms a year earlier, the highest rate since 2011 (Census BDS 2023, preliminary).^[2]
11. Of 37,542 NAICS 2382 firms born 2010 to 2018 and gone after five years, 33,438 (89.1%) were recorded firm deaths and 4,104 (10.9%) were not (Census BDS 2023, our calculation).^[1][9]
12. 41.7% of US construction establishments opened in the year to March 2016 were still operating in March 2026, vs 34.2% of all private establishments (BLS BED).^[11][12]
13. Ten-year survival of construction establishments fell to 24.7% for 2006 openings and has been above the private-sector rate for every opening year since 2011 (BLS BED).^[11][12]

Calculations

Download the calculations (CSV)

Summary

• Census BDS shows 60.8% of NAICS 2382 building equipment contractors born in 2018 still operated as employer firms in 2023; 39.2% were gone.
• For all US employer firms the matching five-year figures are 54.1% surviving and 45.9% gone.
• First-year survival for NAICS 2382 firms born in 2022 was 81.3%, the highest for any 2382 birth year since 1978 and above 76.9% for all firms.
• Five-year survival in NAICS 2382 beat the all-firm rate for all 41 birth years from 1978 to 2018.
• On pooled 2014 to 2018 births, NAICS 2382 ranks 31 of 165 four-digit industries and third of 10 construction industry groups for five-year survival.
• The establishment exit rate for NAICS 2382 averaged 9.3% a year in 2000 to 2007, 11.7% in 2008 to 2011 and 8.1% in 2016 to 2023.
• Of 37,542 NAICS 2382 firms born 2010 to 2018 that were gone after five years, 89.1% were recorded as firm deaths and 10.9% disappeared some other way, which includes being acquired.
• BLS data show 41.7% of construction establishments opened in the year to March 2016 lasted ten years, against 34.2% of all private establishments.

Frequently asked questions

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Reproduce this analysis

Every figure comes from the files below. The scripts that pulled and computed them are kept with the report and can be re-run.

Data quality and exclusions

• BDS suppression flags (D, S, X, N) were read as missing, never as zero. The NAICS 2382 cells used for survival and firm deaths had no suppression; the only missing 2382 firm-age cells are structural (ages 2 to 5 before 1982) and were not used.
• Ranking: 288 four-digit codes in the file; 12 dropped for a suppressed or missing age 0 or age 5 cell; 111 dropped for fewer than 1,000 pooled firm births in 2014 to 2018; 165 ranked.
• Firm-age band 'Left Censored' (firms born before 1977) and ages 11 and over were not used for survival.
• Rates in table t3 are the published Census rates (three decimals); our pooled period rates and firm deaths per 100 firms are recomputed from counts.
• BLS BED survival rates were parsed from the fixed-width text tables; the opening-year count and the published survival rate were both kept, and no rates were recomputed.
• Trade-press figures (4 articles opened) were kept out of every calculation and appear only as Tier 3 claims.

Methodology

Selection: the brief asked for trade-specific survival from Census BDS and BLS BED. We used the BDS 2023 release (the newest; files dated 2025-09-25) at the most detailed industry level it publishes, four-digit NAICS 2382, plus the construction sector and economy-wide files for comparison. BLS BED Table 7 (updated 2026-10-28) supplies establishment survival to March 2026 for construction and the total private sector.

Survival method: BDS counts firms by age each year; it does not follow named cohorts. We compute synthetic-cohort survival as firms aged k in year t+k divided by firms aged 0 in year t. Because firm age is set by the oldest establishment and increases by one each year, firms aged k in t+k can only descend from firms aged 0 in t, apart from firms that change industry code. For ages past five, BDS reports a 6 to 10 band, which we compare with the sum of births five to ten years earlier.

Pooling: for the industry ranking we sum numerators and denominators over five birth years (2014 to 2018 for five-year survival, 2018 to 2022 for one-year survival) rather than averaging rates. Pooled exit rates by period sum exits and average establishment counts in the same way.

