Pricing strategy playbook: Sample pack

Operational add-on

Pricing Strategy Playbook for Sun Valley Mechanical LLC

Prepared for Sun Valley Mechanical LLC

This playbook gives Marcus Rivera and any estimator or partner at Sun Valley Mechanical LLC a repeatable, math-grounded system for setting prices on every service line, reading the shop's own financial data to refine those prices over time, and designing compensation structures that reflect what it actually costs to add a person. Every calculation is shown end-to-end so the next quote can be built the same way the founder would build it; printable worksheets in Section 11 make that possible without software. Revisit the math whenever material costs move more than 8%, a technician's wage changes, workers' comp renews, or the shop's overhead load shifts, your CRM (Decision Built or your current platform) can surface job-level cost data to feed these worksheets on a rolling basis.

Trade context

HVAC pricing in Phoenix hinges on three variables that move independently: burdened labor cost per hour (which is high relative to most trades because of refrigerant certification, specialized tools, and a tight Phoenix labor market), equipment and material cost (which is set largely by distributor pricing from suppliers like Johnstone, Wesco, or Ferguson and fluctuates with refrigerant regulation changes and supply chain), and the seasonal demand curve that compresses most of the year's revenue into a brutal summer window. The single biggest margin killer in Phoenix HVAC is underpricing install labor on large tonnage jobs, the equipment cost is visible and easy to quote, but the labor hours to set, commission, and start up a 5-ton package unit in a tight attic are not. Customers expect a written flat-price quote on installs and a clear service-call fee structure on repairs; time-and-materials quoting on residential installs invites price shopping and erodes trust.

Pricing principles

**Markup is not margin.** A 50% markup on cost produces a 33% gross margin. A 100% markup produces a 50% margin. Every number in this playbook is expressed as gross margin percentage (what stays in the price after direct cost), not markup percentage. Convert before you quote.
**Quote flat price on installs, always.** Residential and light-commercial customers who receive a time-and-materials install quote will math it against the equipment price on the distributor's website and assume the labor is gouging. A flat price for a defined scope, equipment, labor, refrigerant, electrical whip, pad, permits, startup, is the professional standard and protects your margin when the job runs long.
**Every quote in writing, same day.** A verbal quote on a $12,000 system replacement becomes a dispute the moment the customer calls another contractor. Use your job management software to generate a written quote before you leave the driveway.
**Refrigerant and consumables are direct job costs, not overhead.** R-410A and R-454B are priced per pound and fluctuate. Pull the current cost from your last supplier invoice, price it per pound on the quote, and mark it up the same way you mark up equipment. Never absorb refrigerant cost into your labor rate.
**Seasonal demand does not justify panic discounting in slow months.** A February tune-up priced below your burdened cost to 'keep the crew busy' destroys the margin math. The correct response to slow months is to sell maintenance agreements in summer that guarantee winter revenue, not to cut price.
**The overhead clock runs whether the truck is moving or not.** Vehicle payment, insurance, software subscriptions, and your own draw happen every month regardless of job count. Every quote must carry an overhead allocation. The worksheet in Section 11 shows you how to size it.

Cost basis

Burdened labor / hr

$58 – $82

Phoenix HVAC technician base wages run approximately $29–$34 per hour for experienced technicians per Indeed (440 Phoenix salaries, updated July 2026) and Glassdoor (150 Phoenix salaries, July 2026); a lead tech or senior installer at Sun Valley Mechanical with 15+ years of experience should be budgeted at the upper end of that range. To that base wage, add the employer's share of payroll taxes: Social Security (6.2%), Medicare (1.45%), and FUTA (0.6% on first $7,000 of wages) plus Arizona state unemployment insurance (rate varies by experience rating, new employers typically start around 2.0%; pull your current rate from your Arizona Department of Economic Security account). Workers' comp for HVAC in Arizona falls under NCCI Class Code 5537; the national average base rate for Code 5537 is approximately $3.14 per $100 of payroll, and Arizona is an NCCI state where carriers can apply credits or debits of up to 25%, budget $2.50–$4.00 per $100 of wages until your first renewal letter gives you the actual number, then update the burdened labor worksheet in Section 11. Add vehicle allocation (truck payment + fuel + insurance + maintenance divided by the number of technicians using that truck), tool and equipment depreciation, and any paid time off load (10 days PTO on a 2,080-hour year adds roughly 4.8% to the effective hourly cost). The $58–$82 band reflects a two-person W-2 shop in Phoenix with one lead tech and one helper/apprentice; your real number comes out of the burdened labor worksheet in Section 11 using your last payroll register.

Material markup

25% – 100%

Material markup in HVAC varies significantly by category. Industry sources indicate that a 25–100% markup on materials is standard depending on part size, urgency, and labor involved; most HVAC contractors apply a 2.5x–3.5x multiplier on small parts and consumables (which translates to 150–250% markup on cost) and a lower multiplier on large equipment where the customer can more easily price-check. A practical framework for Sun Valley Mechanical: mark up small parts and refrigerant at 50–100% on cost (33–50% gross margin), mark up equipment (condensers, air handlers, heat pumps, mini-split systems) at 25–40% on cost (20–29% gross margin), and mark up specialty or hard-to-source parts at cost-plus-50% minimum. Your real markup floor is derived by pulling your last 10 supplier invoices for each category, comparing the invoiced cost to what you quoted the customer for that line item, and calculating (quoted price − cost) ÷ cost. Do this exercise using the service-line gross margin tracker in Section 11 before setting a shop-wide markup policy.

Monthly overhead

$8,500 – $14,000

For a two-technician W-2 HVAC shop targeting $700,000 in year-one revenue, monthly overhead categories to budget include: vehicle payments and insurance (two service trucks in Phoenix, budget $1,200–$2,000/month per truck including commercial auto insurance), general liability insurance (HVAC contractors in Arizona typically carry $1M/$2M GL; budget $300–$600/month depending on revenue and carrier), tools and equipment (refrigerant recovery machines, manifold gauges, vacuum pumps, leak detectors, depreciate over 3–5 years), software subscriptions (job management, accounting, GPS fleet tracking), owner draw or salary (Marcus Rivera's compensation is an overhead cost if he is not billing hours directly to jobs), marketing and LSA spend, and accounting or bookkeeping. The $8,500–$14,000 monthly band is sized to a lean two-person shop with two trucks and no physical shop space; if Sun Valley Mechanical adds a warehouse or office lease, add that rent directly. Use the overhead allocation worksheet in Section 11 to list every fixed and semi-fixed monthly cost, total them, and divide by the number of billable job-hours per month to get your overhead cost per hour.

Net profit target

10% – 18%

Net profit is what remains after all direct job costs (labor, materials, subs, permits) and all overhead are paid, it is not the markup applied to direct cost. At $700,000 in year-one revenue, a 10% net margin produces $70,000 in retained profit; an 18% net margin produces $126,000. To hit those numbers, gross margin on jobs must be high enough to cover both overhead and net profit: if monthly overhead runs $11,000 ($132,000 annually) and the net profit target is $84,000 (12%), the shop needs $216,000 in gross profit on $700,000 of revenue, a 30.9% gross margin. That is the minimum gross margin target to build into every quote. Industry sources note that well-run HVAC contractors maintain 15–25% net profit margins; operators running below 10% net are typically underpricing labor or absorbing overhead into the wrong bucket. Reconcile this target against your actual closed-job gross margins using the tracker in Section 11 every quarter.

Reading your own financial data

The industry bands in Section 5 are starting points derived from published sources and honest ranges, they are not Sun Valley Mechanical's numbers. The real numbers live in your accounting software and your payroll register, and this section teaches you how to extract them. Once you run these reports on your last 90 days of closed jobs, every number in this playbook becomes specific to your shop, your crew, and your Phoenix market.

Pulling the right reports

QuickBooks Online or Desktop is the most common accounting platform for HVAC shops at this revenue level. The four reports below give you everything you need to populate the worksheets in Section 11. Run them monthly, not quarterly, a margin problem caught in week 6 is fixable; one caught at year-end is a loss.

01**Profit & Loss by Job (Job Profitability Summary):** In QuickBooks, go to Reports > Business Overview > Profit and Loss. Filter by Customer:Job. This shows revenue, cost of goods sold, and gross profit per job. Export to Excel. Sort by gross margin % (gross profit ÷ revenue). Your bottom quartile jobs are telling you where your pricing is broken.
02**Time by Job (Time Activity by Employee Detail):** Reports > Employees & Payroll > Time Activities by Employee Detail. Filter by date range. This shows hours logged per job per technician. Cross-reference against the hours you quoted. If you quoted 8 hours and the crew logged 11, your labor estimate was wrong, not your price.
03**Vendor Bills by Job (Job Costs Detail):** Reports > Expenses > Transaction List by Vendor. Filter by job. This shows every supplier invoice tied to a job. Compare material cost on the invoice to material cost on the quote. If the invoice is higher, you either had waste, a price change, or a scope addition you didn't bill.
04**Accounts Receivable Aging:** Reports > Who Owes You > Accounts Receivable Aging Summary. Any job over 45 days outstanding is a cash flow problem. Collect before you price the next job for that customer.
05**Payroll Summary:** Reports > Employees & Payroll > Payroll Summary. Pull for the last full quarter. This gives you gross wages by employee, the starting point for the burdened labor worksheet in Section 11.
06**Class Tracking for Service Lines:** If you have not already set up Classes in QuickBooks (one class per service line: Install Residential, Install Light Commercial, Service & Repair, Maintenance Plans), do it now. It takes 30 minutes to configure and gives you P&L by service line, the single most useful report for pricing decisions.

