How to Price HVAC Jobs: 7 Steps to Turning a Profit

1. Calculate your job costs

Knowing how much you need to spend helps you cover your essential costs and turn a profit with your pricing. Divide your costs into three categories: labor costs, material costs, and overhead.

Determine your HVAC labor rates

Your labor rate is how much you pay yourself, your contractors, subcontractors, or employees for a job. To ensure you’re paid fairly for your work, factor this number into your installation cost estimate, no matter your pricing strategy.

Here’s how you can calculate your total labor cost for a job:

Labor hours x hourly labor cost

• To calculate labor hours: Multiply the time spent on a job by the number of techs you need on the job. (E.g., 3 hours x 2 people = 6 hours)
• To calculate your hourly labor cost: Add up each HVAC technician’s hourly salary, plus taxes, workers’ compensation, and any other employee-related expenses. A markup of 20–30% is a reliable rate for hourly labor costs. (E.g., $28 + 20% = $33.60)
• When you multiply your labor hours by your hourly labor cost, you’ll get a total labor cost you can add to your final cost estimate. (6 x 33.60 = $201.60)

Calculate material costs

Material costs include the supplies needed to complete an individual job—think new equipment (like an AC unit or thermostat), replacement parts (like fuses and drain pans), or brand-new HVAC tools.

Once you have a clear scope of the work:

1. List all the materials you need for the job
2. Add the cost of each material
3. Add markup to each material cost

Adding markup to new materials you purchase helps you offset overhead costs without cutting wages or adding huge hourly labor rates to your HVAC estimates.

Follow an HVAC parts markup chart to get started. The average markup on HVAC equipment is between 25 and 50%, and 100% or higher for spare HVAC parts and materials.

Pro Tip: Use expense tracking software to keep a record of parts and other job-related materials. Jobber automatically calculates profitability for each job based on every on-the-job expense you’ve tracked.

Calculate overhead costs

Overhead is the combined cost of everything else you need to run your HVAC company, outside of materials and labor. Overhead costs are not specific to an individual job and include expenses like vehicle leases, licensing fees, cell phone bills, HVAC business insurance, office space, and uniforms.

Your overhead costs are likely monthly or annual, so it can be hard to calculate them for one specific job. Estimate overhead costs for one specific job by finding your hourly overhead rate.

To calculate your overhead costs per hour, use this formula:

Total monthly overhead ÷ # of billable hours per week

• Calculate your monthly overhead fees (E.g., $8,000)
• Determine the number of weekly labor hours worked (E.g., 400 hours)
• Divide your weekly overhead cost into hours worked for an hourly overhead cost ($8,000 ÷ 400 = $20)
  • This means that for every labor hour, you need to charge $20 to cover that cost
• Multiply the hourly overhead cost by the number of labor hours for the job ($20 x 260 = $5,200)

2. Choose a pricing strategy

There are a few different methods for deciding how much to charge for HVAC services. Flat rate and time and materials are two industry standards, and hybrid pricing is a method that combines the previous two.

Learn the pros and cons of each pricing approach here before choosing what works best for you.

Flat rate pricing

With flat rate pricing, you set a fixed price for the job, no matter how long it takes. Your flat fee should account for the costs of completing the HVAC job, like ductwork purchased and freon used. But you won’t include line items for labor costs or actual material costs on your estimate.

Flat rates reward efficient work—the faster you go, the more profit you make. Plus, customers will know the exact cost upfront, with no surprises when the job is done.

Here’s how you calculate it:

Total cost = (estimated labor hours x hourly rate) + (estimated cost of materials x markup)

For example, let’s assume you’ve estimated that an A/C tune-up takes at most an hour, the average cost of materials is $20, and you want to factor in a 25% markup. This is what the flat rate for your A/C tune up might look like:

Total cost = (1 hour x $80/hour) + ($20 x (1 + 0.25)) = $105

On the other hand, some customers assume you’re overcharging if there are no line items explaining your rates. An HVAC tech might also earn less than their regular hourly rate if a job takes longer than expected.

HVAC flat rate pricing is usually ideal for these types of work:

• Common repairs: Repairs like refrigerant leaks and thermostat malfunctions are generally straightforward and predictable. Costs for these jobs tend to be easier to factor into a flat rate.
• Routine maintenance and inspections: These typically follow a standard operating procedure, whether you’re using an HVAC inspection checklist or have memorized the steps from years of experience. You won’t have unexpected work that eats into your labor costs, since you’ll charge separately for any repairs or replacements.
• HVAC system installations and replacements: These include the cost of a brand-new HVAC system, which depends on supplier prices, but should be a predictable cost. Add your markup, plus your labor and overhead costs to get your installation rate.

Set flat rates for all your services and add them to your HVAC price book to save time when estimating jobs. To help yourself out, include a price range for every possible job, from high-efficiency furnace installations to a simple thermostat replacement.

Time and materials pricing

The time and materials (T&M) method involves pricing a job based on the time it takes, the HVAC contractor’s hourly rate, and the cost of the materials plus markup.

