All the passion and professionalism in the world can’t make up for a bad HVAC pricing strategy. Your business will only be as successful as your bottom line. As a small company, you must have an effective HVAC pricing strategy that allows you to recover costs and produce a reasonable profit on your services.
Sounds simple, right? Unfortunately, it is a complex and sometimes overwhelming undertaking.
Luckily, there are ways you can control costs, make more money, and ultimately manage your HVAC profit margins.
The Top 5 Basics of a Proper HVAC Pricing Strategy
When it comes to laying out the pricing structure for your business, things can quickly become overwhelming. You know it’s one of the most important pieces to a successful business, but you don’t know where to start.
By taking things one step at a time, you can eliminate the stress and feel confident you are ready to launch your HVAC business successfully.
- Step 1: Identify your level of service. Are you the Dollar Store of HVAC companies or do you strive to be the Nordstrom? If you decide to be a more high-end company, your services, training, supplies, and new hires must all reflect that in order to justify the pricing.
- Step 2: Know all your costs. Once you know the costs associated with each major service offering, you can start to figure out pricing. This means including all labor, parts, marketing investment, lifetime guarantees, etc.
- Step 3: Decide on pricing strategies. Will you be doing promotions? Will you bundle services? Will you offer lifetime guarantees? Free assessments? Depending on the types of services you choose to build into your pricing model, you must account for them in terms of your bottom line.
- Step 4: Define your breakeven figure. After costs are calculated for specific services you must also identify all overhead costs broken down by department. If you are doing paid ads online or using a marketing agency for advertising, all of these things will impact your breakeven figure.
- Step 5: Build a profit margin. Once you know your breakeven figure and have accounted for any promotions you plan to run in the future, you can choose a baseline percentage to mark up your service costs. Don’t sell yourself short. Follow the lead on your costs, your business plan, and price your services to support your goals as a company.
Why HVAC Business Profit Margins are so Important
Proper pricing affects every other area of your business. In fact, if a company doesn’t find a good balance when it comes to profit margins, they might not have the liquidity to continue growing. Having this cash flow is essential to:
- Paying your employees well enough to attract and retain top talent
- Offering competitive benefit packages
- Investing in quality training programs for continued learning
- Paying yourself as the owner a fair salary
- Growing the company with new equipment, new hires, and other technology assets
The goal is to have a 15% operating profit after all of the other important expenses are paid out. You might not get it right the first time, but continue to track your expenses and adjust your pricing model accordingly.
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One of the best ways to improve your HVAC business profit margins is by cutting costs in certain areas of your business. Make your marketing dollars work harder for you with an updated website that allows your customers to buy services online. Learn how simple it can be to sell filters, maintenance agreements, tune-ups, and fully-installed systems with Contractor Commerce.