Calculating your real burdened labor

The burdened labor rate is the true cost of one hour of a technician's time on a job, not the wage, not the wage plus taxes, but the full loaded cost including every dollar the shop spends to put that person on a truck and on a roof. Here is the step-by-step derivation using a worked example with placeholder numbers.

01**Step 1 - Pull gross hourly wage.** From your payroll register, find the technician's gross hourly rate. Example: Lead tech at $32.00/hour.
02**Step 2, Add employer payroll taxes.** Social Security: $32.00 × 6.2% = $1.98. Medicare: $32.00 × 1.45% = $0.46. FUTA (blended hourly, first $7,000 of wages): approximately $0.04/hour for a full-year employee. Arizona SUI: pull your current rate from your DES account; new employers start around 2.0%, at 2.0%: $32.00 × 2.0% = $0.64. Total tax burden: ~$3.12/hour. Running total: $35.12/hour.
03**Step 3 - Add workers' comp.** Arizona NCCI Class Code 5537 base rate is approximately $3.14 per $100 of payroll nationally; Arizona carriers may adjust up or down by up to 25%. Use your actual renewal rate. At $3.14 per $100: $32.00 × 3.14% = $1.00/hour. Running total: $36.12/hour.
04**Step 4 - Add vehicle allocation.** Truck payment + commercial auto insurance + fuel + maintenance ÷ 12 months ÷ hours the truck is in use per month. Example: $1,800/month total truck cost ÷ 160 billable hours/month = $11.25/hour. Running total: $47.37/hour.
05**Step 5 - Add tools, PTO, and benefits.** Tool depreciation and replacement: estimate $3,000/year ÷ 2,000 hours = $1.50/hour. PTO: 10 days = 80 hours paid but not billed; add 80 ÷ (2,080 − 80) = 4.0% load on the wage: $32.00 × 4.0% = $1.28/hour. Health insurance if offered: divide monthly premium by 173 hours. Example: $0 (no benefits yet). Running total: $50.15/hour.
06**Step 6 - Divide by billable hour ratio.** Not every paid hour is a billable hour. Drive time, shop time, training, and callbacks eat into the ratio. If the tech works 2,080 paid hours per year and 1,700 are billable to jobs, the ratio is 1,700 ÷ 2,080 = 81.7%. Divide the running total by that ratio: $50.15 ÷ 0.817 = **$61.38 burdened rate per billable hour.** This is the number that goes into every job cost estimate. Run this calculation for each technician using the worksheet in Section 11.

Calculating real gross margin per job

Gross margin per job is the percentage of the invoice that remains after all direct costs are paid, before overhead. Run this calculation on your last 10 closed jobs and find the median. That median is your current actual gross margin, and it is the number to compare against your target.

01**Step 1 - Pull the invoice.** From your job management software or QuickBooks, find the total invoiced amount for the job. Example: $8,400 invoiced for a 3-ton split system replacement.
02**Step 2 - Subtract material cost.** Pull the supplier invoices tied to that job (condenser, air handler, refrigerant, electrical whip, pad, line set, disconnect). Example: $3,200 in materials.
03**Step 3 - Subtract burdened labor cost.** Pull time entries for that job from your time-tracking tool. Multiply hours by each technician's burdened rate from Step 6 above. Example: Lead tech 6 hours × $61.38 = $368.28; helper 6 hours × $44.00 burdened = $264.00. Total labor cost: $632.28.
04**Step 4 - Subtract any subcontractor or permit costs.** Example: $150 permit. Total direct cost: $3,200 + $632.28 + $150 = $3,982.28.
05**Step 5 - Calculate gross margin.** Gross profit = $8,400 − $3,982.28 = $4,417.72. Gross margin % = $4,417.72 ÷ $8,400 = **52.6%.** Record this in the service-line gross margin tracker in Section 11.
06**Step 6, Run this for your last 10 closed jobs and find the median.** Sort by service line. If your median gross margin on residential installs is 38% but your target is 45%, you have a pricing gap, not a cost problem. The gap tells you exactly how much to raise your flat-price quotes.

Spotting margin leak

**Refrigerant cost absorbed into labor rate.** Symptom: jobs with high refrigerant usage (system recharges, new installs with long line sets) show lower gross margin than similar jobs. Look for: jobs where material cost on the invoice is higher than material cost on the quote. Fix: price refrigerant as a separate line item per pound at current cost plus markup.
**Electrical scope creep on installs.** Symptom: install jobs that required a new disconnect, breaker upgrade, or whip run show lower margin than quoted. Look for: electrician sub invoices or tech time entries for electrical work not on the original quote. Fix: add an electrical scope line to every install quote with a defined allowance and a change-order clause for anything beyond it.
**Drive time not allocated.** Symptom: service call jobs in far-flung Phoenix suburbs (Buckeye, Queen Creek, Maricopa) show lower margin than jobs in central Phoenix. Look for: time entries where drive time exceeds 30 minutes each way. Fix: add a trip charge or zone fee for jobs beyond a defined radius, or build drive time into the service call flat rate for outlying areas.
**Callbacks priced at zero.** Symptom: a job shows full revenue but the time entries show a second visit that was not invoiced. Look for: two time entries on the same job number with the second one having no corresponding invoice line. Fix: define your callback policy in writing (what is covered under workmanship warranty vs. what is a new service call) and enforce it.
**Maintenance plan labor underestimated.** Symptom: maintenance plan revenue looks healthy but job-level gross margin on plan visits is below 30%. Look for: time entries on plan visits that exceed the time budgeted when the plan was priced. Fix: time your next 5 plan visits with a stopwatch, recalculate the labor cost, and reprice new plan enrollments accordingly.
**Equipment price changes not passed through.** Symptom: install jobs quoted in March show lower margin when closed in June because the distributor raised equipment prices. Look for: a gap between the equipment cost on the quote and the equipment cost on the supplier invoice. Fix: add a price-validity clause to every install quote (price valid for 30 days) and reprice any job that sits in the pipeline longer than that.

Margin literacy

Gross margin percentage is the single number that tells you whether a job is paying for itself and contributing to the business. Every other pricing metric, markup, revenue, ticket size, is secondary to gross margin, because gross margin is what actually covers overhead and produces profit.

Markup vs margin

Markup is calculated on cost; margin is calculated on price. They are not interchangeable, and confusing them is the most common pricing error in trades businesses. A contractor who targets '40% margin' but applies a 40% markup to cost is actually running a 28.6% margin, and may not realize it until the P&L shows a loss.

Cost	Markup %	Selling Price	Gross Margin %
$100	25%	$125	20.0%
$100	33%	$133	24.8%
$100	50%	$150	33.3%
$100	100%	$200	50.0%

To convert a target margin to the required markup: Markup % = Margin % ÷ (1 − Margin %). To hit a 40% gross margin, apply a 66.7% markup on cost.

Gross vs net

Gross margin is (Revenue − Direct Job Cost) ÷ Revenue. It tells you how much of each dollar of revenue is left after paying for the labor, materials, subs, and permits that went directly into that job. Net margin is (Revenue − All Costs Including Overhead) ÷ Revenue. It tells you how much of each dollar of revenue is actual profit after the business pays for itself. A 45% gross margin job at a shop with 32% overhead allocation produces a 13% net margin, healthy. The same 45% gross margin job at a shop with 44% overhead allocation produces a 1% net margin, a near-miss on breakeven.

Contribution margin

Contribution margin is the dollar amount each job contributes toward covering overhead and generating profit after direct costs are paid. It is gross profit in dollars, not percentage. When the shop is below its monthly break-even revenue, every additional dollar of contribution margin goes toward covering fixed overhead, so the priority is volume of contribution dollars, not margin percentage. Once the shop is above break-even, contribution margin per job is the number to defend: a smaller job with a higher margin percentage may contribute fewer dollars than a larger job with a lower margin percentage.

