Achieving a successful business requires precise accounting and estimating skills, as prices are constantly changing. Knowing how much you spent on each part is essential to setting the right markup. The average markup on HVAC equipment is around 65%, with commercial contractors typically having a lower Gross Profit Margin (GPM) than residential HVAC contractors. In general, 65% GPM is needed for residential parts and 50% GPM for commercial parts.
These recommendations are based on the assumption that your labor rate does not cover all of your general expenses. To maximize your HVAC company's profit margin, it's important to understand how to set the right markup on parts and materials. Increasing materials by 100% usually increases labor force less, for example, by 25%. You should also consider ways to grow your regular business and provide excellent customer service.
Sometimes it's overstock (which takes up expensive storage space) or a lack of stock (which annoys customers non-stop) or even damaged stock that stays in a truck for weeks, but the end result of this situation is familiar to any owner or manager and is one of the reasons why they don't get anything like the standard profit margin for air conditioning specialists like them. At the end of the day, no HVAC installation will be good enough to compensate for a rude technician, as well as poor customer service over the phone. By following these tips, you can ensure that your HVAC company remains profitable.