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HVAC pricing: how to charge what you’re worth

HVAC pricing: how to charge what you’re worth | Nextdoor
July 8, 2022
Written by Nextdoor Editorial Team
July 8, 2022 | Written by Nextdoor Editorial Team

When you’re starting in the HVAC field or simply need to update your HVAC service pricing, you may be unsure how much to charge.

HVAC is specialized work, and you deserve to be paid fairly for it. Plus, knowing how to price HVAC unit jobs correctly can help you provide clear estimates to customers and build positive relationships with other businesses in your neighborhood. 

This HVAC pricing guide will walk you through how to make the most of your HVAC contractor expertise.

 

Calculating your costs

Before you can work out how much you’ll charge for your services, you’ll want to determine your operating costs and your break-even point (the point when your revenue and costs are the same).

Below are some of the costs to consider when starting your HVAC contractor business or updating your flat rate pricing.

Labor

Labor can be the most expensive part of hiring an HVAC technician, as customers are hiring you for your expertise and knowledge. HVAC repair and HVAC installation is skilled labor, and your wages should reflect that.

The simplest way to calculate your HVAC company’s labor cost is to determine what hourly wage you want to earn. According to the U.S. Bureau of Labor Statistics, or BLS, the median pay for HVAC company techs is $23.38/hour. Over a year, that equates to around $50,000 for each full-time worker. If you’re a more experienced AC repair technician, however, you may be able to charge $35/hour or more for your labor.

If you’ll be employing other AC repair technicians and apprentices, you’ll also need to account for their wages. While your business costs will rise with every new employee, your potential profits should expand, too. With more technicians, you’ll have more availability for jobs and faster installation times.

Transportation

As convenient as it would be, customers typically can’t bring their broken furnaces or air conditioning units to you. Instead, as an HVAC technician, you’ll likely need to make frequent house visits. 

Because you’ll be driving around between homes and businesses, factor in your vehicle costs, including:

  • Vehicle purchase ($20,000–$50,000)
  • Gas ($2,000+ per year)
  • Maintenance (around $1,000 per year)
  • Insurance, registration, and licensing (around $2,000 per year)

Planning ahead for these expenses can also help you to avoid any unexpected costs, should your work vehicle need unexpected repairs.

Materials

Whether you spend most of your time repairing old HVAC systems, replacing parts, or installing new central air conditioning systems altogether, it can help to keep some materials and parts readily available. Keeping some inventory on hand allows you to serve customers more efficiently. 

You’ll likely need to stock the following:

  • Pipes and ducts
  • Tools and fluids
  • Thermostat units
  • Boilers
  • AC units

Whether you stock these AC unit supplies frequently or order them as needed, be sure to keep a list of their prices. Doing so will make it easier for you to charge customers depending on the central AC repairs or replacements they need.

Real estate

While you may not need a brick-and-mortar presence to run a successful HVAC business, you’ll need somewhere to store your ductwork tools and materials. If you’re an independent contractor, you may not need much more than a storage locker. However, if you employ several technicians, you might need to lease a small warehouse building.

On average, you can expect to spend $7.00–$9.50 per square foot of industrial space.

As your small business grows, you may eventually want to have a front-facing office, too. 

Miscellaneous expenses

Other purchases and fees may seem negligible at the moment, but they can add up. As an HVAC technician, you may also need to pay for:

  • A business license
  • Training courses
  • Employee benefits
  • Bookkeeping

While these aren’t services you provide directly to your customers, they can all help you provide a better service. As such, it’s wise to factor these “non-billable” tasks and expenses into your rates.

Deciding which pricing system to use

When figuring out what to charge, you’ll first need to decide how you’ll charge. There are two schools of thought when it comes to HVAC pricing models: hourly pricing, and flat-rate pricing. Each option has its advantages and drawbacks, but comparing them can help you determine which will best suit your air conditioner business.

Hourly pricing

Many contractors (including HVAC techs) choose a “time and materials” model for pricing. Often shortened to T&M, this method involves charging an hourly rate for the labor, plus enough to cover the cost of materials. 

  • Advantages of T&M pricing – When you charge an hourly rate, you guarantee yourself compensation for all of the time you spend working. Because they used fixed rates, T&M contracts are also easy to draft up.
  • Drawbacks of T&M pricing – Because HVAC repair may also include “behind the scenes” costs (such as business expenses and driving time), you may need to raise your hourly rate to account for them. 

