{"id":783,"date":"2023-05-02T00:00:00","date_gmt":"2023-05-01T23:00:00","guid":{"rendered":"https:\/\/www.commusoft.com\/industry-standard-profit-margin-for-hvac\/"},"modified":"2026-01-15T06:19:13","modified_gmt":"2026-01-15T12:19:13","slug":"hvac-profit-margins","status":"publish","type":"post","link":"https:\/\/www.commusoft.com\/en-us\/blog\/hvac-profit-margins\/","title":{"rendered":"How to Calculate &#038; Increase Your HVAC Profit Margins"},"content":{"rendered":"\n<p class=\"has-medium-font-size\"><em><strong>Handling profit margins for your HVAC business can be tricky.<\/strong><\/em><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><span style=\"font-weight: 400;\"><strong><em>Could there be some things that are holding you back when it comes to running your HVAC business and maximizing your profits?<\/em><\/strong><\/span><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>You can see your HVAC business is growing. <\/p>\n\n\n\n<p>You\u2019re hiring more people, you\u2019re getting more customers, you\u2019re spending more money on tools but one thing\u2019s missing: profit.<\/p>\n\n\n\n<p>Spending too much on manual processes can be a big reason you&#8217;re not making the big bucks <em>yet<\/em>.<\/p>\n\n\n\n<p>The blog below will walk you through some of the challenges of automating an HVAC business. <\/p>\n\n\n\n<p>Let&#8217;s dive in:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<!--HubSpot Call-to-Action Code --><span class=\"hs-cta-wrapper\" id=\"hs-cta-wrapper-705f00df-c7a5-42c3-8e0d-33f0fe40c861\"><span class=\"hs-cta-node hs-cta-705f00df-c7a5-42c3-8e0d-33f0fe40c861\" id=\"hs-cta-705f00df-c7a5-42c3-8e0d-33f0fe40c861\"><!--[if lte IE 8]><div id=\"hs-cta-ie-element\"><\/div><![endif]--><a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/530619\/705f00df-c7a5-42c3-8e0d-33f0fe40c861\" ><img decoding=\"async\" class=\"hs-cta-img\" id=\"hs-cta-img-705f00df-c7a5-42c3-8e0d-33f0fe40c861\" style=\"border-width:0px;\" src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/530619\/705f00df-c7a5-42c3-8e0d-33f0fe40c861.png\"  alt=\"discover how to price your services for profit download the guide\"\/><\/a><\/span><script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script><script type=\"text\/javascript\"> hbspt.cta.load(530619, '705f00df-c7a5-42c3-8e0d-33f0fe40c861', {\"useNewLoader\":\"true\",\"region\":\"na1\"}); <\/script><\/span><!-- end HubSpot Call-to-Action Code -->\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">What Are the Standard Profit Margins for the HVAC Industry?<\/h2>\n\n\n\n<p>Firstly, HVAC profit margins can vary a lot, based on a few things:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Location<\/strong> \u2013 interestingly enough, sometimes HVAC companies based in rural areas can earn a lot more due to lower costs of running the business<\/li>\n\n\n\n<li><strong>Specialty<\/strong> \u2013 some HVAC companies try to offer a wide range of services, whilst others focus on specific areas like residential, commercial, installation, maintenance, etc.<\/li>\n\n\n\n<li><strong>Target customers<\/strong> \u2013 it might be more difficult to acquire high value customers, especially in the commercial space, but offering a premium experience can seriously influence your profit range<\/li>\n<\/ul>\n\n\n\n<p>Statistically, however, the industry standard in the United States is between $50 000 and several millions. In percentages, experts say it can vary between 8% and 40%. <\/p>\n\n\n\n<p>The <a href=\"https:\/\/www.energy.gov\/eere\/buildings\/additional-hvac-and-iaq-resources\" target=\"_blank\" rel=\"noreferrer noopener\">Department of Energy<\/a> suggests a 12% HVAC profit margins for successful businesses as the industry standard.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How To Calculate Your HVAC Business Profit Margin<\/h2>\n\n\n\n<p>Here are five steps to help you calculate your profit margin:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Add Up All Your Costs<\/h3>\n\n\n\n<p>A simple way to calculate your profit margin and see if it matches the industry standard (or exceeds it!) is to add up all your costs \u2013 and we do mean ALL your costs, down to the last paperclip. Some common ones are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Rent expenses (office, warehouse, vehicle parking, etc.)