HVAC Pricing Guide for Service Business Owners

The HVAC industry has grown at a 13% rate over the past few years. Going by the growth rate, this service market is expected to reach $82.5 billion by 2026.

With the rise in demand, HVAC business owners need to ensure that they have a robust ecosystem and workflow to handle the needs of the industry.

But the increase in work volume doesn’t always mean that the business will make profits. 

Why?

It comes down to the HVAC business pricing. Sometimes HVAC businesses often price their service incorrectly, and other times the correct prices are not implemented accurately in the entire business operations.

To help you bypass these major issues, we have created a well-vetted HVAC pricing guide to ensure that your pricing and its implementation are on point.

Which Pricing Model is Best for Your HVAC Business?

You might be confused about whether you want to choose a flat pricing model or a time and material pricing model to set up your prices for your HVAC business.

Many competitors might be using the traditional time and material or hourly rate pricing model, but we have something different.

You should switch to a flat pricing model that helps you, in the long run, to stand out from the rest and ensure that your HVAC business drives you great profits.

But how?

First, let’s discuss the drawbacks of the time and material approach.

Drawbacks of time and material pricing model

There might be multiple drawbacks to the time and material model. But we have listed the top two drawbacks that can make you switch to the flat pricing model.

  • Considering hourly rates

    If you choose the time and material pricing, it automatically implements hourly work rates in your business ecosystem. You include your expenses in your hourly price with a few chunks for your profits, and the price of the HVAC service goes up to $200 or $300 per hour, including the installation cost, HVAC replacement cost, and overhead costs.

    You understand why the pricing is on the higher end, but your prospects might not understand the logic clearly even if you explain the reasons.

    But if you are focused on residential complexes, the homeowners will not feel comfortable paying such a high price for the HVAC service. They might feel that you are taking advantage of them, and they might not end up being your customers.

    Because the homeowner might be making $35 or $50 an hour, they might find it hard to understand why the HVAC technicians ask them for such an exorbitant price.

    The high-end pricing can work great with commercial projects, but it can hinder your residential business approach.

  • Shadowing technician’s performance

    The time and material pricing shadow the poor performance of the HVAC technicians which can deliver a bad customer experience to the customers. Your HVAC business might charge the customers a high service price compared to the quality of service delivered by the technicians. 

    The technicians who work slowly because of inexperience, disorganization, insufficient training, or laziness can increase the working hours and the bill for the customers while doing subpar work. It can work for some time, but it’s not a good practice, in the long run, to sustain the HVAC business.

    You need to deliver a quality customer experience and results for the price you are charging your customers. 

    But suppose you also have an HVAC technician on your team who can deliver fast. In that case, the technician will generate less revenue for your business because of the time and material pricing model limitations.

    The quick delivery of results restricts the revenue numbers from increasing, and the client won’t pay extra for the quality of service received. This barrier of the pricing model can be bypassed if you switch to flat-rate pricing.

Benefits of flat-rate pricing

Implementing the flat-rate pricing model can help you bypass the time and material pricing model’s major drawbacks and remove customers from the hourly HVAC service rate chains.

Setting up a fixed price can make the customer aware of the exact cost of the job regardless of the time consumed in completing the task. The customers don’t need to sit and ensure that their final tally of the bill remains concise. 

It can increase the incentives of the technicians and encourage them to perform more jobs in a day because they are being paid well for the hard work they put in.

Now that you understand the right pricing model let’s explore the factors for setting the right HVAC fixed pricing for your business.

3 Factors For Setting Accurate HVAC Pricing

Different factors play a decisive role in setting up accurate HVAC pricing. Still, we have filtered the top elements.

1. Price based on value

You need to avoid pricing the services based on the competitors as that can result in your business losing money if your value of the HVAC service differs from that of your competitors.

Price based on value

Once the pricing war starts with your competitors, you lower prices than the other service providers, shrinking your profitability.

You should fix your service pricing rates based on the value provided to the customers, your goals for profitability, quality, reputation, and other factors.

You need to ensure that your prices are competitive and drive your profits. Your work should provide great satisfaction to the client paying the price for the service.

2. Labor rate calculations

You need to ensure that you calculate the cost of your service, including the non-billable tasks your technicians perform. Inefficient labor rate calculation is one of the most common HVAC pricing errors.