Here’s how you calculate it:

Total cost = (actual hours worked x hourly rate) + (cost of materials x markup)

For example, assuming a 25% markup on materials for a custom ductwork project, this is what that formula might look like:

Total cost = (2 hours x $80/hour) + ($600 x (1 + 0.25)) = $910

Pricing by the hour lets you compensate technicians for the exact amount of time a job takes—and it shows customers exactly what they’re paying for. It’s good practice to give customers a quote up front with estimated hours so they can get a sense of what the actual cost will be.

However, the longer a job takes, the more money it will cost the homeowner. A technician who’s slow or makes mistakes on the job will drive up your invoice total, and getting paid for the job hourly doesn’t incentivize faster work.

T&M pricing is best suited for these types of jobs:

• Complex or unusual repairs: Estimating the labor hours it’ll take to diagnose and repair less common HVAC system problems is more challenging. Charging by the hour ensures you’re compensated fairly for the extra time and specialized skills you need for the job.
• Custom installs: Pricing by the hour helps you profit on labor that’s difficult to predict ahead of time—think systems that need custom sheet metal ductwork or have unique architectural features.
• Emergency calls: Without an initial inspection to understand the root cause of the problem, emergency HVAC service calls can be time-consuming and complicated. These calls also take time away from planned work and can happen after hours, so you should ensure you are paid appropriately for this premium service.

3. Research competitor rates

Call or request HVAC proposals or estimates from competitors to find out what average HVAC contractor prices are in your service area.

Be sure to review new and established HVAC businesses to understand how pricing varies based on experience.

Browse competitor websites and take note of the services they offer—and how similar they are to yours. Pay attention to things like:

• Whether they offer residential or commercial HVAC services (or a mix of both)
• The size of their HVAC jobs
• Size of the company
• How long they have been in business

Established, commercial-focused HVAC companies may charge higher rates because they need more equipment or employees. Alternatively, small, residential HVAC startups may offer lower rates because they have less overhead.

If you’re just starting out your HVAC business, try to price yourself somewhere between the highest and lowest prices. If you have a specific market in mind, like high-end customers, set your pricing for that market.

Keep an eye on what your competition charges even after you’ve set your service pricing. As market rates change and the costs of labor and materials shift, you’ll have to adjust your own pricing accordingly.

Gauge what local customers are willing to pay

In addition to competitor research, your prices should also reflect what local customers can afford.​ Here are some ways to do that:

• Survey recent customers directly. Ask what they consider a fair price for common services and what they expect from a premium vs. budget-friendly service business.
• Poll people in online community groups and social media. Ask homeowners what they’ve paid for HVAC work, what motivated them to choose a particular company, and a price level caused them to hesitate.
• Review customer feedback for competitors. Check review platforms like Google and Yelp. Look for mentions of being too expensive, if customers think the pricing is a good deal, or if there are any complaints.
• Track customer interests and needs. Look to see which of your discounts, bundles, and plans get the most traction. If premium maintenance plans sell well, there could be a willingness to pay more for the value. If low-priced specials hardly sell, the discount might not be big enough, or there may not be demand for the service.
• Do a “price test” occasionally. Offer two price points for a small group of your customers and monitor conversions and pushbacks. This can help identify the local price ceiling before making any big changes across the board.

Average HVAC service prices

The following costs are typical average ranges that HVAC companies charge in the United States for residential, according to data from HomeAdvisor:

4. Add markup to your total cost estimate

Add your material, labor, and overhead costs to get your total cost estimate. This estimate is approximately how much you’ll spend on the job.

Then, add markup to this total. Markup is how much you charge on top of your costs to meet your target profit margin for the job.

5. Factor in taxes

To cover your business taxes, add them in when you’re charging for HVAC work. You have two options when it comes to quoting your customers for your HVAC services:

1. Include taxes in your pricing model
2. Charge taxes separately on each invoice

Most businesses list taxes as a separate line item on each quote or invoice because it’s easier to calculate and manage. That means setting a specific price for a service, like $80 to repair a flame sensor, and then charging taxes on top of it.

If you decide to include taxes in your pricing, you need to make sure they don’t cut into your profit, especially if tax rates change.

6. Handle customers who negotiate

Eventually, you’ll come across a client who wants a deal. But whether you can give one to them depends on a few factors.

Before you offer discount pricing to a customer, you should consider:

• How much you’ll profit from the job
• If you can offer an upsell at a discount price instead
• If you can provide a different service within their budget instead

Next, figure out why they’re asking for a discount. Are they on a tight budget or just hunting for a deal? Helping a customer out in a tough spot can build loyalty, but you don’t want to set unreasonable expectations for future work either.

Try offering a price guide with a few equipment or service options at different prices using a good-better-best HVAC proposal. Or help your customer pay in installments by adding consumer financing options to your quote.

READ MORE: Learn how to write an HVAC service contract and what to include in them

7. Build an accurate HVAC estimate

Understanding how to estimate HVAC jobs and send detailed quotes will help you win jobs, set clear expectations for your customers, and drive profit.

A detailed quote should describe all the work you’ll do before, during, and after the HVAC service call.

It also needs to look professional and include you and your client’s contact details, your company branding, terms and conditions, and any special discounts or rates.