Common traps

**Quoting from a desired margin without checking the resulting price against the market.** If your cost math says the job should be $14,500 but three recent comparable quotes in Phoenix came in at $11,000–$12,500, you either have a cost problem or a scope problem, not a pricing problem. Know both numbers.
**Confusing gross margin with net margin.** A 42% gross margin job sounds healthy until you realize the shop's overhead runs 38% of revenue. That job produced a 4% net margin. Track both.
**Applying the same markup to equipment and to labor.** Equipment is a pass-through with a margin; labor is a cost center with a rate. They need separate markup logic, not a blended percentage applied to the total job cost.
**Discounting to close without recalculating the margin impact.** A 10% discount on a $10,000 job with 40% gross margin ($4,000 gross profit) drops the job to $9,000 with $3,000 gross profit, a 25% reduction in gross profit for a 10% reduction in price. Know the dollar impact before you offer the discount.
**Treating maintenance plan revenue as high-margin without measuring it.** Plan revenue looks recurring and predictable, but if the labor cost of plan visits exceeds the plan price, it is a loss leader. Measure gross margin on plan visits separately from install and service revenue.

Residential HVAC Install

Flat per job

Typical unit: per system
Target margin: 32% – 48%

Residential install gross margin varies with system size (larger tonnage jobs have higher equipment cost relative to labor, compressing margin percentage), job complexity (attic installs in Phoenix summer heat add labor hours), and whether the job is a straight replacement or a new system with duct work. The 32–48% band reflects the range across simple replacements (lower end) to complex installs with duct modifications or difficult access (upper end). Industry sources note that well-run HVAC contractors target 15–25% net profit, which requires gross margins in this range after overhead. Derive your actual median from the last 10 closed residential installs using the tracker in Section 11, then set your quote floor accordingly.

Cost inputs

**Equipment cost**, pull the distributor invoice for the specific model quoted (condenser, air handler or furnace, coil). This is your cost basis for equipment markup. Do not use MSRP or online retail as your cost.
**Refrigerant**, price per pound at current distributor cost (R-410A and R-454B prices fluctuate; pull from your last Johnstone, Wesco, or Ferguson invoice). Estimate pounds needed based on system tonnage and line set length. Mark up the same as other materials.
**Line set and electrical materials**, copper line set per linear foot at current copper pricing, electrical whip, disconnect, breaker if needed. Pull from your last materials invoice for a comparable job.
**Labor hours × burdened rate**, estimate hours for the full install: removal and disposal of old equipment, setting new equipment, brazing, pressure test, evacuation, electrical, startup and commissioning. Use your time entries from the last 3 comparable installs as your baseline. Multiply by the burdened rate from Section 11.
**Permit** - Maricopa County and City of Phoenix mechanical permit fees vary by system size. Pull the current fee schedule from the jurisdiction's website or call the permit desk. Budget $150–$400 for a residential replacement.
**Disposal and miscellaneous**, old equipment disposal (refrigerant recovery is required; budget time and recovery machine depreciation), pad or curb if replacing, duct modifications if in scope.

Markup / margin logic

Start with total direct cost: equipment + refrigerant + line set and electrical materials + permit + disposal. Apply your equipment markup (25–40% on cost) to the equipment line only. Apply your parts and materials markup (50–100% on cost) to refrigerant, line set, and electrical materials. Add labor cost at the burdened rate (not marked up, the burdened rate already includes overhead allocation for the labor component). Then add an overhead allocation for the non-labor overhead the job must carry: take your total monthly overhead from the worksheet in Section 11, divide by monthly billable hours, and multiply by the hours this job will consume. Finally, add your profit target in dollars: (direct cost + overhead allocation) ÷ (1 − target net margin %). The resulting number is your flat-price quote floor. Example: equipment cost $2,800, materials $400, labor cost $490 (8 hours × $61.38 burdened), permit $200, disposal $75. Total direct cost: $3,965. Equipment marked up to $3,920 (40% markup = 28.6% margin). Materials marked up to $600 (50% markup = 33.3% margin). Labor stays at $490. Overhead allocation: $11,000/month ÷ 160 billable hours × 8 hours = $550. Subtotal before profit: $3,920 + $600 + $490 + $200 + $75 + $550 = $5,835. At a 35% gross margin target: $5,835 ÷ (1 − 0.35) = $8,977 quote price. Round to $8,950–$9,200 depending on job complexity and competitive context.

Sample priced job

Replacement of a 4-ton split system (condenser + air handler) in a single-story Phoenix home. Existing equipment is 15 years old. Attic air handler, side-yard condenser. Existing line set and duct work are in good condition and will be reused. City of Phoenix permit required.

4-ton condenser (14 SEER2)
Pull from your distributor invoice for the specific model. Do not use online retail pricing as your cost basis.
$1,800 – $2,400
4-ton air handler / coil
Matched system from same manufacturer. Includes TXV.
$900 – $1,300
Refrigerant (R-454B or R-410A)
Estimate 6–10 lbs for a 4-ton system with existing line set. Price per pound at current distributor cost.
$80 – $160
Electrical materials (whip, disconnect)
New disconnect and whip if existing is undersized or deteriorated.
$60 – $120
Miscellaneous supplies (brazing, nitrogen, fittings)
Consumables for the install.
$40 – $80
Labor, removal, set, braze, evacuate, commission
7–10 hours at burdened rate of $61–$62/hour. Attic air handler adds time vs. closet or utility room.
$430 – $620
City of Phoenix mechanical permit
Pull current fee from Phoenix Development Services. Fees vary by system size and valuation.
$175 – $350
Old equipment disposal and refrigerant recovery
Recovery machine depreciation + disposal fee if applicable.
$50 – $100

Quote range$7,800 – $10,500

Price toward the low end of this range for a simple side-yard condenser swap with easy attic access, an existing customer, or a referral partner job where relationship matters. Price toward the high end for a difficult attic with poor access, a summer emergency call where demand is high, or a customer who found you through LSA and has no prior relationship with the shop. Anything above $10,500 on a 4-ton replacement in Phoenix should be justified by documented scope additions (new line set, duct modifications, upgraded thermostat, extended warranty), not by feel.

What kills the margin

**Quoting equipment cost from memory instead of the current distributor invoice.** Equipment prices from Johnstone, Wesco, and Ferguson move with refrigerant regulation changes and supply chain. A quote built on a price from 60 days ago may be $200–$400 short on a 4-ton system.
**Underestimating labor on attic installs.** Phoenix attic temperatures in summer exceed 150°F. Crews work in shorter rotations, take more breaks, and the job takes longer. If your labor estimate is based on a garage or closet install, you will lose hours on every attic job.
**Forgetting the permit.** A residential replacement in Phoenix requires a mechanical permit. If you absorb the permit cost into your overhead instead of billing it as a direct job cost, you are giving away $175–$350 per job.
**Matching a competitor's price without knowing their scope.** If a competitor quotes $7,200 on the same 4-ton replacement, find out what they are installing before you match it. A 13 SEER2 builder-grade unit is not the same as a 16 SEER2 variable-speed system. Scope defines price.
**Not pricing the startup and commissioning time.** A proper system startup, superheat and subcooling measurements, airflow verification, thermostat programming, customer walkthrough, takes 45–90 minutes. If that time is not in your labor estimate, it is free.

Light Commercial HVAC Install

Flat per job

Typical unit: per system or per project
Target margin: 28% – 42%

Light commercial install gross margin runs lower than residential because equipment costs are higher relative to labor (compressing the blended margin), customers are more sophisticated buyers, and competitive bidding is more common. The 28–42% band reflects the range from a competitive multi-bid RTU replacement (lower end) to a negotiated single-source install for a property management relationship (upper end). Jobs with significant controls or BACnet integration scope can push toward the upper end because that work is more specialized and less price-shopped. Derive your actual median from closed commercial jobs using the tracker in Section 11.

Cost inputs

**Equipment cost**, rooftop package units (RTUs) and commercial split systems are priced through commercial distributors. Pull the current quote from your distributor rep for the specific model and tonnage. Commercial equipment margins are typically tighter than residential because the customer (property manager or GC) is more price-aware.
**Crane or lift rental** - RTU replacements on flat commercial roofs often require a crane or boom lift. Get a quote from a local equipment rental company (Sunbelt, United Rentals) for every commercial job before you price it. This is a direct job cost, not overhead.
**Curb adapter**, if the new RTU footprint does not match the existing curb, a custom curb adapter is required. Budget $300–$800 depending on size and lead time.
**Controls and thermostat**, commercial jobs may require a BACnet-compatible thermostat, zone controller, or integration with a building management system. Scope this explicitly and price it separately.
**Labor hours × burdened rate**, commercial installs typically require two technicians. Estimate hours from your last comparable job. Add time for rooftop safety compliance (fall protection, hot work permit if brazing on roof).
**Permits and inspections** - Maricopa County commercial mechanical permits are calculated on project valuation. Budget more than residential; call the jurisdiction's permit desk for the current fee schedule.
**Subcontractor costs**, electrical work on commercial jobs often requires a licensed electrician sub. Get a quote before you price the job, not after.

