Best Ways to Maximize Your HVAC Business’s Profit Margins

The art of balancing profit and expense is something every business owner must master. If your HVAC business’s profit margins are looking a little slim, learn how to bolster them with these tips.

Determine Your Starting Point

The average net profit for the HVAC industry is about 2.5% to 3.5%. If you want to achieve margins closer to 10 percent or higher, you must make some changes. This requires you to calculate your overhead, track job and labor costs, and know the gross/net profit for each department.

If you don’t know these numbers, sit down and work them out. Make sure you’re covering your overhead with a reasonable amount left over. If your margins are too low, breaking down the numbers will tell you where to make changes to maximize your HVAC business’s profits.

Adjust Your Pricing Method

Do you still charge customers for time and materials? This complicated method can lead to field math errors and customer complaints. Simplify your life, reduce mistakes, make customers happier, and charge what you need to make a profit by adopting a flat rate pricing method.

If you already charge a flat rate, think about the last time you increased it. Costs go up in every industry as time goes by, so using a four-year-old flat rate price book could be costing you tens of thousands of dollars per year. Print updated books and start seeing your profit margins improve.

Charge More for a Faster Response

When demand is so high that you can’t take on every customer request, consider charging a premium for same-day service. Place customers in a queue if they’re not willing to pay. You may fear this technique could lose you customers. However, if you can’t respond to every call, you face this risk anyway, whether or not you charge more based on supply and demand.

Emphasize Service Agreements

One-time customers can become long-term clients if they sign a service agreement. Every call should include asking the customer if they want to become a service plan member. If they’re interested, sign them up on the phone. If not, the technician can ask again on site, showing a price comparison for that day’s services and future visits with and without a service plan.

Offer Performance Pay

This flat-rate increase gives your technicians an incentive to get organized and provide the best customer service possible. When they’re more efficient out in the field, you make more money, and you reward them for their efforts with higher pay. This win-win situation is one you should certainly tap into.

Run Monthly Specials

Pick a product—such as Wi-Fi thermostats, air purifiers, UV germicidal lights, humidifiers, or dehumidifiers—and market it with extra gusto for one month. Prepare a script for office staff and field technicians to plant seeds with customers.

To increase your selling power, offer a discounted rate during this time. With the additional focus on one product per month, your team will be better equipped to make sales all year round, even when a promotion isn’t in effect.

Credit the Cost of a Repair Against a Replacement

Many homeowners elect to patch up failing HVAC equipment just to get them through the season. Have your technicians make a note of these customers, and follow up in a week or two with an offer to apply the repair cost toward a replacement system. If the homeowner isn’t interested, tell them the offer stands until the end of the season. Follow up one more time to make the final offer and hopefully land the replacement job.

Implement Field Service Management Software

One of the best ways to increase HVAC business profit margins is to invest in field service management software like 3C Connect. With a more efficient way to schedule jobs, manage customer relationships, track your inventory, and streamline invoicing and payments, you save time and money every day. Best of all, our Cost Recovery Plus system passes all membership and set up costs to your clients, giving you a no-cost way to maximize your HVAC business’s profit margins.

To learn more about the features of 3C Connect and how easy our software is to implement, please contact us for a free demo today.

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