Four quick steps with your own numbers, then your rate. The starting numbers are an example two-person shop, so change anything that doesn't match yours.
Step 1 of 4. Everyone on payroll, including you: what they make in a year and how they spend their time.
Billable % is the share of paid hours you actually charge customers for. 50% to 60% is standard for techs. Owners who also run the office usually bill less.
Step 2 of 4. Everything else it costs to run the business for a year: trucks, insurance, tools, office and marketing.
These are example costs. Tap a group to open it and change what doesn't match yours.
Step 3 of 4. What you spend at the supply house in a year, and how you price it. A good guess is fine.
Last year's supplier bills or your accounting software will have these totals. If you don't sell one of them, leave it at 0.
Furnaces, condensers, air handlers, heat pumps, mini-splits
Repair parts, line sets, fittings, thermostats, filters
Step 4 of 4. How much profit you want to keep.
The share left over after every cost and paycheck. It pays for slow months, new trucks and cash in the bank. Most shops aim for 10% to 20%.
So your results can compare it with the rate you need.
Enter your details to open your results.
Everyone on the team at the same billable %.
Made with the free HVAC labor rate calculator from QuoteSheet · quote-sheet.com
Your labor rate has one job: cover every cost of running your shop, pay everyone, and leave the profit you want. The calculator above does it in four steps:
Example: $241,260 of overhead ÷ 0.8 = $301,575. Subtract $83,846 kept from equipment and parts, and labor has to bring in $217,729. Divide by 2,100 billable hours and the rate is $103.68 an hour.
There's no single right number, because it depends on your costs. Two shops in the same town can need very different rates if one has more trucks, pays more, or bills fewer hours. Copying the shop down the road is how contractors end up busy but broke. Work out your own number from your own costs.
It's the share of paid hours you actually charge a customer for. Drive time, estimates, callbacks, shop time and paperwork don't count. 50% to 60% is standard for techs. Owners who also run the office usually bill less. It has a big effect on your rate: in the example above, moving the team from 49% to 55% billable drops the rate from $103.68 to $93.15.
Markup is what you add to your cost. Margin is the share of the selling price that's profit. A $100 part with a 50% markup sells for $150. The same part at a 50% margin sells for $200. Pick the one you actually use on the Suppliers step, because mixing them up changes your rate.
It's the rate that covers every cost with nothing left over. Charge less and you lose money on every billed hour. In the example, break-even is $74.96 an hour.
Most shops count it, and the calculator does too. But if equipment and parts cover more than half your costs, a slow install season can leave you short. The calculator warns you when that happens and shows what labor alone would need to charge.
At least once a year, and any time your costs change: a new hire, a new truck, an insurance renewal or a raise.