HVAC flat rate pricing: how to price HVAC jobs step by step
HVAC flat rate pricing means the customer gets one price for a defined task before the work starts, whatever the clock says. You build each price from three numbers: what a billable hour really costs your shop, how long the task takes on average, and the part cost with your markup. Alvin keeps the price book current by drafting updated entries when supplier prices change, for the owner to approve.
On this page
- Flat rate pricing vs time and materials
- How to price HVAC jobs: the three numbers
- Build a flat rate price in five steps
- A worked example with example numbers
- Keeping the price book current when supplier prices move
- What Alvin handles and what stays with you
- Mistakes that make a flat rate book lose money
- Questions
Flat rate pricing vs time and materials
Both methods can make money. They put the risk in different places and they feel different to the customer standing in the hallway.
Scroll sideways to see every column.
| Question | Flat rate | Time and materials |
|---|---|---|
| What the customer hears | One price before work starts | An hourly rate plus parts, total unknown until the end |
| Who carries the risk of a slow job | The shop | The customer |
| What a fast technician earns the shop | The same price in less time | A smaller invoice |
| Office work up front | A price book to build and maintain | Almost none |
| Where it fits best | Residential service and repair | Open-ended troubleshooting, some commercial work |
Many shops run flat rate for residential service and keep time and materials for commercial accounts or jobs nobody can scope in advance.
How to price HVAC jobs: the three numbers
- Billable hour cost. Everything it costs to run the shop for a year, except parts and equipment you resell, divided by the hours you can actually bill. This is the number most shops guess at, and usually guess low.
- Task time. The average time for the task done properly, including setup, testing and cleanup. Use your own job history where you have it.
- Part cost with markup. What you pay the supply house today, times a multiplier that covers stocking, warranty returns and profit.
Billable hours are fewer than paid hours. A technician paid for 40 hours a week spends part of that driving, at the supply house, in training and on callbacks. Count what your own schedule shows.
Build a flat rate price in five steps
- Add up a year of costs. Technician wages and payroll burden, office wages, owner pay, trucks and fuel, rent, insurance, software, marketing, tools. Leave out parts and equipment.
- Count billable hours. Number of technicians, times paid hours a year, times the share of those hours that land on an invoice.
- Divide, then add profit. Costs divided by billable hours is your break-even hour. Divide that by (1 minus your target net margin) to get the hourly rate you build prices from.
- Price the task. Task time times the hourly rate, plus part cost times your parts multiplier. Round to a clean number.
- Check it against reality. Compare a month of flat rate invoices to the hours those jobs took. Adjust task times that run long.
A worked example with example numbers
Every figure below is an example to show the arithmetic. Your costs, hours and margins will differ.
| Line | Example figure |
|---|---|
| Annual costs, not counting parts and equipment | $780,000 |
| Technicians | 4 |
| Paid hours per technician per year | 2,080 |
| Share of paid hours that are billable | 50% |
| Billable hours per year (4 x 2,080 x 0.50) | 4,160 |
| Break-even cost per billable hour ($780,000 / 4,160) | $187.50 |
| Target net margin | 15% |
| Hourly rate for pricing ($187.50 / 0.85) | $221 (rounded) |
Now price one task: replace a dual run capacitor.
| Line | Example figure |
|---|---|
| Task time, including testing and cleanup | 0.8 hours |
| Labor (0.8 x $221) | $176.80 |
| Part cost from the supply house | $28.00 |
| Parts multiplier for small parts | 3.0 |
| Part price (3.0 x $28.00) | $84.00 |
| Total | $260.80 |
| Price book entry | $265 |
Two details trip people up. First, margin and markup are different: adding 15% to $187.50 gives $215.63, which is a 13% margin. Dividing by 0.85 gives the 15% you meant. Second, parts multipliers usually slide. Small parts carry a high multiplier because the handling cost is large next to the part cost. A compressor or a coil carries a much lower one.
If you charge a separate diagnostic or trip fee, keep that out of the task price so the customer is not charged for the visit twice.
Keeping the price book current when supplier prices move
A flat rate book starts going stale the day it is finished. Supply houses change prices, and nobody in the office has time to re-check 800 entries.
In the example above, if the capacitor moves from $28 to $34, the part price becomes $102 and the total becomes $278.80. A book still saying $265 gives away about $14 on every one of those calls. Spread that across the parts you use most and it adds up over a season.
A routine that works for a small office:
- Pick your top 50 parts by volume and re-check their cost every month.
- Re-check the whole book twice a year, before cooling season and before heating season.
- Recalculate the hourly rate once a year, or after a raise, a new truck or a new hire.
- Keep one owner of the book. Technicians suggest changes, one person approves them.
The same supply-house prices drive your parts ordering, so it helps to pull both from one place.
What Alvin handles and what stays with you
| Alvin does | You do |
|---|---|
| Checks current part costs on supply-house portals, or from the price files and invoices you forward | Choose the suppliers and the parts worth tracking |
| Flags price book entries where the part cost has moved since the entry was set | Decide how much movement is worth a change |
| Drafts the new price using your hourly rate and multipliers, with the old and new figures side by side | Set the hourly rate, the margin and the multipliers |
| Updates the entry in your field service app after you approve | Approve, edit or reject each change |
| Keeps a receipt of who approved what and when | Explain the price to the customer |
Alvin does the arithmetic and the data entry. The owner sets every price. Nothing in the book changes without an approval.
Mistakes that make a flat rate book lose money
- Using paid hours as billable hours. This alone can cut the real rate nearly in half.
- Leaving owner pay out of costs. If the owner runs calls or the office, that is a wage.
- One multiplier for every part. It overprices big parts and underprices small ones.
- Copying a competitor's book. Their costs are not yours.
- Letting technicians discount on the spot. Put any discount in the book, such as a maintenance agreement member price.
To work out your own billable hour rate, use the free flat rate pricing calculator.
Frequently asked questions
What is flat rate pricing in HVAC?
Flat rate pricing is a fixed price for a named task, quoted before the work starts. The price comes from a price book built on the shop's hourly cost, the average task time and the part cost with markup. The customer pays the same amount whether the job runs fast or slow.
How do I calculate my HVAC hourly rate?
Add up a year of costs other than parts and equipment, then divide by the hours you actually bill. That is your break-even hour. Divide the result by one minus your target net margin to get the rate you price from. For example, a $187.50 break-even hour at a 15% margin gives about $221.
Is flat rate better than time and materials for HVAC?
For residential service, many shops prefer flat rate because the customer approves a price up front and a fast technician is not penalized. Time and materials still suits open-ended troubleshooting and some commercial accounts. Plenty of shops use both.
How much should I mark up HVAC parts?
There is no single correct figure. Most price books use a sliding scale, with a high multiplier on inexpensive parts and a lower one on costly parts. Set the scale from your own handling, stocking and warranty costs, and test it against real invoices.
How often should I update my HVAC price book?
Re-check your highest-volume parts monthly and the full book at least twice a year. Recalculate the hourly rate yearly or whenever a major cost changes. Alvin can flag entries where the supplier price has moved and draft the new price for you to approve.
Keep the price book honest.
Alvin watches supplier prices, drafts the price book changes and waits for your approval. See what else Alvin handles for an HVAC office.