<\/li>\n\n\n\n<li>Cost of goods (office supplies)<\/li>\n\n\n\n<li>Running the business costs: marketing, accounting, lawyers, etc.<\/li>\n\n\n\n<li>Vehicle costs (fuel, checkups, insurance, etc.)<\/li>\n\n\n\n<li>Inventory and tools or equipment costs<\/li>\n\n\n\n<li>Employee salaries, benefits, and insurance costs<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">2. Calculate Your Total Revenue<\/h3>\n\n\n\n<p>Then calculate your company\u2019s total revenue \u2013 ideally, per year but you can also do this per month although we recommend trying to get an average total revenue number, rather than taking a high or a low month.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Calculate Your Net Income<\/h3>\n\n\n\n<p>From your total revenue, you should deduct the business costs and then deduct the taxes you owe.<\/p>\n\n\n\n<p>It should look something like this: Net Income = Total Revenue \u2013 Business Expenses \u2013 Tax<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Obtain Your Net Profit Margin<\/h3>\n\n\n\n<p>To calculate your HVAC business profit margins, you need to divide the net income by the total revenue and multiply the result by 100 to obtain a percentage.<\/p>\n\n\n\n<p>For example, it could look something like this:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Total revenue<\/strong> = $200,000<\/li>\n\n\n\n<li><strong>Total costs <\/strong>= $150,000<\/li>\n\n\n\n<li><strong>Taxes<\/strong> = $10,000<\/li>\n\n\n\n<li><strong>Net income <\/strong>= $40,000.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Net income ($40,000) \/ Total revenue ($200,000) = 0.2<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large is-resized is-style-default\"><img decoding=\"async\" src=\"https:\/\/www.commusoft.com\/wp-content\/uploads\/2025\/10\/hvac-profit-margin-calculations-poster-1024x410.png\" alt=\"industry standard hvac profit margin formula on a poster\" class=\"wp-image-21908\" style=\"width:768px;height:308px\"\/><\/figure>\n\n\n\n<p>Your HVAC business profit margin is: 0.2 x 100 = 20% which falls in the middle of the industry standard, meaning you\u2019re doing quite well for yourself. <\/p>\n\n\n\n<p>However, don\u2019t take this as the limit. If you are in a situation where you feel like you can comfortably raise prices (to increase total revenue) or decrease costs by making processes more efficient and set metrics for business growth, then don\u2019t let a number stop you. As a business owner, you are in control of your profit.<\/p>\n\n\n\n<p>One main reason so many <a href=\"https:\/\/www.achrnews.com\/articles\/102470-why-hvac-contracting-businesses-fail\" target=\"_blank\" rel=\"noreferrer noopener\">businesses fail every year, according to ACHR News<\/a>, &nbsp;is because they don\u2019t take the time to do these basic calculations (or they get the wrong result because they don\u2019t have an accurate view of their costs). <\/p>\n\n\n\n<p>If your profit margin comes out negative, you\u2019re basically spending money to work. How can that happen? <\/p>\n\n\n\n<p>We\u2019ll detail a few reasons why you might not be breaking even below.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Why Are You Earning Less Than the Industry Standard?<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">You&#8217;re Focusing on the Wrong HVAC Business Metrics<\/h3>\n\n\n\n<p>Let\u2019s start with a slightly different question:<\/p>\n\n\n\n<p>What makes your business better than the field service competition? If you answered with things like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Number of technicians<\/li>\n\n\n\n<li>Years of experience<\/li>\n\n\n\n<li>New tools<\/li>\n\n\n\n<li>Quality workmanship<\/li>\n<\/ul>\n\n\n\n<p>Then you\u2019ve got one reason right there for your bottom line being less than the industry standard profit margin. <\/p>\n\n\n\n<p>Your answers are perfectly logical and do contribute to what makes you stand out from the crowd, but they\u2019re <em>not<\/em> the most important thing and they shouldn\u2019t be your only goal.&nbsp;<\/p>\n\n\n\n<p><strong>Solution: <\/strong>Improving the Customer Journey<\/p>\n\n\n\n<p>So, the right question to ask yourself when you see your HVAC business profit margins slipping, is how does the customer experience you offer differ from what your competitors can do? How does it outperform theirs?