FINANCE
BY RUTH KING
Calculating HVAC Maintenance Price Plans for Two or More Systems
W
hen pricing maintenance plans for additional (second and third) home heating and cooling systems, you should know as a business owner, it is not merely about cutting your maintenance price for the first system in half. Why? Simply put, unless you plan on performing only half the maintenance on the additional systems, you must charge for the full-service work you plan to provide. The only fee you should ever be leaving off the plan for additional systems, is a travel expense.
When pricing maintenance plans for additional home heating and cooling systems, you should know as a business owner, it is not merely about cutting your maintenance price for the first system in half…you must charge for the full-service work you plan to provide. STEPS TO SETTING UP A MAINTENANCE PRICING PLAN FOR ADDITIONAL HVAC SYSTEMS As a heating and cooling home contractor, you must make certain assumptions
when setting up price points for your business. It is the only way to remain competitive and profitable. Below are some reasonable assumptions that can and should be included in your maintenance price plans for additional systems maintenance.
HOME HVAC SYSTEM 1 Sample - Assumptions: • Total time for heating and cooling maintenance service is 4 hours, including travel. • The technician hourly rate is $20/hr. • Overhead cost is $30/hr. • Material cost is $5 • SPIFF is $10 per system. • Net profit is $5/hr.
Sample Price Plan for the First System: • • • •
Labor: $80 Overhead: $120 Materials & SPIFF: $15 Profit: $20
Price: $235 As you see, I based this on a $5 net profit per hour estimate because your maintenance plans must at least break even. At $5 an hour, you will have some breathing room when you hire a technician who earns more than $20 an hour while performing maintenance during the slower season.
ADDITIONAL HOME HEATING AND AIR SYSTEMS The only expense not included in additional systems maintenance pricing, is
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travel. Let’s go on a reasonable assumption that travel is one hour of the four hours, keeping in mind that each maintenance visit is 30 minutes.
ADDITIONAL HVAC SYSTEM MAINTENANCE PRICING Sample - Assumptions: • Total time for heating and cooling maintenance service is 3 hours. • The technician hourly rate is $20/hr. • Overhead cost is $30/hr. • Material cost is $5. • SPIFF is $10 per system. • Net profit is $5/hr.
Sample Price Plan for Additional Systems: • • • •
Labor: $60 Overhead: $90 Materials & SPIFF: $15 Profit: $15
Price: $180 Based on reasonable assumptions for a two-system home, the price to your customer is $235 plus $180 (or $415 total).
CONTRACTORS: HOW TO REMEDY UNDER-PRICING FOR HVAC MAINTENANCE VISITS Now that you know how to formulate a set of price plans for the first and additional systems maintenance, you might need to correct any erroneous underpricing from the past. What do you do if you have been charging only half-price for additional systems? Raise the price. Do nothing else before you raise the prices. You may lose clients. It’s an almost inevitable possibility. If you feel like that may be a concern however, try reaching out to your customers first. How do you explain the price increase to your existing maintenance customers with two or more systems? 1. Recognize the inevitability that you will lose some maintenance customers when you raise prices. www.hvacrbusiness.com
