HVAC job pricing: what to include in cost
An HVAC price is only as good as the cost under it. List every cost line first, then add markup.
Job cost = equipment and materials + labor + permit and disposal + subcontractors + equipment or rental + overhead
Overhead rate per hour = annual overhead divided by annual billable labor hours
The cost lines
- Equipment and materials: units, parts and supplies for the job.
- Labor: hours x loaded hourly cost.
- Permit and disposal: permit fees and hauling away old equipment.
- Subcontractors: work you hire out.
- Equipment or rental: lifts, cranes or tools rented for the job.
- Overhead: annual overhead divided by annual billable labor hours gives a rate per hour.
Illustrative example
Examples use made-up numbers. Education only, not tax, legal or investment advice.
The setup
- Materials: $1,000.00
- Labor: 20 hours x $30.00 = $600.00
- Permit and disposal: $400.00
The math
- Job cost = $1,000.00 + $600.00 + $400.00 = $2,000.00.
- Price at 40% markup = $2,000.00 x 1.4 = $2,800.00.
- Profit = $2,800.00 − $2,000.00 = $800.00.
- Margin = $800.00 divided by $2,800.00 = 28.57%.
What to remember
- 40% markup is not 40% margin.
- Callbacks and warranty time are cost too. Count them, or they come out of profit.
Questions owners ask
Markup vs margin?
Markup is profit divided by cost; margin is profit divided by price.
Should callbacks be in the price?
Yes: return trips and warranty labor are real cost, so build an allowance in.
What is a loaded hourly cost?
Hourly pay plus the payroll costs and benefits you pay on top.
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Educational content, not tax, legal or investment advice.