Learn how to price every job profitably using net profit pricing, the only method that guarantees your margin.
The correct way to price an HVAC job for a specific net profit margin is: Selling Price = Total Cost ÷ (1 − Target Net Profit %). This is net profit pricing , your margin is a percentage of what the customer pays, not a percentage added on top of cost. The sections below explain how to build Total Cost correctly.
HVAC overhead includes shop rent, truck payments, insurance, and software. Divide each division's allocated overhead by its billable hours, not total paid hours, to get the true overhead rate per job hour for that division.
Selling Price = Total Cost ÷ (1 − Target Net Profit %)
This formula ensures every job hits your target net profit percentage. Instead of guessing or copying competitors, you calculate the exact price needed to cover all costs and achieve your profit goals.
Labor burden includes all the costs beyond base wages that you pay for each employee. Typical burden rates range from 35–50% of base wages.
Many contractors only use base wages when pricing jobs, leaving 35–50% of labor costs uncovered. This eats directly into your profit margin.
Fully Loaded Labor Rate = Base Wage × (1 + Labor Burden %)
Example: $25/hr base wage × 1.40 (40% burden) = $35/hr fully loaded
Overhead costs must be spread across every billable hour to ensure they're recovered. The calculator does this separately for your service and install divisions.
Billable hours are not the same as paid hours. Technicians spend real time on travel, paperwork, callbacks, and training, none of which is billed to a customer. The productivity percentage captures this gap. Your overhead has to be recovered across fewer hours than you pay for.
Service: ~68% productivity
3 techs × 160 hrs × 68% = 326 billable hours/mo
Install: ~80% productivity
Higher because crews are on-site most of the day
If billable hours are overstated, OPH will be understated, and every job will be underpriced.
If your business does both service calls and installations, you need to decide what percentage of overhead each division carries. There is no universal right answer, the split should reflect how your divisions actually consume overhead resources. Common approaches:
Review your split at least annually as your business mix changes.
This is one of the most important distinctions in HVAC job pricing and one of the most commonly misunderstood.
When a two-person crew works an 8-hour install job, you have 16 man-hours of labor , but your overhead for that job is based on 8 hours, not 16. Your rent, your truck payment, your office staff all run for 8 hours regardless of how many people you put on the job. Sending a bigger crew does not double your overhead for the day.
2-person crew, 8 hours = 16 man-hours
Labor Cost = 16 hrs × fully loaded rate
2-person crew, 8 hours = 8 job hours
Overhead Cost = 8 hrs × Install OPH
Industry experts recommend targeting 15–25% net profit for a healthy HVAC business. Here's how to think about profit targets:
10–15%
Minimum Viable
Covers basic operations but leaves little room for growth
15–20%
Healthy Target
Sustainable growth and reasonable owner compensation
20–25%
Excellent
Strong cash reserves and expansion capability
A 20% markup on cost is NOT the same as 20% profit. A $100 cost with 20% markup = $120 selling price, but your profit is only 16.7% ($20 ÷ $120). Use the net profit formula instead.
Using only base wages means you're underpricing every job by 35–50%.
Every business cost must be covered by your pricing. Forgotten costs come directly out of your profit.
If you assume techs are billable 100% of the time, your OPH will be too low and every job will be underpriced. A service tech is realistically billable 65–70% of paid hours. Use a realistic productivity percentage.
Your costs are different. Competitor prices may be based on guesswork or different business structures. Calculate YOUR profitable price.