Markup / margin logic

Light commercial pricing follows the same cost-plus-margin structure as residential, but with two adjustments: equipment margin is typically lower (20–30% on cost rather than 25–40%) because commercial customers and property managers are more price-sensitive and more likely to have gotten multiple bids, and overhead allocation per job is higher because commercial jobs involve more coordination, permitting, and inspection time. Build the quote by summing all direct costs (equipment at cost, materials at cost, labor at burdened rate, crane rental at cost, permit at cost, sub costs at cost), then apply your markup by category, then add overhead allocation, then divide by (1 − target net margin %). For a commercial job, the overhead allocation should include the estimating time you spent on the bid, commercial jobs that do not close still cost you time. Example: $8,500 RTU at cost, marked up 25% = $10,625. Materials $600 marked up 50% = $900. Labor 16 hours × $61.38 = $982. Crane $450 at cost. Permit $400 at cost. Electrical sub $800 at cost. Total direct: $14,157. Overhead allocation: $11,000 ÷ 160 hours × 16 hours = $1,100. Subtotal: $15,257. At 35% gross margin: $15,257 ÷ 0.65 = $23,472 quote price.

Sample priced job

Replacement of a 7.5-ton rooftop package unit on a single-story commercial strip mall in Tempe, AZ. Crane required. Existing curb fits new unit. Electrical disconnect is in good condition. City of Tempe mechanical permit required.

7.5-ton RTU (14 SEER2 commercial)
Pull from distributor quote. Commercial RTU pricing varies significantly by brand and efficiency tier.
$5,800 – $7,500
Crane rental (4-hour minimum)
Get a quote from Sunbelt or United Rentals before pricing the job. Crane cost is a direct job cost, not overhead.
$600 – $1,200
Refrigerant and consumables
RTUs are typically factory-charged; budget for top-off and consumables.
$150 – $300
Electrical materials
Whip, conduit, fittings if needed.
$80 – $200
Labor, two techs, removal, set, connect, startup
12–18 hours total crew time at burdened rate. Rooftop work adds time for safety setup.
$800 – $1,200
City of Tempe commercial mechanical permit
Commercial permit fees are calculated on project valuation. Call the permit desk.
$350 – $700
Disposal of old RTU
Crane lifts old unit off roof; disposal fee at metal recycler or HVAC recycler.
$100 – $250

Quote range$13,500 – $19,500

Price toward the low end for a property management company that sends you multiple jobs per year and where the relationship has long-term value. Price toward the high end for a one-time customer, a job with difficult roof access, or a job that requires after-hours or weekend work. Any job requiring a licensed electrician sub, BACnet controls integration, or a custom curb adapter should be scoped and priced as a separate line item above this range.

What kills the margin

**Not getting the crane quote before pricing the job.** Crane rental in Phoenix varies by boom length, duration, and availability. A $600 estimate that comes in at $1,400 on the day of the job is a $800 margin hit you cannot recover.
**Underestimating permit fees on commercial jobs.** Commercial mechanical permits in Maricopa County jurisdictions are calculated on project valuation and can run $500–$1,500 on a large RTU replacement. Call the permit desk before you quote.
**Pricing commercial equipment at residential markup.** Property managers and commercial GCs know equipment pricing. A 40% markup on a $7,500 RTU will lose the bid. Know the competitive markup range for commercial equipment in your market.
**Not scoping the electrical.** Commercial RTU replacements frequently require electrical work that exceeds your license scope. If you need an electrician sub, get the quote before you price the job, not after you win it.
**Winning the bid and then discovering the curb does not match.** A custom curb adapter adds $300–$800 and a week of lead time. Measure the existing curb before you quote.

Service and Repair

Flat per job

Typical unit: per service call
Target margin: 45% – 65%

Service and repair gross margin is typically higher than install gross margin because the labor component is a larger share of the ticket (relative to equipment cost), diagnostic skill commands a premium, and the customer is often in an emergency situation with low price sensitivity, especially in Phoenix in July. The 45–65% band reflects the range from a simple warranty-adjacent repair on a newer system (lower end) to an emergency refrigerant leak repair on a 10-year-old system in peak summer (upper end). Derive your actual median from closed service calls using the tracker in Section 11, separated from install jobs.

Cost inputs

**Service call / diagnostic fee**, the cost of dispatching a technician to the job before any repair is done. This covers drive time, diagnostic time (typically 30–60 minutes), and the overhead of the call. This fee should be charged on every call and credited toward the repair if the customer approves the work.
**Parts cost at distributor invoice price**, pull the actual cost from your last supplier invoice for the specific part. Do not use online retail or memory. Parts markup on service calls is typically higher than on installs because the diagnostic skill, urgency, and smaller ticket size justify it.
**Labor time for the repair**, estimate from your time entries on comparable repairs. A capacitor swap is 20 minutes; a blower motor replacement is 90 minutes; a refrigerant leak search and repair is 2–4 hours. Use your actual time data, not a guess.
**Refrigerant cost per pound**, price at current distributor cost plus markup. Never absorb refrigerant into the service call flat rate.
**Warranty parts**, if the repair is on a system still under manufacturer warranty, the part may be covered but labor is not. Know your warranty claim process with each manufacturer before you price warranty calls.

Markup / margin logic

Service and repair pricing works best as a flat-rate menu: a defined price for each common repair type, built from cost-up and updated when parts prices change. Build the menu by listing your 20 most common repairs, calculating the direct cost for each (parts at cost + labor hours × burdened rate + refrigerant if applicable), then applying your target gross margin. Industry sources indicate that repairs and service calls typically carry higher parts markups (3x–4x on small parts) than installs because of the diagnostic skill involved and the smaller ticket size. Example: capacitor replacement. Part cost: $18. Labor: 25 minutes × $61.38/hour burdened = $25.58. Total direct cost: $43.58. At 50% gross margin: $43.58 ÷ 0.50 = $87.16, round to $89 on the flat-rate menu. The service call diagnostic fee ($89–$149 in the Phoenix market, credited toward repair) is separate and covers the drive and diagnostic time before any repair is authorized. Your real menu prices come from your own cost data run through this formula for each repair type.

Sample priced job

Emergency service call in Phoenix in July. Customer's 5-year-old 3-ton split system is not cooling. Diagnosis: failed condenser fan motor. Motor is in stock on the truck.

Service call / diagnostic fee
Charged on arrival, credited toward repair if approved. Covers drive time and 30–45 minutes of diagnosis.
$89 – $149
Condenser fan motor (OEM or aftermarket)
Pull actual cost from your last distributor invoice for this motor. OEM vs. aftermarket affects cost and warranty.
$85 – $180
Capacitor (replaced as part of motor swap)
Replace the run capacitor whenever replacing the fan motor. Parts cost only.
$12 – $25
Labor, motor swap, test, verify operation
45–75 minutes at burdened rate. Emergency summer call may justify a premium labor rate.
$55 – $90

Quote range$320 – $520

Price toward the low end for a maintenance plan customer (the diagnostic fee may be waived per plan terms) or a repeat customer with a long relationship. Price toward the high end for an emergency call in peak summer, an after-hours call, or a customer who found you through LSA with no prior relationship. The diagnostic fee is non-negotiable, it is the cost of showing up. If the customer declines the repair, the diagnostic fee is still owed.

What kills the margin

**Waiving the diagnostic fee to win the call.** The diagnostic fee covers your drive time and the first hour of labor. Waiving it on a call that does not convert to a repair means you paid to drive to the job and diagnose the problem for free.
**Pricing parts from memory instead of the current invoice.** A condenser fan motor that cost $95 six months ago may cost $130 today. Pull the current price before you quote.
**Not charging for refrigerant separately.** A system that is low on refrigerant requires a leak search, a repair, and a recharge. Each of those is a separate billable item. Absorbing the refrigerant cost into a flat service call rate gives away $80–$200 per call.
**Underpricing emergency and after-hours calls.** Phoenix summer emergency calls at 9 PM have a different cost structure (overtime pay, disrupted crew schedule) and a different demand curve (customer has no alternative) than a scheduled Tuesday morning call. Your flat-rate menu should have a separate after-hours rate.
**Not tracking callback rate by repair type.** If your blower motor replacements have a 15% callback rate and your capacitor replacements have a 2% callback rate, the blower motor price needs to include a callback cost buffer or your parts sourcing needs to change.

Maintenance Plans

Flat per job

Typical unit: per plan per year
Target margin: 35% – 55%

Maintenance plan gross margin varies with visit frequency (one visit vs. two), what is included (filter supply, priority service, discount on repairs), and how efficiently visits are routed. The 35–55% band reflects the range from a full-service plan with two visits, filter supply, and a diagnostic fee waiver (lower end) to a basic one-visit inspection-only plan with no included parts (upper end). The real risk in maintenance plan pricing is underestimating visit labor time, if your plan is priced on 45-minute visits and your techs are spending 75 minutes, the plan is losing money. Time your visits and reprice annually.