You need to consider factors beyond vacation, holiday, sick days, and otters. Here are a few example questions:

  • How many hours are your technician’s meeting, planning, or driving?
  • How long does the truck washing take? How often do they wash their trucks?
  • How much time do they take in training?

Evaluating all these factors can help you maintain profitability and continue a sustainable business.

3. Membership agreements

Maintenance agreements have become essential for HVAC businesses to compete in the industry and maintain a loyal customer base. Companies offer 10-15% to their customers who sign a membership agreement for a long term.

It’s a quality marketing tool, but it also plays a vital role in setting up the business’s pricing.

HVAC contractors apply the discounts to the standard pricing, and it’s the biggest mistake they make. You need to ensure that the discounted pricing rates are the baseline prices for your business.

The customers who don’t sign up with the membership agreement should be charged at a premium. 

These are a few key factors to scale your HVAC business to profitability and ensure that you create a sustainable business in the long run.

But during the implementation of HVAC pricing in your business ecosystem, you might face different challenges that need to be addressed.

Challenges Faced with HVAC Pricing Integration in Your Business

Once you plan to change your pricing model and polish it, the real challenge is integrating the pricing model into your business ecosystem.

Different problems may arise with the implementation, and you need to address the issues with finesse.

  • The first problem is that the prices of the material supplies and wages fluctuate consistently in the industry. You need manual updating and monitoring to ensure you don’t end up charging less. If you use different templates or documents, monitoring and updating them is time-consuming, tedious, and can result in errors that might result in losses.
  • The second issue is that you might somehow manage to set the prices right, but it’s not often converted correctly during the invoicing or the estimations. Manual involvement in the process can result in discrepancies that can hurt your business financially and squeeze your business losses. The miscalculation and misread pricing may lead to the clients’ inaccurate pricing, resulting in a bad brand image. You need to be through with the process and ensure that the prices are maintained and integrated into the system professionally.

What’s the solution?

  • You need to remove the manual processing of HVAC pricing and integrate an automated pricing system to handle your finances’ monitoring, invoicing, and accounting operations.

Importance of Field Service Management Software for Your HVAC Business

  • HVAC service business requires a lot of focus and dedication to installing and servicing the HVAC systems, air conditioners, heating, and cooling systems. So, you need professional field service management software that can ensure the system’s proper functioning while maintaining a check on the pricing.
  • A field service software can help you with the invoicing, enabling the technicians to handle the task within a few clicks seamlessly. It can help you lessen the manual management of the processes by integrating automation into the ecosystem.
  • You can get centralized control over the business operations to enhance productivity and efficiency. A field service management software can help you stand out from the rest and increase the business scale.
  • With minimal manual processing, you can utilize your resources better and channel them towards the core business operations. But there are multiple field service management software solutions in the industry, so you need to filter one that can help handle your HVAC business requirements and assist you with integrating and managing your pricing models.

Don’t worry. We have filtered the best field service management software for your HVAC business.

An HVAC Business Software That Helps You

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FAQs

According to HomeAdvisor, an HVAC system cost can vary from $1500 to $2500 for a new system, and for the replacement system, the cost varies from $500 to $10000 depending upon the brand and size of the system.

According to Forbes, installing a central 2000 sq ft air conditioning system can be priced between $3000 to $6000. It can also depend on service providers and the system used.

Yes, the HVAC business is profitable because of the rise in residential and commercial buildings. You need to ensure that you deliver a quality customer experience and have the right pricing model to strengthen your presence in the industry.

An HVAC business requires professional management at the backend to handle the rising demand of the customers and industry. A field service software can help you get the extra hands required for the smooth and effective management of the HVAC business. It can help you cut the additional expenses and increase your team’s productivity with finesse.

FieldCamp is the best field service software for HVAC businesses, and it can help you bypass the hurdles in running smooth operations. You can scale your business, integrate automation, get centralized control, and remove inefficiencies for better results.

FieldCamp: A Go-To Service Scheduling Solution

FieldCamp is the leading field service management solution that can help you handle your HVAC pricing seamlessly. You can schedule, dispatch, invoice, and manage your resources and service business within a few clicks.

You establish a flawless communication channel between your on-ground HVAC technician team and management to handle your business workflow.

You can save up to 95% of your management work and digitize up to 90% of your business to increase business efficiency and effectiveness.

The technicians and the admin can quickly adapt to the new approach to handling your HVAC business, resulting in significant business profits and success.

Get the to take your HVAC pricing integration and management in a few clicks.

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