HVAC
HVAC Margin Calculator
Work out the gross margin a job returned once labour, equipment, materials and the travel are all counted.
Result
Markup is measured against your cost, margin against the price you charge. A 50% markup is a 33.3% margin, not a 50% one. Pricing off the wrong one is the most common way a job that looked profitable turns out not to have been. Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditWhat moves the number
- Actual hours against quoted hours, including the return visit for commissioning.
- Equipment at landed cost including freight.
- Travel and vehicle, which belong to the job rather than to overhead.
Where this one goes wrong
Calculating margin on revenue including sales tax. Tax is not yours, and including it inflates the margin on every job in the report.
Questions
About this calculator
What gross margin should HVAC work return?
It depends on your overhead and mix, which is why calculating it beats adopting a number. What matters more is knowing which job types consistently come in under your average.
Should install and service be measured separately?
Yes. They have different cost structures, different risk and different margins, and blending them hides whichever one is weaker.
Why do big installs sometimes disappoint?
Because the hours run over and the equipment margin is thin. Large tickets carry large costs, and the margin percentage is often lower than on service work.
The formula
margin = (price - cost) / price; markup = (price - cost) / cost
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How to use this calculator
- Price charged ($). Enter your own figure; the page starts at $620.
- Direct cost ($). Enter your own figure; the page starts at $340.
The result updates as you type, so you can try a figure, see what it does to gross margin, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Price charged | $620 |
| Direct cost | $340 |
What comes out
| Result | Value |
|---|---|
| Gross margin main result | 45.2% |
| Gross profit | $280 |
| Same thing as a markup | 82.4% |
That job earns $280 of gross profit, a 45.2% margin. The same job described as a markup is 82.4%.
How sensitive the answer is
Holding everything else steady and changing only price charged, this is what happens to gross margin. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Price charged ($) | Gross margin |
|---|---|
| $310 | -9.7% |
| $465 | 26.9% |
| $620 example above | 45.2% |
| $930 | 63.4% |
| $1,240 | 72.6% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Price charged ($)
- A money amount, starting at $620.
- Direct cost ($)
- A money amount, starting at $340.
What the results tell you
| Result | What it is |
|---|---|
| Gross margin | The headline result. A percentage. |
| Gross profit | A money figure. |
| Same thing as a markup | A percentage. |
Before you rely on this number
Sizing, capacity and load figures here are planning estimates. A real installation depends on the manufacturer's data for the specific equipment, the duct system it is going into, and a proper load calculation for the building. Use this to sanity-check a number or price a job, not to select equipment.
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.