<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A premium customer journey is what allows you to set prices that will make your business thrive, not simply survive.&nbsp;<\/li>\n\n\n\n<li>Understanding your potential customers and anticipating their needs is a lot more valuable than simply fixing their issue. <\/li>\n<\/ul>\n\n\n\n<p>More often than not, customers won\u2019t be able to tell apart an excellent HVAC install from an average one, but they\u2019ll definitely remember the company that sent them <a href=\"https:\/\/www.commusoft.com\/en-us\/blog\/service-reminder-guide\">service reminders<\/a> exactly when their filters were getting grimy.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">You&#8217;re Underestimating Your Own Business Costs and Overestimating Profit<\/h3>\n\n\n\n<p>Since we\u2019re on the topic of prices: most business owners, regardless of experience, engage in a fight to the bottom when it comes to what they should charge for their HVAC services.<\/p>\n\n\n\n<p>This stems from not having an accurate overview of their overheads and what these include (it\u2019s not just labor costs and spare parts) and from the fact that they\u2019re not aware of which parts of the business are bleeding money.<\/p>\n\n\n\n<p>Not all jobs are the same. You might be doing more service work than replacement or specialize in industrial fittings with the occasional residential work but it\u2019s rare that all types of jobs bring in the same amount of profit.&nbsp;<\/p>\n\n\n\n<p>Your customers should also inform your decisions when it comes to ordering stock, hiring, marketing, and other business-related activities. <\/p>\n\n\n\n<p>There\u2019s no point in setting prices to match the competitor\u2019s; you don\u2019t know the price of their materials or what they pay their techs, just like you don\u2019t know how much they\u2019re winning or losing.<\/p>\n\n\n\n<p><strong>Solution: <\/strong>Compartmentalizing your business <\/p>\n\n\n\n<p>This will help you calculate exactly how much each type of service costs you, then decide how much your profit should be (the industry standard profit margin for HVAC is approx. 10%).&nbsp;<\/p>\n\n\n\n<p>Add that to obtain the final price, you\u2019ll always end up in the green and the customers that will pay for your service are the ones worth keeping around.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"has-text-align-center\"><strong>Listen to Ruth King, HVAC expert, explain this in more depth below.<\/strong><\/p>\n\n\n\n<p class=\"has-text-align-center\">She explains how growing your revenue is highly dependent on who your customers are, who your customers could be, and how accurate your financial statements are.<\/p>\n\n\n\n<figure class=\"wp-block-embed aligncenter is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Let&#039;s Talk: Setting Revenue Goals For Your Business | Commusoft\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/LGPY_lY5Bc0?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">The Company isn&#8217;t Using its Resources Efficiently<\/h3>\n\n\n\n<p>Imagine an HVAC technician goes to a repair job, diagnoses the issues, then realizes they don\u2019t have the spare part they need in the truck. <\/p>\n\n\n\n<p>They call the operations office where someone checks a spreadsheet (or worse, a paper list) and lets them know that they don\u2019t have it in the warehouse either but that they\u2019ll place a purchase order and have it in 2-3 business days.<\/p>\n\n\n\n<p>Sometimes it\u2019s <strong>overstock<\/strong> (which takes up pricey storage space) or <strong>understock <\/strong>(which annoys customers to no end) or even damaged stock that rattles around in a truck for weeks. <\/p>\n\n\n\n<p>The end result of this scenario is familiar to any owner or manager and one of the reasons they\u2019re not making anything close to the standard profit margin for HVAC specialists like them.<\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">It\u2019s the same situation with jobs that are scheduled whenever there\u2019s an available tech instead of using a digital tool to judge which route is more efficient when it comes to fuel consumption and time spent on the road (since that time is a billable resource).<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>Solution: <\/strong> <a href=\"https:\/\/www.commusoft.com\/en-us\/features\/Inventory-management\">Inventory management software<\/a> is the natural solution! <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">But even then you need to make sure it&#8217;s set up properly.