When it comes to running a successful business, it's essential to understand the concept of markup. This is the difference between what you pay for a product or service and what you charge your customers. In the HVAC industry, the average markup is typically around 65%.To calculate your markup, you need to know how much you spent on each part and the total cost of the job. This includes a labor surcharge, which is an additional fee for the technician's time.
Generally, increasing materials by 100% will result in a 25% increase in labor costs. Commercial contractors usually have a lower gross profit margin than residential HVAC contractors. For residential parts, a 65% GPM is recommended, while commercial parts should have a 50% GPM. This is based on the assumption that your labor rate doesn't cover all of your general expenses. At the end of the day, customer service is just as important as the quality of your HVAC installation. Poor customer service can lead to lost business and lower profits.
To maximize your profit margin, it's important to keep track of overstock, lack of stock, and damaged stock. This will help you avoid any unnecessary losses.
