Being an HVAC contractor is rewarding work — you help keep people cool in the summer and warm in the winter. It’s an irreplaceable job.
But like a lot of small business contractors, there’s a pricing crisis in the HVAC industry. Customers are often under the impression that HVAC profit margins are huge, and that HVAC professionals are taking advantage of uninformed customers.
This might even cause you to lower your parts markup, resulting in less profit for you — especially if you aren’t sure how to calculate your parts markup.
That’s when a Parts Markup Calculator comes in.
Read on for the basics and get an HVAC Parts Markup Calculator you can use right away.
What is HVAC parts markup?
Markup is how much more money you charge for an HVAC product or service after costs to help ensure a stable profit. It can be measured in a dollar amount (fixed) or a percentage (variable) amount, and it can be applied to the products you’re offering.
For example, your customer’s heat pump needs to be replaced. First, you need to purchase the new pump from a retailer which might cost you $2,000.
If you’re looking for a profit margin of 33%, you might markup the retail price of the pump by 50%.
Remember that you want to charge a fair price that also helps you yield a profit. To do this, you need to understand your margins well and ensure they’re being calculated correctly.
You can set a profit margin goal and refer to this table to roughly decide on the markup estimate that fits your goal:
Everything you need to know about markup
A calculation guide for small businessesLEARN MORE
How to calculate markup for your HVAC business
When creating an estimate for your customers, it’s important to determine your parts markup, and to understand other aspects of your pricing strategy.
Figure out your business’:
- Cost of labor (found out the average HVAC tech hourly rate in your state)
- Cost of Goods Sold (COGS)
- Operating costs
- Other expenditures
Then, use the markup-profit margin chart above to figure out what your markup should be so you can meet your profit goal.
You can play around with these percentages until you find the right one for your profit margin goal.
Next, HVAC markup can be calculated with this calculation:
Markup = (Revenue – Cost of Goods Sold)
(Cost of Goods Sold) x 100
For an even easier (and faster) option, use our HVAC parts markup calculator.
HVAC Parts Markup Calculator
Use the Markup Calculator to see if you were able to provide a reasonable profit once you’ve completed a job.
The calculator helps you determine the profit margin, profit dollar amounts, and job markup after the real costs (like materials, and labor) and price are added in.
INTERESTED IN CALCULATING YOUR MARKUP AND MARGINS?
Use our Profit Margin Calculator free tool and get to know your numbers better.Start Now