How to price your HVAC services

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Regardless of your business’ size, age, or service niche, nailing down a solid price list for labor services is one of the most difficult parts of establishing a successful business. You, like other HVAC industry entrepreneurs, went into the business to turn a profit. Within the HVAC industry, entrepreneurs like yourself went into the business to turn a proper profit. 

Unfortunately, more often than not, HVAC business owners find themselves building their price list template based on undercutting their local competitors. While this does effectively push bargain-hunters toward your undercut service prices, it doesn’t usually leave you with the most ideal profit margin.

While there is no one-size-fits-all process to create your price list, there is more opportunity for you to calculate the value of your time.

The following guide will walk you through how to create a smart pricing list template and how to keep your business booming, while turning larger profits.

Research your market

The first step to constructing an effective HVAC price list template is conducting a bit of market research. 

Look to new businesses

Despite popular belief, newer businesses will give you far more insight into how to price your services than long-standing establishments. Since new businesses don’t yet have years of reputation history and client loyalty to back them up, they needed to figure out how to thrive and price HVAC services all on their own.

In addition to pricing, additional items that you should uncover through your market research are:

  • Who are your customers?
  • What do your customers want most?
  • What are their service request trends?
  • What services are most common?
  • What times of the year are significantly busier than others?
  • What makes one HVAC business stand out from another?

Having a solid answer to each of these questions will set you up for success when planning your price list template. Not only will you be able to determine your business potential, but you’ll get a realistic sense of how your business fits into your local HVAC scene.

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Calculate your costs

Instead of randomly setting a price on your technicians’ labor, calculate the exact numerical cost of that labor. In order to set yourself up for success, you have to be sure that your service costs will cover the many expenses that are already attached to running an HVAC business. These costs can be broken down into three categories: material, labor, and overhead.

Material costs

Anything and everything spanning from ladders and face masks to valves and pumps all qualify as material costs. Just as an auto-repair business would charge the supply cost of brake pads or oil canisters, HVAC businesses need to track the total cost of supply items. This will ensure that item supply costs won’t put you into the negative.

Labor costs

According to Paycor, labor costs can account for as much as 70% of total business costs. This includes employee hourly wages, HVAC tech salaries, benefits, and payroll. If your business functions as a middleman for a service, you become responsible for hiring an HVAC technician and making sure they get paid out.

Overhead costs

Overhead costs are all other costs that factor into running, marketing, and managing your business. Examples include office laborers who handle HVAC invoicing, advertising, utilities, monthly rent, taxes, insurance, gas mileage, and outsourced labor costs. These indirect costs need to be covered by the prices offered on your HVAC price list template.

Consider different pricing models

Now that you have a solid grasp on what research needs to be done to reach your target audience with service prices that make both parties happy, it’s time to pin down your pricing model. The two most popular pricing models for HVAC companies are flat rates and hourly rates. Each model comes with pros and cons worth examining.

Charging hourly rates

  • Pros: Most businesses prefer this model. Pricing by the hour means your rate of return actually correlates to the time and labor put in. Instead of pricing specific services—say, for example, replacing a filer—you are putting a price on the value of your service. Because what if you went to replace a filter and saw that it demanded much more effort than a standard job and took you a lot longer to finish? Unfortunately, unless you priced your HVAC service by the hour, you’d be locked into that one flat fee. Your hourly rate should be determined by you and your technician’s level of expertise—seniority should be considered here.
  • Cons: The only downside to hourly rates is that timekeeping can become a mess if done manually. Fortunately, HVAC software systems like Housecall Pro allow you and your technicians to track time from the moment they set off to the moment they complete the repair—all on one app.

Charging flat fees

  • Pros: Clients love knowing exactly what they’re paying for. Flat fees allow HVAC business owners to set the price (with justification behind the price) and give customers peace of mind that the job will be done at the cost originally stated.
  • Cons: The most significant disadvantage of charging a flat fee is the possibility of a project taking far longer than expected. If an AC unit repair is slated to run about an hour but ends up taking your technician two hours, your deficit costs may ruin the projected profit from that job. Flat rates can sometimes end up being a risk for small business owners, especially during busy seasons.

Bottom Line

Creating an HVAC service price guide requires a great deal of extensive research, careful planning, and diligent construction. In order to keep your HVAC business thriving, you have to keep a watch on all your deficit expenses while monitoring your costs, making sure that they are all generously covered by your service income. Setting the right price leads to happy clients and happy business owners.

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