A standard profit margin in a non-retail business is 100 percent, which means you charge the customer twice what you 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 highlight it properly. The total cost of the job 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 company profitable.
Increasing materials by 100 percent usually increases labor force less, for example, by 25 percent. That's a good question and a difficult one to answer, because it depends on the average price you pay for the parts. The short answer is probably around 65%.Commercial contractors typically 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, 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 (something common in flat rate companies). I will be happy to answer any follow-up questions.
Many owners and managers of HVAC companies have moved up from technicians or started their business after working in the field. 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. 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. You may also be interested in 7 ways to grow the regular business of your HVAC company and how to maximize the profit margin of your HVAC company.