Inclusion and exclusion: cells flagged D, S, X or N are never treated as zero. Industries with any suppressed age 0 or age 5 cell (12) or fewer than 1,000 pooled births (111) are left out of the ranking, leaving 165 of 288. Trade-press figures were opened and are reported as Tier 3 claims, not used as evidence.

Conflicting numbers: where trade-press figures differ from federal data we report both, explain the population difference, and do not combine them.

Limitations: NAICS 2382 combines HVAC with electrical, plumbing and other building equipment contractors; BDS and BED exclude businesses without payroll; the latest BDS year is provisional; Census applies noise infusion to BDS. All calculations are in derived_metrics.csv and scripts/. Last updated 2026-11-02.

This report presents published data with its limitations. It is not legal, financial or investment advice.

Sources, ranked by quality

Tier 1: primary and official sources (16)

• [1] US Census Bureau. Business Dynamics Statistics 2023: firm age by 4-digit NAICS (bds2023_vcn4_fa.csv). 1978 to 2023. Accessed 2026-11-02.
• [2] US Census Bureau. Business Dynamics Statistics 2023: 4-digit NAICS totals (bds2023_vcn4.csv). 1978 to 2023. Accessed 2026-11-02.
• [3] US Census Bureau. Business Dynamics Statistics 2023: economy-wide firm age (bds2023_fa.csv). 1978 to 2023. Accessed 2026-11-02.
• [4] US Census Bureau. Business Dynamics Statistics 2023: sector by firm age (bds2023_sec_fa.csv). 1978 to 2023. Accessed 2026-11-02.
• [5] US Census Bureau. Business Dynamics Statistics 2023: sector totals (bds2023_sec.csv). 1978 to 2023. Accessed 2026-11-02.
• [6] US Census Bureau. Business Dynamics Statistics 2023: economy-wide totals (bds2023.csv). 1978 to 2023. Accessed 2026-11-02.
• [7] US Census Bureau. Index of /programs-surveys/bds/tables/time-series/2023 (file dates 2025-09-25). 2023 release. Accessed 2026-11-02.
• [8] US Census Bureau. BDS Methodology. page revised 2026-06-18. Accessed 2026-11-02.
• [9] US Census Bureau. Business Dynamics Statistics Glossary and Codebook (PDF). 2023 release. Accessed 2026-11-02.
• [10] US Census Bureau. Business Dynamics Statistics (BDS) program page. 1978 to 2023. Accessed 2026-11-02.
• [11] US Bureau of Labor Statistics. BED Table 7. Survival of private sector establishments by opening year: Construction. March 1994 to March 2026. Accessed 2026-11-02.
• [12] US Bureau of Labor Statistics. BED Table 7. Survival of private sector establishments by opening year: Total private. March 1994 to March 2026. Accessed 2026-11-02.
• [13] US Bureau of Labor Statistics. Establishment Age and Survival Data (page last modified 2026-10-28). March 1994 to March 2026. Accessed 2026-11-02.
• [14] US Bureau of Labor Statistics. Frequently asked questions regarding establishment age and survival. n/a. Accessed 2026-11-02.
• [15] US Bureau of Labor Statistics. Business Employment Dynamics: Frequently Asked Questions. n/a. Accessed 2026-11-02.
• [16] US Census Bureau. 2017 NAICS Descriptions (2017_NAICS_Descriptions.xlsx). NAICS 2017. Accessed 2026-11-02.

Tier 3: journalism and expert commentary (4)

• [17] Contractor magazine. 1 Contractor in 5 Closes Annually: Report (2005-03-01). published 2005. Accessed 2026-11-02.
• [18] Contracting Business. Its Tough Out There: One Contractor In Five Closes Annually (2005-03-22). published 2005. Accessed 2026-11-02.
• [19] Contracting Business. Four Common Business Killers (2021-05-26). published 2021. Accessed 2026-11-02.
• [20] ACHR News. Why HVAC Contracting Businesses Fail (2007-01-29). published 2007. Accessed 2026-11-02.