Flat-rate pricing

Alternatively, you can simply calculate the value of each service you offer and include them in a flat-rate price. For example, you might decide to charge $200 for every service call. By taking all of the above expenses into account, you can come up with a set price for each job—one that allows you to earn a healthy profit without overcharging your customers.

  • Advantages of flat-rate pricing – With flat-rate pricing, you can build every expense into your rates. What’s more, this model can sometimes be easier for customers to understand.
  • Drawbacks of flat-rate pricing – If a job takes longer than anticipated, but you have agreed on a fixed price for labor, your implied per-hour rate may drop. As such, it’s worth adding an “unforeseen circumstances” clause into any flat rate contract.

Determining what to charge

Now that you understand what your overhead will look like, you can calculate your rates.

If you choose to charge by the hour, you may already have your rates sorted out. In the case of hourly rates, each job will be worth however long it takes to complete, plus the cost of materials.

If you decide on a flat-rate pricing model, you’ll have to do some math to determine the overall value of your services, plus the cost of materials. For inspiration, here are some examples of standard services and how you might price them.

Service calls

Service calls are usually quick visits that involve minor air conditioning unit repairs or consultations. A service call fee structure typically involves two parts:

  • First, there’s the fee for the visit itself. This fee is independent of any work you need to do when you’re there—it’s simply your price for driving over and spending your time looking at the issue. 
  • Second, there’s the cost associated with fixing the problem. Here, you’ll include your fee for labor and parts. Service calls are usually for minor issues, so your rates should account for that.

While both of these charges might be a flat fee, you may also want to add an “emergency” surcharge for weekends or holidays. By

HVAC replacements

Replacing part or all of an older HVAC system can often be easier than installing a brand new system. For example, you may only need to replace the air conditioning unit, not the ducts. As such, your rates for this service might be lower than a complete HVAC installation.

Replacing a boiler, AC unit, or furnace usually includes the price of the new unit, labor, and the cost to dispose of the old unit. According to Bob Vila, the cost of labor for an HVAC replacement typically ranges from $500–$2,500. 

New installations

Installing an HVAC system in a new build or a home without an existing system can be more costly. A new unit itself can cost anywhere from $1,000 to $10,000. You may need to charge more to account for the installation of ductwork, thermostats, and other accommodations.

With that in mind, you should factor both the time-intensive nature of the installation and the cost of the new system into your price. Another helpful way to consider the cost of labor for an installation is by the size of the home. According to Forbes, the average installation cost per square foot is $15–$18. That brings the cost for the consumer to $4,000–$10,000, depending on square footage and the unit.

How to earn more as an HVAC technician

Aside from making yourself available on holidays and weekends, there are other ways you can increase your potential take-home. When wondering how to grow your HVAC business, consider leveraging the following:

  • Advertising – Advertising online is an excellent way to generate new leads and connect with your community of customers. For example, you can use Nextdoor Ads to promote your business to local homeowners.
  • Promotions – Looking to drum up business? You may be able to draw in new customers by offering an introductory rate or a discount for combined services.
  • Positive testimonials – With glowing recommendations from your community, you can lean on your reputation to start charging more. You could add a testimonials page to your website or use Nextdoor to collect recommendations from locals.

Bring year-round comfort to your neighbors with Nextdoor

From icy-cold air conditioners to toasty furnaces, your HVAC business helps to keep people comfortable, no matter the season. For you to run a successful small business and maintain a comfortable profit, however, you need a steady income stream. The first step to building that is expanding your client base.

Looking to share the beauty of climate-controlled air with new customers? With a free Nextdoor Business Page, you can reach homeowners and office managers in your community. Sign up today to start customizing your page and connect with neighbors in need.

Claim Your free business page

 

Sources: 

U.S. Bureau of Labor Statistics. Occupational Outlook Handbook: Heating, Air Conditioning, and Refrigeration Mechanics and Installers. https://www.bls.gov/ooh/installation-maintenance-and-repair/heating-air-conditioning-and-refrigeration-mechanics-and-installers.htm 

Statista. Average rent per square foot paid for industrial space in the United States from 4th quarter 2020 to 4th quarter 2021, by type. https://www.statista.com/statistics/626555/average-rent-per-square-foot-paid-for-industrial-space-usa-by-type/ 

Forbes. How Much Does A New HVAC System Cost? https://www.forbes.com/advisor/home-improvement/new-hvac-system-cost/ 

Bob Vila. How Much Does an HVAC Unit Replacement Cost? https://www.bobvila.com/articles/hvac-unit-replacement-cost/ 

 


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