A standard profit margin at a non-retail company is 100 percent, meaning that the customer is charged twice what they spent on the part or material. This requires precise accounting and estimating skills, as prices are constantly changing. Know how much you spent on each part before you can mark it correctly. The total cost of the work also includes a labor surcharge, that is, charging more per hour for the technician's time than you pay him.
These two margins can work together to make your business profitable. When you increase your materials by 100 percent, you usually increase your labor force less, for example, by 25 percent. That's a good question and difficult to answer, because it depends on the average price you pay for the parts. The short answer is probably around 65%.Commercial contractors often have a lower GPM (gross profit margin) than a residential HVAC contractor.
This brings me to my recommended GPM for parts. Wouldn't you know? That depends on your labor rate. Let me answer it this way. In general, you need a GPM of 65% on residential parts and a GPM of 50% on commercial parts. These recommendations are based on the assumption that your labor rate does not cover all the burden of your general expenses (which is common in companies with fixed rates).
I'll be happy to answer any follow-up questions. You may also be interested in 7 ways to grow your HVAC company's regular business and how to maximize your HVAC company's profit margin. Sometimes it's overstock (which takes up expensive storage space) or lack of stock (which annoys customers endlessly) or even damaged stock that makes noise in a truck for weeks, but the end result of this scenario is familiar to any owner or manager and is one of the reasons why they don't get anything like the standard profit margin of HVAC specialists like them. Many HVAC business owners and managers have been promoted from technicians or have created their businesses after working in the field.
At the end of the day, no HVAC installation will be good enough to compensate for a rude technician, in addition to poor customer service over the phone.
