There are plenty of things one should take care of when it comes to charging for HVAC services. While keeping competitive or reasonable rates is crucial to surviving in the competitive market, the energy audit services providers must have to keep the right balance between their profit margins to keep themselves and their customers happy.
If you look at the reviews of all the different home energy audit providers, they are usually good. But the one or two reviews that pop up in the front of the eyes of the other customers is the irritated customer who thinks they have been charged excessively. The feeling of being ripped off is valid and genuine, and some residential energy audit service providers do take advantage of customers by charging them for the things that are not required actually.
However, there could be a misunderstanding too! And the reason behind this could be a lack of information in terms of home energy solutions or HVAC pricing. There are a couple of things to keep in mind when it comes to energy audit services pricing. Read through this blog post we have prepared for you to learn some of the most important things about correctly pricing the Professional Home Energy Audits or HVAC services.
Time & Material vs. Flat Rate Pricing for Energy Audit Services
Some residential energy audit service companies charge “time and materials,” which is calculated by multiplying the hours worked by an hourly labor rate and then adding the cost of the supplies utilized. However, almost every residential HVAC firm nowadays employs a “flat rate price book” to set pricing for each particular customer. A flat rate price book is just a (very long) list of fixed costs for all types of repairs.
Larger HVAC or home energy solutions companies subscribe to and/or have their own version of the price book, which is published by many price book companies. This means that, within reason, most service businesses have comparable price structures, with a few tweaks and adjustments.
Understanding the benefit of flat pricing
The flat rate price book is a standardized and reproducible way for pricing residential energy audit services profitably. The technicians don’t have to worry about running out of time or resources, their customers have been given a set price, and the corporation knows that each of its customers is getting the same deal (minus any appropriate discounts).
Factors to consider for appropriate pricing of HVAC services:
- Calculate the costs properly. So the first step in pricing HVAC services is to figure out how much it will cost you. You can figure out what you need to earn by determining how much you need to spend. The expenses are broken down into three categories: materials, labor, and overhead.
- Labor Costs: This includes salaries, training, benefits, insurance, and taxes related to your employees. Also, take into account the time spent traveling to and from job sites.
- Overhead Costs: Expenses that aren’t tied to a specific job, like office rent, utility bills, office staff salaries, advertising, vehicle maintenance, and equipment costs, fall under this category.
- Profit Margin: The aim of every business is to make a profit. Ensure you’re adding an appropriate profit margin to cover unexpected costs and ensure business growth.
- Market Rates: What are other HVAC companies in your region charging? You must be competitive to attract and retain customers.
- Analyze your competitor’s pricing model. Make sure you conduct some competitive research to see what the city or town’s average HVAC pricing is. Make careful to look at both new and veteran HVAC companies to get a sense of how the price fluctuates depending on past experiences. On their website, not all of their competitors’ pricing is available. You might wish to phone them and inquire about their charges. This will provide you with some useful information about how much they charged.
Make sure to familiarise yourself with their offerings and assess how comparable they are to yours. Try to understand the following things:
- Whether your competitors provide commercial or residential HVAC services or a combination of the two, it’s important to know what you’re up against.
- How long have they been in business?
- What size jobs do they prioritize? How big is their company?
- Whether they hire freelancers or full-time staff
All of these factors heavily affect how you can charge for the different home energy audit services.
- Make sure you consider taxes. You’re probably aware that you’re required to pay business taxes. However, don’t forget to factor them in when deciding on a price. When quoting your customers for HVAC Load Calculator services, it’s also critical that you have two main options.
- Taxes should be included in each invoice separately.
- When determining to price, take into account taxes.
Because it is easier to compute and handle, most HVAC companies now prefer to list taxes separately on each invoice or quote for their energy audit services. It simply means that they charge a different price for each service. If you’re going to include taxes in your price, make sure that they don’t drastically reduce your profit when tax rates change.
- Calculate your HVAC profit margin. Markup is the amount you want to charge/rate on top of all your expenses. Markup can be expressed as a percentage or a sum. Typically, you set up distinct markups for services and materials. Service industry markup and profit margins appear to be closely related.
- Make sure you use HVAC software. HVAC contractors may find it difficult to price their residential energy audit services and make the appropriate profit. Tracking all of the job extras that can be added to the computation, in addition to pricing, is a simple operation. You also wanted to know the employment profit and loss, on top of everything else.
Understanding the Key Components of Calculate HVAC Costs
There are three primary components to consider when calculating HVAC costs: equipment costs, labor costs, and operational costs.
- Equipment Costs: This is the cost of the HVAC unit itself, along with any additional equipment required for the installation, such as ductwork. The price will vary based on the brand, type of system (e.g., central air, heat pump, furnace), and the unit’s capacity.
