"Just undercut the competition." Great advice, thanks, Uncle Jim. Now, take Jim's advice, ball it up, and throw it with the rest of the rubble into the nearest vacant lot. When considering how to price HVAC jobs properly, that's the kind of advice that'll run your business into the ground.
Though, let's be fair to Jim (or whoever is giving you unsolicited advice); learning how to price ductwork jobs or other HVAC jobs does mean paying attention to what the competition is doing. He was in the right ballpark. But just because you're watching the competition doesn't mean they are your most significant factor. If all you're doing is undercutting them, you'll likely end up with a tiny profit margin and a reputation for being "cheap".
Instead, what you need is a smart pricing model that combines the needs of your business with the needs of your customers. Finding that balance is a lot of hard, time-consuming work, but the reward of knowing you can walk onto an HVAC job and quickly provide a fair quote every time is well worth the work.
Here are some strategies to help you learn how to price HVAC jobs.
RELATED: Learn the logistics of starting an HVAC business from scratch.
How To Price HVAC Jobs
Pricing HVAC jobs; let's dig a little deeper. Since we've already mentioned your competitors, let's start there.
Research Your Local Competitors
To create a good HVAC price list template, you must conduct some market research into the competition. Start by looking at how much your competitors are charging for the same service, being sure to define "competitors" as companies of a similar size and level of experience who work in and around your area. Their website is a great place to start, as many HVAC technicians will list their services and prices online.
As well as researching their prices, look into how their business operates and how well their services are received. If their prices undercut yours by a significant margin, ask yourself why this is the case. Do they provide auxiliary services that fill in the profitability gaps? Do they cut corners? If so, that's not a price point to aspire to.
Determine Your Target Customers
To find the best way how to price HVAC jobs, you need to know who you're selling to. Determining who your target market is will make a huge difference in how you structure your prices.
When offering HVAC installations in highly affluent areas, it's reasonable to price yourself higher - a strategy that works for two reasons. Firstly, you know your customers can afford your services. Secondly, your target customers will likely be put off by seemingly "cheap" services.
On the other hand, when selling your services to a customer demographic with a lower income or in an area with many new homeowners, you'll have to keep your prices competitive.
Hourly Pricing Vs Project Pricing
Two of the most common ways how to price HVAC jobs are charging per hour and charging per project. Each business has its preferred method and reasons why they prefer it. Here's a breakdown of how each works and how each can impact your revenue.
Hourly pricing is straightforward: you charge for how long it takes you to do a job. Many of your customers will expect an hourly rate. They'll also expect you to get the job done as fast as possible, which is why charging by the hour is not always the best way to structure your prices. You may feel pressured to work more quickly and not to the best of your ability.
But there's another problem, too; when you charge per hour, you're punishing yourself for being efficient. The more experienced you get, the less time it will take you to work through issues and get the job done. So, really, the customer is paying less for a more experienced technician.
You could potentially mitigate this problem by raising your hourly rate. Or, you could elect to charge per project.
Structuring a project pricing system when calculating how to price HVAC jobs can often work out better for you and your customer - even if they baulk at the quote initially. By setting a fixed price for the job and firmly defining what falls within the scope of the job (to deter those customers who love to throw an, "Oh, can you just tighten the kitchen sink tap while you're here?" at you!), you will get paid your worth no matter how long or short the job takes. It's good for clients because they know exactly how much they'll pay, and it's good for you because your efficiency is rewarded, not punished.
Pricing Ductwork Jobs: Factors To Consider
A pricing structure for HVAC businesses is not that different from other trade businesses. Like with any quote, there are so many expenses to consider outside of the more obvious costs you're probably already including in your estimates, such as materials and labour. But are you on top of your overhead? If not, you could run the risk of losing profit by not calculating all your ongoing expenses. Let's dig a little deeper into overhead costs.
Your overhead is the money your business spends on things unrelated to the HVAC jobs you do, such as:
- Non-billable labour costs (taxes and employee benefits, to name a few)
- Phone bills
- Administrative fees
- HVAC software
- Repairs to your car or other vehicles.
If you don't know how much you're spending on your overhead, you aren't likely to be factoring in these costs when determining how to price HVAC jobs, and this could be harming your business.
A simple way to address this is to add up your annual overhead costs and divide them by the number of billable hours you paid yourself and your employees throughout the year. For example:
If your annual overhead costs were $53,000, and your billable hours for the year were 8,200, your hourly overhead cost would equal $6.46 per hour.
Now that you know your hourly overhead cost, you can quickly begin incorporating that cost into your quotes to ensure you cover your overhead costs throughout the year.
Getting Help When Learning How To Price HVAC Jobs
Simply undercutting your competition's prices is not a smart way to run your business. So, what if we told you we could remove much of the laborious work that goes into job costing with some very smart and sophisticated software?
We're AroFlo. What we do is offer job and operational management solutions for small-to-medium businesses - trade businesses in particular. Our software is built especially with features for HVAC professionals, providing a vast scope of functionality. If you're here because you're having trouble learning to how price HVAC jobs, you'll be pleased to know that our software offers pricing management options as standard, allowing you to input data once (such as your materials costs, labour costs, and hours per job) to streamline job costing. As well as helping you oversee job costing and pricing, we also simplify admin, scheduling, and project management.
As an HVAC technician who likely spends a lot of time in the field, you'll also appreciate our field and office functionality that makes it incredibly easy to work efficiently from both job sites and your desk., Our job management software gives you the option to run your business from anywhere you like and make changes on the fly.
So, why not try out our software for yourself? Follow this link to book a complimentary demo, where we'll take you through everything that AroFlo can offer your HVAC business. Or, if you want to know more about how companies like yours use AroFlo every day, check out how much easier our software has made business operations for the team at Online Air And Solar.