Cost inputs

**Labor cost per visit**, time your last 5 maintenance visits with a stopwatch. A residential tune-up (filter check, coil cleaning, electrical inspection, refrigerant check, drain flush) takes 45–90 minutes depending on system age and condition. Multiply by your burdened labor rate. This is the floor cost of every plan visit.
**Drive time allocation**, maintenance visits are often clustered by neighborhood for efficiency, but drive time is still a cost. Include it in your per-visit labor estimate.
**Consumables per visit**, filters (if supplied by the contractor), coil cleaner, drain treatment tablets. Pull the cost from your last supply order.
**Diagnostic fee waiver cost**, if the plan includes a waived diagnostic fee on service calls, that is a contingent cost. Estimate the probability that a plan customer calls for service in a given year and the average diagnostic fee. Include a fraction of that cost in the plan price.
**Administrative cost**, plan renewals, reminder calls, scheduling, and invoicing take time. Allocate a portion of your office or admin cost to each plan.

Markup / margin logic

Maintenance plan pricing is a subscription product, not a per-job product. The math is: (cost per visit × number of visits per year) + consumables + contingent service cost + admin allocation = total annual cost per plan. Divide by (1 − target gross margin %) to get the plan price. Example: two visits per year at $55 labor cost each = $110. Consumables: $20. Contingent service cost (30% probability of a service call × $89 diagnostic fee waived = $26.70). Admin: $15. Total cost: $171.70. At 40% gross margin: $171.70 ÷ 0.60 = $286.17, price the plan at $279–$299/year. The value of maintenance plans is not just the margin on the plan itself, it is the priority access to the customer's equipment and the first right of refusal on any repair or replacement. Track plan-customer repair revenue separately from non-plan-customer repair revenue to measure the lifetime value difference.

Sample priced job

Annual residential maintenance plan for a single-family home in Scottsdale with one split system. Two visits per year (spring and fall). Plan includes priority scheduling, waived diagnostic fee on one service call per year, and contractor-supplied filters.

Spring tune-up labor (60 min)
Burdened labor rate × 1 hour including drive time allocation.
$55 – $70
Fall tune-up labor (60 min)
Same as spring visit.
$55 – $70
Filters (2 per year, contractor-supplied)
Pull cost from your last supply order. 1-inch vs. 4-inch media filter changes the cost significantly.
$15 – $35
Consumables (coil cleaner, drain tabs)
Per-visit consumable cost.
$8 – $15
Contingent diagnostic fee waiver
Estimated cost of one waived diagnostic fee × probability of a service call in the plan year.
$20 – $40
Admin and scheduling allocation
Reminder calls, renewal invoicing, scheduling time.
$10 – $20

Quote range$249 – $349

Price toward the low end for a multi-system household (offer a per-system discount for 2+ systems) or a referral from a partner. Price toward the high end for a single-system home with an older system (higher probability of a service call, which increases the contingent cost). Offer a monthly payment option ($22–$30/month) to reduce cancellation friction, customers who pay monthly renew at higher rates than customers who pay annually.

What kills the margin

**Pricing the plan without timing actual visits.** If you price on 45-minute visits and your techs spend 75 minutes, every plan visit loses money. Time your next 5 visits before setting the plan price.
**Not tracking plan-customer repair revenue separately.** The maintenance plan is a customer retention tool as much as a revenue line. If plan customers are not converting to repairs and replacements at a higher rate than non-plan customers, the plan is not working as designed.
**Offering too many inclusions to close the sale.** A plan that includes two visits, filter supply, diagnostic fee waiver, and a 15% repair discount may be priced below its cost. Price each inclusion separately and add them up before setting the plan price.
**Not escalating plan prices annually.** A plan priced in 2023 at $249 may cost $290 to deliver in 2026 due to labor rate increases and refrigerant price changes. Build an annual escalation clause into the plan agreement.
**Scheduling plan visits inefficiently.** A maintenance visit that requires 45 minutes of drive time each way costs more than a visit 10 minutes from the shop. Route plan visits by neighborhood and schedule them in clusters to reduce drive time cost.

Heat Pumps (Residential and Light Commercial)

Flat per job

Typical unit: per system
Target margin: 32% – 48%

Heat pump install gross margin targets are the same as residential install because the cost structure is similar. The higher equipment cost means more gross profit dollars at the same margin percentage, which is why heat pump installs are worth pursuing even at the same margin percentage as a standard split system. Jobs that include an electrical panel upgrade or sub-panel work can push toward the upper end of the band if the electrical scope is priced correctly. Derive your actual median from closed heat pump jobs using the tracker in Section 11.

Cost inputs

**Heat pump equipment cost**, heat pumps (air-source, dual-fuel, or cold-climate) carry a higher equipment cost than standard split systems of the same tonnage. Pull the current distributor quote for the specific model. In Phoenix, air-source heat pumps are the dominant type; cold-climate heat pumps are less common but growing.
**Electrical upgrade cost**, heat pumps often require a dedicated 240V circuit or a panel upgrade. Scope the electrical before quoting. If an electrician sub is needed, get the quote before pricing the job.
**Refrigerant**, heat pumps use R-410A or R-454B depending on vintage. Price per pound at current distributor cost.
**Labor hours**, heat pump installs take similar time to split system installs of the same tonnage, but startup and commissioning is more involved (reversing valve check, defrost cycle verification, auxiliary heat staging). Add 30–60 minutes to your standard install labor estimate.
**Permits**, same as residential install. Some jurisdictions require an electrical permit in addition to a mechanical permit for heat pump installs.
**Federal tax credit documentation**, the Inflation Reduction Act provides a 30% federal tax credit (up to $2,000) for qualifying heat pump installs. You are not responsible for the customer's tax filing, but providing the equipment efficiency documentation (AHRI certificate) is a service that differentiates you. Budget 15 minutes of admin time per job.

Markup / margin logic

Heat pump pricing follows the same cost-plus-margin structure as residential install, with two adjustments: equipment cost is higher (which means the dollar amount of markup is higher even at the same percentage), and the IRA tax credit creates a customer perception of lower net cost that can support a higher quoted price. Do not discount your price because of the tax credit, the credit goes to the customer, not to you. Build the quote the same way as a standard install: equipment at cost + markup, materials at cost + markup, labor at burdened rate, overhead allocation, profit target. The tax credit is a customer benefit you communicate, not a cost you absorb.

Sample priced job

Replacement of a gas furnace and AC system with a 3-ton air-source heat pump in a Phoenix single-family home. Existing duct work is in good condition. New 240V dedicated circuit required (electrician sub). City of Phoenix mechanical and electrical permits required.

3-ton heat pump system (condenser + air handler)
Pull from distributor quote. Heat pump equipment runs $400–$800 more than a comparable split system.
$2,800 – $3,800
Refrigerant and consumables
R-454B or R-410A at current distributor cost per pound.
$80 – $160
Electrical materials (whip, disconnect)
New disconnect and whip for heat pump.
$60 – $120
Electrician sub (new 240V circuit)
Get a quote from your licensed electrician sub before pricing the job.
$350 – $700
Labor, removal, set, braze, evacuate, commission
8–11 hours at burdened rate. Heat pump startup and commissioning adds 30–60 minutes vs. standard split system.
$490 – $680
City of Phoenix mechanical permit
Pull current fee from Phoenix Development Services.
$175 – $350
Electrical permit
Required for new circuit. Pull from Phoenix Development Services.
$75 – $150
Old equipment disposal
Refrigerant recovery from old AC system required. Furnace disposal.
$75 – $150

Quote range$9,500 – $13,500

Communicate the IRA 30% federal tax credit (up to $2,000 for qualifying systems) as a customer benefit, it does not change your price, but it changes the customer's net cost perception and can make a heat pump more competitive against a standard split system replacement. Price toward the high end when the electrical upgrade is complex or when the job requires coordination between your crew and the electrician sub. Price toward the low end for a referral partner job or a customer replacing a system that is still under manufacturer warranty on the old equipment.

What kills the margin

**Not scoping the electrical before quoting.** A heat pump install that requires a panel upgrade instead of a new circuit can add $1,500–$3,000 in electrician sub cost. Scope the electrical on the site visit, not after you win the job.
**Discounting the price because of the IRA tax credit.** The tax credit is the customer's benefit, not yours. Your cost structure does not change because of the credit. Quote your full price and let the customer capture the credit.
**Not verifying AHRI efficiency ratings for IRA qualification.** Not all heat pumps qualify for the full IRA credit. Verify the AHRI certificate for the specific model before promising the customer a specific credit amount.
**Underestimating startup time.** Heat pump commissioning requires verifying reversing valve operation, defrost cycle, and auxiliary heat staging. If your labor estimate is based on a standard AC startup, you will run short on time.
**Forgetting the second permit.** A heat pump install with a new electrical circuit requires both a mechanical permit and an electrical permit in most Phoenix-area jurisdictions. Missing the electrical permit creates an inspection problem.