- Labor Costs: Labor costs include the charges for professional installation or repair services. It generally takes into account the time taken to complete the job, the complexity of the task, and the expertise of the technicians involved.
- Operational Costs: These are the costs to run the HVAC system, including energy consumption and routine maintenance. These costs will vary based on the energy efficiency of the system, the local cost of electricity, and the frequency of maintenance required.
Steps to Calculate HVAC Costs
Step 1: Estimate Equipment Costs
Research the types of HVAC systems suitable for your space. Consider factors like the size of the area to be cooled/heated, the climate in your region, and your specific needs (such as allergen filtration or humidity control). Once you’ve determined the right system, compare prices from different brands to get an estimate of the equipment cost.
Step 2: Factor in Installation Costs
Labor costs can be determined based on the complexity of the installation. A simple replacement of an existing system with a new one might cost less compared to installing an entirely new system in a building. Contact local HVAC professionals for quotes to get a clearer idea of what you might be facing in labor costs.
Step 3: Calculate Operational Costs
The operational cost of an HVAC system can be calculated using its Seasonal Energy Efficiency Ratio (SEER) or Annual Fuel Utilization Efficiency (AFUE) rating. The higher these ratings, the more energy-efficient the system is, translating to lower energy costs.
You’ll also need to factor in routine maintenance costs. HVAC systems typically need to be serviced once or twice a year, depending on the system type and usage.
Step 3: Service Calls
Service calls are usually straightforward tasks that encompass minor AC system repairs or consultations. The fee structure typically consists of two parts:
- Visit Fee: This is a fixed charge for your time and travel to inspect the issue. This fee applies regardless of the work required at the site.
- Repair Cost: This charge includes the labor fee and parts required to fix the problem. Keep in mind, service calls generally pertain to minor issues, so price accordingly.
You might also consider an emergency surcharge for visits during weekends or holidays.
Step 4: HVAC Replacements
HVAC replacements often involve replacing parts of an older system rather than installing a brand-new one. For instance, you might only need to replace the air conditioning unit or the heat pump. Accordingly, your rates for this service could be lower than a complete HVAC installation.
The cost generally includes the price of the new unit, labor, and disposal of the old unit. Labor costs for HVAC replacements can range from $500–$2,500, as suggested by Bob Vila.
Step 5: New Installations
New HVAC installations in a newly constructed building or a home without an existing system can be costlier. The system itself can range from $1,000 to $10,000, and you may need to charge more to account for the installation of ductwork, thermostats, and other elements.
Consider the extensive nature of the installation and the cost of the new system in your pricing. A handy way to estimate labor cost for installations is by looking at the size of the home. As per Forbes, the average installation cost per square foot is $15–$18, which translates to a total consumer cost of $4,000–$10,000, depending on the square footage and the unit.
Comparing HVAC Pricing Models: Hourly Rates vs. Flat Fees
Many businesses like hourly rates because they are directly related to the time and work of the team.
Pros: If you charge by the hour, you can price your service based on how much it’s worth. You are not stuck with a flat fee if a job that seems easy, like replacing a filter, takes more time than usual. Your hourly rate should be based on how skilled your technician is, with higher rates for more experienced workers.
Cons: One big problem with hourly rates is that customers might be unhappy if the technician is slow or if the job takes longer than expected. On the other hand, if you finish the job too quickly, it might not pay for itself. Also, keeping track of time can be hard if scheduling and billing are done by hand. Housecall Pro and other HVAC software systems can help keep track of time from the time the technician leaves for the job until the job is done.
Pros: Flat fees give customers the peace of mind that they won’t have to worry about extra costs.
Customers like flat fees because they are easy to understand. They know how much the service will cost right away, which gives them a sense of security and keeps them from being surprised by extra costs.
Cons: A flat fee can be bad because a job might take longer than expected. If an AC repair that was supposed to take an hour takes two, you might have to pay for the extra time and money, which could cut your profits by a lot. This business model can be risky, especially for small companies and during busy times.
It’s a good thing EDS HVAC software is now available! Performing accurate heat or cooling load calculations is as simple as clicking a button! Everything is streamlined and organized with this software solution.
From the start, pricing any of your HVAC jobs/services can be a lot of work. However, taking the effort to set excellent strategic rates will benefit both you and your customers in the long run. Many HVAC firms fail because they fail to take this critical step. So, by conducting competitive research, analyzing your costs, and estimating markup, you can ensure that your HVAC company can develop profitably and sustainably in the future. If you wish to get your home energy audits automated, get in touch with us now!