<\/span> Using a digital system can boost profitability and improves productivity, so your team will never misplace another part and you&#8217;ll always be able to get an overview of your inventory. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"section4\">You&#8217;re Hiring More Admin Instead of More HVAC Contractors<\/h3>\n\n\n\n<p>And the truth of the matter is that you don\u2019t even have a choice about it. <\/p>\n\n\n\n<p>You might be thinking it\u2019s a sign of high demand and a growing business that you need to keep hiring admin and office staff, but if office staff are outnumbering your techs, that\u2019s not growth.<\/p>\n\n\n\n<p>Your technicians are the ones who help to put money in the bank.<\/p>\n\n\n\n<p>Office staff are vital, yes: they make sure that technicians are organised, jobs are books and all sorts of help admin tasks, but they&#8217;re not the ones going out and directly doing jobs that make your business its money.&nbsp;<\/p>\n\n\n\n<p>If you want to make anything close to the industry standard profit margin for HVAC, you\u2019ll want to have a ratio of 1 admin for every 5 techs.<\/p>\n\n\n\n<p>As staff get more experienced (or use smart software), a ratio of 1:7 would be a recipe for success. <\/p>\n\n\n\n<p>The only way to do this is with the help of digital tools connected to a <a href=\"https:\/\/www.commusoft.com\/en-us\/features\/job-scheduling-software\">job scheduling software<\/a>.<\/p>\n\n\n\n<p><strong>Solution: <\/strong><a href=\"https:\/\/www.commusoft.com\/en-us\/blog\/contractor-vs-subcontractor\">Hire with soft skills in mind<\/a><\/p>\n\n\n\n<p>At the end of the day, no HVAC installation will ever be good enough to make up for a rude technician, as well as poor customer service on the phone.&nbsp;<\/p>\n\n\n\n<p>That&#8217;s why you should always know what to consider before you hire HVAC technicians.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Your Team Aren&#8217;t Working Efficiently<\/h3>\n\n\n\n<p>And it&#8217;s not their fault&#8230;<\/p>\n\n\n\n<p>A lot of HVAC business owners and managers have either worked their way up from technicians or started their business after being in the field. <\/p>\n\n\n\n<p>This means they know the industry in and out, they know how to manage other techs, and are experienced in dealing with customers.<\/p>\n\n\n\n<p>No one would blame them for having little patience to sit down every quarter and audit the business from top to bottom for their average HVAC profit margin, starting with every sheet of paper bought and paid for with company funds and down to every truck. <\/p>\n\n\n\n<p>Then list every customer, the type of service provided, the cost, the profit, the time it took to get it done, and so on and so forth. Every 3 months.&nbsp;<\/p>\n\n\n\n<p>This is what running your own HVAC business means. <\/p>\n\n\n\n<p>There\u2019s rarely a lot of time left for anything else and it\u2019s simply part of the entrepreneurial journey. <\/p>\n\n\n\n<p>You don\u2019t need an MBA to know that if you can\u2019t measure it, you can\u2019t manage it.&nbsp;<\/p>\n\n\n\n<p><strong>Solution: <\/strong>Understand your numbers first! <\/p>\n\n\n\n<p>This will help you streamline the way in which your employees record them in the first place. Then sit down (either on your own or with a business consultant) and start writing out potential improvements.&nbsp;<\/p>\n\n\n\n<p>For example, if you looked at your <a href=\"https:\/\/www.commusoft.com\/en-us\/features\/customer-database-software\">customer database<\/a> and separated your new customers from your returning customers in the last quarter and realized that the latter makes up only 5% of your business, you\u2019d deduce that you need to improve your customer retention rate.<\/p>\n\n\n\n<p>Knowing your numbers becomes much more straightforward when you use a specialized <a href=\"https:\/\/www.commusoft.com\/en-us\/features\/analytics\">reporting and analytics software<\/a> with an easy to comprehend dashboard.