HVAC flat rate pricing: how to set your prices step by step

The method in five steps

Start with the job as the customer would describe it, then price it in five moves. First, decide the labor hours the defined task takes, from arrival to cleanup. Second, multiply those hours by your billable rate, which is a number you derive from payroll, burden and overhead, not from the market. Third, add parts at cost and apply the markup your shop uses. Fourth, add any fixed fee that does not scale with time, such as a disposal charge. Fifth, round the total with one rule and apply it everywhere. The result is the flat rate price. A separate member price follows from a discount rule, and your own true cost sits underneath so you can see the margin.

Worked example, computed by the pricing engine

The table in this page prices a capacitor replacement using the same functions the app uses. Every number there is a sample input, labeled as such, and none is a recommendation. Read it from the top: labor price is hours times rate, parts price is cost times multiplier, the subtotal adds them, and the rounded price applies the ending rule. Below that you can see the member price, the true cost based on a burdened labor rate, and the gross margin. Change the numbers in the calculator further down to reproduce the arithmetic with your own costs.

Labor hours: what to include

The most common error in a flat rate is a labor figure that covers only the time with hands on the equipment. A real task includes loading the truck, drive time you are not billing separately, diagnosis, the repair, testing, cleanup and a short explanation to the customer. If a return visit is part of the defined scope, it belongs in the hours. If it is not, it belongs in a different task. Write down what the hours cover so a technician who quotes it next year makes the same assumption. Time it a few times and use an honest average instead of a best case.

Parts markup and why a multiplier is not a margin

A multiplier of 2.5 on parts means a markup of 150 percent, but the margin on those parts is 60 percent. People mix these up and misprice in both directions. Tiered markups reduce the problem: cheap parts carry a larger multiplier because the handling cost is a bigger share, and expensive parts carry a smaller one so the price does not look out of line. The calculator reports both numbers, so you can see the markup percent and the margin percent side by side before you commit to a tier table.

Rounding and member pricing

Rounding is a presentation decision. Nearest dollar keeps the number plain, nearest five is easy to say aloud, and ending in nine is a common retail habit. Choose one, because mixing rules across the book makes prices look arbitrary. Apply the member discount after the standard price is set, round it with the same rule, and never let it exceed the standard price. If the member discount makes a task unprofitable, the problem is in the base price or the discount, not the rounding.

Common mistakes

Four mistakes show up repeatedly. Copying a competitor's number instead of calculating your own. Leaving overhead out of the billable rate and then wondering why a busy month still loses money. Using one hour estimate for jobs that vary widely, instead of splitting them into a basic task and an assessment first. And never revisiting the book. A flat rate is a snapshot of your costs on the day you wrote it. When wages, parts or rent move, the price should move with them.

When to update your prices

Review the book on a schedule, for example every quarter, and also when something large changes: a raise, a new truck, a supplier increase, a new insurance premium. Start with the billable rate calculator if your overhead changed. Then preview the new prices before applying them, and check any manual prices by hand. Tell your technicians what changed and why, so the next customer conversation matches the new numbers.

How it works in TierMenu

1. Step 1

   Enter your numbers

   Billable rate, labor hours, parts cost, multiplier and rounding rule.

2. Step 2

   Read the breakdown

   See labor, parts, subtotal, rounded price, member price and margin.

3. Step 3

   Move it into a book

   Create the same task in TierMenu and reuse the rule on every other task.

TierMenu, a spreadsheet and a paper price book

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