Mini-Splits (Ductless Systems)

Flat per job

Typical unit: per system
Target margin: 35% – 52%

Mini-split gross margin is typically higher than traditional split system installs because the labor component is a larger share of the ticket (relative to equipment cost on smaller single-zone systems) and because mini-splits are a more specialized product with fewer contractors who install them well. Multi-zone systems push toward the upper end of the band because the complexity justifies a premium. Single-zone garage or addition installs are more commoditized and sit toward the lower end. Derive your actual median from closed mini-split jobs using the tracker in Section 11.

Cost inputs

**Mini-split equipment cost**, single-zone and multi-zone mini-split systems (Mitsubishi, Daikin, LG, Fujitsu, and others) are priced through HVAC distributors. Multi-zone systems require one outdoor unit and multiple indoor heads; price each head separately. Pull the current distributor quote for the specific model and configuration.
**Line set**, mini-splits use smaller diameter copper line sets than traditional split systems. Price per linear foot at current copper cost. Long line set runs (over 25 feet) add material cost and labor time.
**Electrical**, mini-splits require a dedicated circuit. Scope the electrical on the site visit. If a new circuit or panel work is needed, get an electrician sub quote before pricing.
**Mounting hardware and wall sleeves**, indoor head mounting brackets, line set cover (if surface-mounted), wall sleeve for through-wall line set penetration. These are direct job costs, not overhead.
**Labor hours**, mini-split installs vary significantly by number of zones and line set complexity. A single-zone wall-mount install in a garage is 3–4 hours; a 4-zone multi-zone system with concealed line sets in a finished home is 12–16 hours. Use your time entries from comparable jobs.
**Permits**, most Phoenix-area jurisdictions require a mechanical permit for mini-split installs. Some also require an electrical permit. Call the permit desk before quoting.

Markup / margin logic

Mini-split pricing follows the same cost-plus-margin structure as other installs. The key difference is that multi-zone systems have a higher equipment cost and more complex labor, which means the dollar amount of gross profit is higher even at the same margin percentage. Price each zone as a separate line item (outdoor unit + each indoor head + line set for that head + labor for that head) so the customer can see the cost of adding or removing zones. This also makes scope changes easier to price. Apply your standard equipment markup to the outdoor unit and each indoor head, your materials markup to line set and hardware, and your burdened labor rate to the install hours.

Sample priced job

Installation of a 2-zone mini-split system in a Phoenix home addition and garage. One 12,000 BTU wall-mount head in the addition, one 9,000 BTU wall-mount head in the garage. Outdoor unit on side yard. New 240V circuit required. City of Phoenix mechanical permit required.

Outdoor multi-zone unit (2-zone, 18,000 BTU)
Pull from distributor quote for the specific brand and model.
$1,200 – $1,800
12,000 BTU indoor head (addition)
Wall-mount cassette. Pull from distributor quote.
$500 – $800
9,000 BTU indoor head (garage)
Wall-mount cassette. Pull from distributor quote.
$400 – $650
Line set, addition (25 ft)
3/8" and 1/4" copper line set at current copper pricing per linear foot.
$80 – $150
Line set, garage (35 ft)
Same sizing. Longer run adds material and labor.
$110 – $200
Line set covers and mounting hardware
Surface-mount line set cover if exposed runs are visible.
$60 – $120
Electrical materials and new 240V circuit
If electrician sub is needed, get a quote before pricing. If within your license scope, price at materials + labor.
$200 – $450
Labor, mount, run line sets, braze, evacuate, commission (2 zones)
8–12 hours at burdened rate. Two-zone system with separate line set runs.
$490 – $740
City of Phoenix mechanical permit
Pull current fee from Phoenix Development Services.
$150 – $300

Quote range$5,800 – $8,500

Price toward the low end for a simple install with short line set runs and easy access. Price toward the high end for concealed line set runs through finished walls or ceilings, difficult mounting locations, or a job that requires coordination with an electrician sub. Multi-zone systems with 3 or 4 heads should be priced by adding each additional head as a line item at $800–$1,500 per additional zone depending on line set length and mounting complexity.

What kills the margin

**Not scoping the line set routing before quoting.** A 25-foot exposed line set run on the exterior of a block wall is very different from a 25-foot concealed run through a finished ceiling. The concealed run adds 2–4 hours of labor and drywall patching that is not in your scope.
**Underpricing multi-zone systems.** Each additional indoor head adds equipment cost, line set cost, and labor time. Price each zone as a separate line item, not as a flat add-on.
**Not verifying the electrical before quoting.** Mini-splits require a dedicated circuit. If the panel is full or the existing wiring is undersized, the electrical scope can add $500–$2,000 to the job. Scope it on the site visit.
**Mixing brands on multi-zone systems.** Multi-zone mini-split systems require matched outdoor and indoor units from the same manufacturer. Mixing brands voids the warranty and creates startup problems. Quote the complete matched system.
**Forgetting the refrigerant charge verification.** Mini-split systems are factory-charged for a specific line set length. Longer line sets require additional refrigerant. Price the additional refrigerant as a line item, not as an afterthought.

Commission & pay structures

Per-role compensation models tailored to this trade. Each model includes the structure, a worked example, the pros and cons, and which operators it fits.

Comfort Advisor / Install Salesperson

Runs in-home consultations on system replacements, heat pump upgrades, and mini-split installs; closes the job and hands off to the install crew. Compensation needs to incent closing rate, average ticket size, and margin protection, not just volume.

Commission on gross revenue (flat percentage)

The salesperson earns a fixed percentage of the total invoiced contract value on every job they close. Industry sources indicate HVAC commission rates generally range from 4% to 8% of total sale value depending on company structure and salesperson experience. A flat 6% on a $10,000 install produces $600 to the rep. This model is easy to explain and calculate but does not incent margin protection, a rep who discounts to close still earns commission on the discounted price.

Worked example

Rep closes a $9,500 residential heat pump install. Commission at 6%: $9,500 × 6% = $570. Cost of sale as a percentage of revenue: 6.0%. If the rep discounted $800 from a $10,300 quote to close, the commission dropped by $48 but the shop lost $800 in gross profit. The rep felt no pain from the discount.

Pros

Simple to calculate and communicate to the rep.
Easy to track in QuickBooks or your job management software.
Predictable cost-of-sale percentage for budgeting.

Cons

Does not penalize discounting, rep has no incentive to hold price.
Does not reward upsells that improve margin (e.g., selling a higher-efficiency system at a higher price).
Can overpay on large commercial jobs where the rep's effort was minimal.

When to use: Use this model when you are bringing on a first salesperson and need a simple structure to get them productive quickly. Revisit after 90 days of closed jobs to assess whether discounting is a problem.

Commission on gross margin dollars

The salesperson earns a percentage of the gross profit dollars on each job, not the revenue. This directly aligns the rep's incentive with the shop's margin. A rep who holds price earns more; a rep who discounts earns less. A typical structure in HVAC is 20–30% of gross margin dollars per closed job. At 25% of gross margin, a $10,000 job at 40% gross margin ($4,000 gross profit) pays the rep $1,000, a 10% cost-of-sale on revenue.

Worked example

Rep closes a $10,000 install at 40% gross margin. Gross profit: $4,000. Commission at 25% of gross profit: $1,000. Cost of sale: 10% of revenue. If the rep discounts to $9,200 and gross margin drops to 35% ($3,220 gross profit), commission drops to $805. The rep felt $195 of the $800 discount, a real incentive to hold price.

Pros

Directly incents margin protection, discounting hurts the rep's paycheck.
Rewards upsells to higher-efficiency or higher-margin equipment.
Scales naturally with job size without overpaying on large commercial jobs.

Cons

Requires accurate job costing in real time, the rep needs to know the gross margin before or at the time of the quote.
More complex to explain and calculate than a flat revenue percentage.
Rep may resist if they do not trust the margin calculation.

When to use: Use this model once you have accurate job costing in your accounting software and the rep has enough experience to understand margin math. This is the model that best protects Sun Valley Mechanical's profitability as the shop scales.

Base salary plus per-job bonus

The salesperson receives a modest base salary (enough to cover living expenses) plus a per-job bonus for every install they close above a minimum ticket size. Example: $2,500/month base plus $300 per closed install job over $6,000. This model provides income stability for the rep while still incenting performance. It works well for a first salesperson who is also doing some administrative or estimating work alongside selling.

Worked example

Rep closes 8 install jobs in a month averaging $9,500 each. Base: $2,500. Bonus: 8 jobs × $300 = $2,400. Total comp: $4,900. Cost of sale: $4,900 ÷ (8 × $9,500) = 6.4% of revenue. If the rep closes only 4 jobs, total comp is $3,700, still above base, but the bonus drop creates a clear performance signal.

Pros

Provides income stability that attracts higher-quality candidates.
Easy to explain and administer.
Base salary can be offset by administrative or estimating duties.

Cons

Does not incent margin protection, the per-job bonus is the same regardless of discount.
Base salary is a fixed cost even in slow months.
Rep may focus on closing volume rather than ticket size or margin.