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"section6\">You&#8217;re Not Managing Cashflow Properly<\/h3>\n\n\n\n<p>If you have to keep the jobs coming constantly and work overtime just to make sure you can pay your own bills, then you don\u2019t have a healthy cash flow and your HVAC business profit margins may not be below where you&#8217;d like them. <\/p>\n\n\n\n<p>This can be due to any number of things, from the aforementioned misunderstanding of overheads and profit numbers, to inventory management errors, to the very way you\u2019re invoicing.<\/p>\n\n\n\n<p>Late invoices mean late payments! Sadly, there are plenty of customers who like to pretend that they\u2019ve \u201cforgotten\u201d about paying, much like you did about requesting payment.<\/p>\n\n\n\n<p>If this is a common problem your business is running into, you can solve that problem with&#8230;<\/p>\n\n\n\n<p><strong>Solution:<\/strong> Invoicing tools that help you to automate the payment process (like Commusoft does).<\/p>\n\n\n\n<p>However, sometimes errors happen and payments get delayed (or completely neglected) for other reasons. Not to mention mistakes on invoices can occur because the tech didn\u2019t write down the parts they used. <\/p>\n\n\n\n<p>We haven\u2019t even started on the customers who simply refuse to pay for whatever reason. These are all taking a bite out of your profit margins!<\/p>\n\n\n\n<p>The best way to minimize the chance of that happening is to adopt software that sends automatic payment reminders and has a <a href=\"https:\/\/www.commusoft.com\/en-us\/features\/customer-portal\">customer self-service portal<\/a> that lets customers pay 24\/7.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">How To Take Your HVAC Profit Margins To the Next Level<\/h2>\n\n\n\n<p>All in all, identifying the problem is only half of the job, but if you know why you\u2019re not making the industry-standard profit margin for HVAC companies, you can get started on fixing the underlying issues. <\/p>\n\n\n\n<p>Setting the right price is the first step towards a thriving business, instead of a struggling one. From there, you can learn to sell more confidently, too.<\/p>\n\n\n\n<p>But automating a business with an <a href=\"https:\/\/www.commusoft.com\/en-us\/industries\/hvac-software\">HVAC software<\/a>, like Commusoft, will help you increase profit margins and take home more at the end of the day! <\/p>\n\n\n\n<p>Learn more by clicking the banner below.<\/p>\n\n\n\n<!--HubSpot Call-to-Action Code --><span class=\"hs-cta-wrapper\" id=\"hs-cta-wrapper-9d485c68-71d8-4e6d-b7d1-32a5b312da94\"><span class=\"hs-cta-node hs-cta-9d485c68-71d8-4e6d-b7d1-32a5b312da94\" id=\"hs-cta-9d485c68-71d8-4e6d-b7d1-32a5b312da94\"><!--[if lte IE 8]><div id=\"hs-cta-ie-element\"><\/div><![endif]--><a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/530619\/9d485c68-71d8-4e6d-b7d1-32a5b312da94\" ><img decoding=\"async\" class=\"hs-cta-img\" id=\"hs-cta-img-9d485c68-71d8-4e6d-b7d1-32a5b312da94\" style=\"border-width:0px;\" src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/530619\/9d485c68-71d8-4e6d-b7d1-32a5b312da94.png\"  alt=\"check out commusoft hvac job management software\"\/><\/a><\/span><script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script><script type=\"text\/javascript\"> hbspt.cta.load(530619, '9d485c68-71d8-4e6d-b7d1-32a5b312da94', {\"useNewLoader\":\"true\",\"region\":\"na1\"}); <\/script><\/span><!-- end HubSpot Call-to-Action Code -->\n","protected":false},"excerpt":{"rendered":"<p>Handling profit margins for your HVAC business can be tricky. Could there be some things that are holding you back when it comes to running your HVAC business and maximizing your profits? You can see your HVAC business is growing. You\u2019re hiring more people, you\u2019re getting more customers, you\u2019re spending more money on tools but&hellip;<\/p>\n","protected":false},"author":6,"featured_media":3724,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[23],"tags":[],"class_list":["post-783","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-hvac"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Calculate &amp; Increase HVAC Profit Margins<\/title>\n<meta name=\"description\" content=\"The Department of Energy suggests HVAC profit margins of 12% for a successful business, learn how to calculate yours\u2026\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commusoft.com\/en-us\/blog\/hvac-profit-margins\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Calculate &amp; 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