How to Price HVAC Jobs: Flat-Rate vs Hourly
How to price HVAC jobs the right way: flat-rate vs hourly, know your true cost per hour first, build the rate to hit margin, and present priced options.
Most HVAC shops price jobs on a gut feel. They glance at what the competitor down the road charges, add a little, and call it a day. The problem is that the competitor is probably guessing too, so you end up in a race to a number neither of you can actually live on. That is how busy shops still end the year with no money.
Pricing HVAC jobs correctly comes down to two decisions. First, flat-rate or hourly. Second, and more important, building that rate off your real cost to run a truck for an hour, not off what the shop across town charges. Get the cost right and the pricing model is easy. Get the cost wrong and no model saves you.
How do you price an HVAC job correctly?
You price an HVAC job by calculating your true cost per billable hour first, then setting a rate that covers that cost plus the margin you need to stay in business. Everything else is downstream of that one number. If you do not know what an hour on a truck actually costs you, every price you quote is a guess, and some of those guesses are losing you money on jobs you think are winners.
Ellen Rohr is blunt about this: the math does not care about your feelings. You can want to charge $95 an hour, but if your true cost is $110, you lose money on every hour you sell at $95, no matter how busy you are. Pricing starts with the cost, not the wish.
What is the difference between flat-rate and hourly pricing?
Flat-rate pricing charges one set price for a defined job no matter how long it takes, while hourly pricing bills the customer for time plus materials. Most successful HVAC shops use flat-rate, because it protects your margin on the jobs your fast techs crush and removes the customer's fear of an open-ended meter running.
Hourly feels honest, but it punishes your best techs and rewards your slow ones. The faster a tech finishes, the less you bill, which is backwards. Flat-rate also kills the argument at the door. The customer knows the price before you start, so there is no surprise on the invoice and no haggling over how many hours it "should" have taken.
How do you calculate your true cost per hour?
You calculate it by adding up every cost of running the business for a year, including labor, trucks, fuel, insurance, tools, office, and your own pay, then dividing by the number of hours you can actually bill. The catch is that last number. Your techs are not billable for all 2,080 hours in a work year. Drive time, training, callbacks, and downtime eat a big chunk, so your billable hours might be closer to half of clocked hours.
That is where most shops go wrong. They divide costs by total clocked hours, get a low number, and price off it, then wonder why a full schedule produces no profit. Divide by real billable hours and the true cost jumps, often well past what they were charging. Once you have that number, every flat-rate price is built on solid ground instead of a hope.
How do you build a flat-rate that hits your margin?
You build a flat-rate by taking your true cost per hour, multiplying it by the realistic hours a job takes, adding materials at your marked-up price, then adding the profit margin you set as a target. Pick the margin on purpose. If you want 20 percent net, the price has to carry it, because margin you do not build in is margin you never get.
Then book the job, do not just quote it. A flat-rate priced for margin only matters if it closes, which is why presenting it well matters as much as the math. Build the rate to win the business you want, not to be the cheapest in town, because the cheapest shop in town is usually the one going out of business. See how to get more HVAC customers for filling the schedule at that rate.
Should you present pricing options to the customer?
Yes. You should present two or three priced options rather than one number, because options lift both your close rate and your average ticket. Joe Crisara's approach fits HVAC perfectly: show the homeowner Good, Better, and Best, like the basic replacement, the high-efficiency system, and the premium system with the longer warranty, and let them choose a level instead of saying yes or no to a single price.
A single number invites the customer to shop it against two competitors and pick on cost. Three options keep the decision inside your truck. Most homeowners do not choose the cheapest tier once they understand what the better ones include, which means options quietly raise your ticket while making the customer feel in control.
How Maximus protects the jobs you priced right
Pricing a job correctly does you no good if the call never gets answered or the estimate never gets followed up. That is where the carefully built rate leaks back out. Maximus answers every call so the job gets booked, then follows up on every estimate so the priced options actually close instead of going cold. He runs on top of the software you already use, like ServiceTitan or Housecall Pro, and costs $497 a month, or 8 percent of the revenue he recovers, whichever is higher.
He makes sure the margin you built into the price is margin you actually collect.
Good pricing only pays off if the job closes. Know your real cost, build the rate, then make sure every priced job gets booked and followed up.
Frequently asked questions
How do I price an HVAC job correctly? Calculate your true cost per billable hour first, then set a rate that covers that cost plus your target margin. Pricing built off the competitor's number instead of your own cost is how busy shops still lose money.
Is flat-rate or hourly better for HVAC? Flat-rate is better for most HVAC shops because it protects your margin on jobs your fast techs finish quickly and removes the customer's fear of an open-ended meter. Hourly punishes your best techs by billing less the faster they work.
How do I figure out my true cost per hour? Add up every annual cost of running the business, including your own pay, then divide by the hours you can actually bill, not total clocked hours. Drive time, training, and downtime mean billable hours are far lower than clocked hours, which raises your real cost.
How much margin should I build into an HVAC price? Set it on purpose based on the net profit you want to take home, then build the price to carry it. Margin you do not deliberately build into the price is margin you will not get.
Should I give the customer pricing options? Yes. Presenting Good, Better, and Best options lifts both your close rate and your average ticket, because most homeowners do not pick the cheapest tier once they understand what the higher ones include.
Why do busy HVAC shops still lose money? Usually because they priced off the competitor or off total clocked hours instead of their true cost per billable hour. A full schedule at a price below your real cost just loses money faster.
See What He Finds in Your Business. See how much priced revenue is leaking out of your shop on unanswered calls and cold estimates, in about 60 seconds. Look in the Mirror
Written by Nirav Doshi and Neal Doshi, owners of Temperature Pros Orlando and co-founders of Complete Data Products. Every number here comes from a real home services P&L.
Related: how to get more HVAC customers and the home services revenue leak.