When to use: Use this model when hiring a first salesperson who is not yet proven in HVAC sales and needs income stability to stay through the learning curve. Transition to a margin-based commission model after 6 months of performance data.

Lead Install Technician / Foreman

Runs the install crew, ensures quality and completeness of every install, and is the primary point of contact with the customer on the job site. Compensation needs to incent quality, efficiency, and customer satisfaction, not just hours worked.

Hourly wage plus efficiency bonus

The lead tech earns their standard hourly wage for all hours worked, plus a bonus when a job is completed within the quoted labor hours at or above a quality standard (no callbacks within 30 days). Example: if the job was quoted at 8 labor hours and the crew completes it in 7 hours with no callback, the lead tech earns a $75–$150 efficiency bonus. This incents the crew to work efficiently without sacrificing quality.

Worked example

Lead tech earns $32/hour. Install job quoted at 8 hours. Crew completes in 6.5 hours with no callback. Efficiency bonus: $100. Total comp for the job: (6.5 × $32) + $100 = $308. The shop saved 1.5 hours of burdened labor cost ($61.38 × 1.5 = $92.07) and paid out $100 in bonus, a net cost of $7.93 for a motivated crew.

Pros

Directly incents efficiency without creating pressure to cut corners.
Easy to calculate from time entries in your job management software.
Callback clause protects quality, no bonus if the job comes back.

Cons

Requires accurate labor hour tracking on every job.
Crew may rush on complex jobs where efficiency is not realistic.
Bonus pool needs to be funded from the margin on the job.

When to use: Use this model for an experienced lead tech who already has strong quality habits. The efficiency bonus rewards what they are already doing well.

Straight hourly with quarterly performance review

The lead tech earns a competitive hourly wage with no variable component, but receives a formal quarterly performance review with a defined raise schedule tied to measurable outcomes: callback rate below 5%, customer satisfaction score above 4.5/5, and jobs completed within 110% of quoted hours. Raises of $1–$2/hour per quarter for sustained performance above threshold.

Worked example

Lead tech starts at $30/hour. After Q1 with a 3% callback rate, 4.7/5 customer score, and 108% average labor efficiency: raise to $31.50/hour. Annual cost of the raise: $31.50 × 2,080 hours = $65,520 vs. $30 × 2,080 = $62,400, a $3,120 annual increase for documented performance.

Pros

Simple and predictable for the employee.
Raise schedule creates a clear career path.
No complex bonus calculation required.

Cons

No short-term incentive for exceptional performance on a specific job.
Raise schedule requires consistent performance tracking and documentation.
Does not differentiate between a great month and a mediocre month.

When to use: Use this model for a lead tech who values stability and predictability over variable income. Works well for a shop that does not yet have the job costing infrastructure to support a bonus model.

Service Technician

Runs service calls and repairs independently; diagnoses problems, presents repair options, and closes the repair on the spot. Compensation needs to incent diagnostic accuracy, average repair ticket, and maintenance plan conversions, not just call volume.

Hourly wage plus spiff on maintenance plan conversions

The service tech earns their standard hourly wage for all hours worked, plus a flat spiff for every maintenance plan they sell on a service call. Industry sources note that spiffs for selling maintenance agreements are a common HVAC incentive structure. A typical spiff is $50–$100 per plan sold. This incents the tech to present the plan on every call without creating pressure to oversell repairs.

Worked example

Tech earns $29/hour. In a month with 60 service calls, the tech converts 8 customers to maintenance plans at a $75 spiff each. Total spiff income: $600. Total monthly comp: (173 hours × $29) + $600 = $5,617. Cost of the spiff program: $600 ÷ (8 plans × $299 plan price) = 25.1% of plan revenue, acceptable given the lifetime value of a plan customer.

Pros

Simple to track and pay, one spiff per plan sold.
Directly incents the behavior (plan conversion) that has the highest long-term value.
Does not create pressure to oversell repairs.

Cons

Does not incent average repair ticket size.
Tech may focus on plan sales at the expense of thorough diagnosis.
Spiff cost must be budgeted into the maintenance plan pricing.

When to use: Use this model for a service tech who is already strong on diagnostics and repair. The spiff adds a revenue-generating incentive without changing the core compensation structure.

Hourly wage plus tiered bonus on average ticket

The service tech earns their standard hourly wage plus a monthly bonus based on their average closed repair ticket size. Example: average ticket $200–$299: no bonus. Average ticket $300–$399: $150 bonus. Average ticket $400+: $300 bonus. This incents the tech to present complete repair options (not just the minimum fix) and to convert diagnostic calls into full repairs.

Worked example

Tech runs 55 service calls in a month. Average closed ticket: $385. Monthly bonus: $150. Total comp: (173 hours × $29) + $150 = $5,167. If the tech's average ticket rises to $420 next month: bonus jumps to $300. Total comp: $5,317. The incremental bonus cost is $150; the incremental revenue from higher average tickets is $420 − $385 = $35 × 55 calls = $1,925.

Pros

Incents presenting complete repair options rather than minimum fixes.
Easy to calculate from your job management software's average ticket report.
Scales with performance, higher average ticket, higher bonus.

Cons

Tech may oversell repairs to hit the ticket threshold, requires a callback rate check.
Average ticket can be skewed by a few large jobs in a month.
Does not directly incent maintenance plan conversions.

When to use: Use this model for a service tech who is technically strong but tends to present only the minimum repair option. The tiered bonus creates a financial incentive to present complete options.

Office Administrator / Dispatcher

Handles inbound calls, schedules service and install jobs, manages the dispatch board, and supports invoicing and customer follow-up. Compensation needs to incent responsiveness, scheduling efficiency, and customer satisfaction, not sales metrics.

Straight salary with annual performance review

The admin/dispatcher earns a fixed annual salary paid bi-weekly, with a formal annual review tied to measurable outcomes: inbound call answer rate, scheduling efficiency (jobs per truck per day), and customer satisfaction score. Salary range for an experienced HVAC dispatcher in Phoenix is best derived from your own hiring market, post the role and see what candidates expect. A quarterly bonus of $500–$1,000 for sustained performance above threshold is a common addition.

Worked example

Admin earns $48,000/year ($23.08/hour). After a year with a 94% call answer rate, 4.8/5 customer satisfaction, and average of 5.2 jobs per truck per day: annual raise of $2,000 to $50,000. Quarterly bonus: $750 × 4 = $3,000. Total annual comp: $53,000. Cost as a percentage of $700,000 revenue target: 7.6%.

Pros

Predictable cost for budgeting.
Stable income for the employee, reduces turnover in a role where institutional knowledge matters.
Annual review creates a clear feedback loop.

Cons

No short-term incentive for exceptional performance.
Salary is a fixed cost in slow months.
Performance metrics require consistent tracking.

When to use: Use this model for all office and administrative roles. Variable compensation structures are not appropriate for dispatch and admin roles where the incentive should be service quality, not sales volume.

Pricing conversation scripts

Presenting the flat price after the site visit

in_person

When: After completing the load calculation or system assessment and before leaving the customer's home or property. Present in person whenever possible.

Goal: Present the price with confidence, explain what it includes, and give the customer a clear path to yes.

- Lead with the scope, not the price: 'Here's exactly what we're going to do, [equipment model and efficiency rating], [labor scope], [permit], [startup and commissioning], [warranty].'
- State the price clearly and without apology: 'The total for this project is $[X].'
- Explain what is included: 'That covers everything, equipment, labor, refrigerant, the City of Phoenix permit, and our [X]-year workmanship warranty. There are no add-ons unless you ask for something outside this scope.'
- Explain the IRA credit if applicable: 'This system qualifies for the federal energy efficiency tax credit, up to $2,000 back on your taxes. I'll give you the AHRI certificate you need to file for it.'
- Give them a decision path: 'If you want to move forward today, I can get you on the schedule for [date range]. The quote is good for 30 days, after that, equipment pricing may change.'
- Do not fill the silence after you state the price. Let them respond.

Handling 'can you go lower' without panic-discounting

in_person

When: When the customer pushes back on price after you have presented the quote. Use this before offering any discount.

Goal: Hold price by reanchoring to value and scope, and only discount if you can remove scope, not just to close.

- Acknowledge without conceding: 'I hear you, it's a significant investment. Let me make sure you understand what's in the price.'
- Restate the scope: 'This includes [equipment brand and model], [efficiency rating], [permit], [warranty], and our startup and commissioning. We're not cutting corners on any of that.'
- Ask what they're comparing to: 'If you've gotten another quote, I'm happy to look at it with you. Sometimes the difference is the equipment tier or what's included in the scope.'
- Offer a scope reduction, not a price reduction: 'If you want to bring the price down, we could look at a [lower efficiency tier] system, that would save you about $[X] on the equipment. The labor and permit cost stays the same.'
- If they still push: 'The price I gave you is built on what it actually costs us to do this job right. I can't go lower on the same scope without cutting something that matters to the quality of the install.'
- Do not offer a discount without removing scope. A discount with no scope change tells the customer your first price was inflated.

Raising rates with an existing maintenance plan customer

When: Annual plan renewal, or when labor or material costs have moved enough to require a price increase on existing plans.

Subject: Your Sun Valley Mechanical maintenance plan renewal, updated pricing for [Year]

Hi [Customer First Name],

Thank you for being a Sun Valley Mechanical maintenance plan customer. Your plan is coming up for renewal on [Renewal Date], and I want to give you advance notice of a pricing update.

Starting with your [Year] renewal, your plan price will be $[New Price]/year, up from $[Old Price]/year. This reflects increases in labor costs and parts pricing that have moved over the past year in the Phoenix market.

What stays the same: [List plan inclusions, e.g., two tune-up visits, priority scheduling, waived diagnostic fee on one service call].

Your renewal will process automatically on [Renewal Date] unless you contact us. If you have questions or want to talk through the plan, call or text us at [Phone Number].

Thank you for trusting us with your system.

[Marcus Rivera]
Sun Valley Mechanical LLC
[Phone] | [Email]

Presenting a service repair option on a system that is near end of life

in_person

When: When a service tech diagnoses a significant repair on a system that is 10+ years old and the repair cost is more than 30% of a replacement system cost.

Goal: Present both the repair and the replacement option let the customer decide, and document the conversation.

- State the diagnosis clearly: 'Your [component] has failed. Here's what that means for the system.'
- Present the repair option first: 'We can replace the [component] today for $[Repair Price]. That gets the system running. Given the age of the system, I want to be honest with you about what that buys you.'
- Present the replacement context: 'This system is [X] years old. The average lifespan for a system like this in Phoenix is 12–15 years. A repair today fixes this problem, but it doesn't address the age of the compressor, the coil, or the other components that are on the same timeline.'
- Present the replacement option: 'A full system replacement would be $[Replacement Price]. That resets the clock on everything, new equipment, new warranty, and the efficiency improvement means lower utility bills.'
- Let them decide: 'Both options are on the table. I can do the repair today, or I can get you a full replacement quote if you want to think about the bigger picture. What makes sense for you?'
- Document the conversation in your job management software. If the customer chooses the repair and the system fails again within 90 days, you want a record that you presented the replacement option.

Presenting a maintenance plan at the end of a service call

in_person

When: After completing a service call or repair, before leaving the customer's home. Every service call is a plan conversion opportunity.

Goal: Present the maintenance plan as a logical next step based on what you just found, not as a sales pitch.

- Anchor to the service call: 'Based on what I found today, [specific finding, e.g., dirty coil, low refrigerant, worn capacitor], this system would benefit from regular maintenance. A lot of what I fixed today was preventable with a tune-up.'
- State the plan simply: 'We offer a maintenance plan for $[Plan Price]/year. That covers two tune-up visits, spring and fall, plus priority scheduling if you ever need a service call, and I waive the diagnostic fee on one call per year.'
- Give the math: 'Two tune-up visits on their own would run you about $[2 × Service Call Price]. The plan saves you $[Savings] and puts you at the front of the line in July when everyone's calling at once.'
- Make it easy to say yes: 'I can set it up right now, takes two minutes. Want to do that before I head out?'
- If they say no: 'No problem. I'll leave you a card. If you want to sign up later, just call or text us.'

Printable worksheets

Print this section to work through by hand

These are designed to print and fill in. Each worksheet shows multiple blank copies so you can re-run the math as your numbers change. Calculated fields are highlighted and show the formula.

Burdened Labor Rate Calculator

4 copies when printed

Calculates the true cost of one billable hour for each technician or role, including wages, payroll taxes, workers' comp, vehicle, tools, PTO, and the billable-hour ratio. Run this for each W-2 employee and update it at every payroll change or workers' comp renewal.

How to use

Fill in one worksheet per employee. Use the most recent payroll register for wage data.
Pull your Arizona SUI rate from your DES employer account. Pull your workers' comp rate from your most recent policy declarations page (NCCI Class Code 5537).
For vehicle allocation, use one truck's total monthly cost (payment + insurance + fuel + maintenance) divided by the number of technicians sharing that truck, then divide by monthly billable hours.
The billable-hour ratio is your best estimate of what percentage of paid hours are actually billed to jobs. Start with 80% if you do not have data; refine from your time entries after 90 days.

Burdened Labor Rate Calculator

Copy 1 of 4

01
Employee name / role
One worksheet per employee.
02
Gross hourly wage ($)
Pull from payroll register. Use the actual rate, not a rounded number.
03
Social Security tax (6.2%)Calc
= Gross hourly wage × 0.062
04
Medicare tax (1.45%)Calc
= Gross hourly wage × 0.0145
05
FUTA (blended hourly, approx.)
For a full-year employee, FUTA on first $7,000 ÷ 2,080 hours ≈ $0.04/hour. Adjust if employee is part-year.
06
Arizona SUI rate (%)
Pull from your DES employer account. New employers start around 2.0%.
07
Arizona SUI cost per hour ($)Calc
= Gross hourly wage × (AZ SUI rate ÷ 100)
08
Workers' comp rate per $100 of wages (%)
NCCI Class Code 5537. Pull from your policy declarations page. National average ~$3.14 per $100; your AZ rate may differ.
09
Workers' comp cost per hour ($)Calc
= Gross hourly wage × (WC rate ÷ 100)
10
Vehicle allocation per hour ($)
Total monthly truck cost ÷ number of techs on that truck ÷ monthly billable hours.
11
Tool depreciation per hour ($)
Annual tool budget ÷ 2,000 hours. Example: $3,000/year ÷ 2,000 = $1.50/hour.
12
PTO load (%)
PTO days × 8 hours ÷ (2,080 − PTO hours). Example: 10 days = 80 hours ÷ 2,000 = 4.0%.
13
PTO cost per hour ($)Calc
= Gross hourly wage × (PTO load ÷ 100)
14
Health insurance per hour ($)
Monthly premium employer share ÷ 173 hours. Enter $0 if not offered.
15
Total loaded cost per paid hour ($)Calc
= Wage + SS + Medicare + FUTA + SUI + WC + Vehicle + Tools + PTO + Health
16
Billable-hour ratio (%)
Billable hours ÷ total paid hours. Start with 80% if no data; refine from time entries.
17
Burdened rate per BILLABLE hour ($)Calc
= Total loaded cost per paid hour ÷ (Billable-hour ratio ÷ 100)

Burdened Labor Rate Calculator

Copy 2 of 4

01
Employee name / role
One worksheet per employee.
02
Gross hourly wage ($)
Pull from payroll register. Use the actual rate, not a rounded number.
03
Social Security tax (6.2%)Calc
= Gross hourly wage × 0.062
04
Medicare tax (1.45%)Calc
= Gross hourly wage × 0.0145
05
FUTA (blended hourly, approx.)
For a full-year employee, FUTA on first $7,000 ÷ 2,080 hours ≈ $0.04/hour. Adjust if employee is part-year.
06
Arizona SUI rate (%)
Pull from your DES employer account. New employers start around 2.0%.
07
Arizona SUI cost per hour ($)Calc
= Gross hourly wage × (AZ SUI rate ÷ 100)
08
Workers' comp rate per $100 of wages (%)
NCCI Class Code 5537. Pull from your policy declarations page. National average ~$3.14 per $100; your AZ rate may differ.
09
Workers' comp cost per hour ($)Calc
= Gross hourly wage × (WC rate ÷ 100)
10
Vehicle allocation per hour ($)
Total monthly truck cost ÷ number of techs on that truck ÷ monthly billable hours.
11
Tool depreciation per hour ($)
Annual tool budget ÷ 2,000 hours. Example: $3,000/year ÷ 2,000 = $1.50/hour.
12
PTO load (%)
PTO days × 8 hours ÷ (2,080 − PTO hours). Example: 10 days = 80 hours ÷ 2,000 = 4.0%.
13
PTO cost per hour ($)Calc
= Gross hourly wage × (PTO load ÷ 100)
14
Health insurance per hour ($)
Monthly premium employer share ÷ 173 hours. Enter $0 if not offered.
15
Total loaded cost per paid hour ($)Calc
= Wage + SS + Medicare + FUTA + SUI + WC + Vehicle + Tools + PTO + Health
16
Billable-hour ratio (%)
Billable hours ÷ total paid hours. Start with 80% if no data; refine from time entries.
17
Burdened rate per BILLABLE hour ($)Calc
= Total loaded cost per paid hour ÷ (Billable-hour ratio ÷ 100)

Burdened Labor Rate Calculator

Copy 3 of 4

01
Employee name / role
One worksheet per employee.
02
Gross hourly wage ($)
Pull from payroll register. Use the actual rate, not a rounded number.
03
Social Security tax (6.2%)Calc
= Gross hourly wage × 0.062
04
Medicare tax (1.45%)Calc
= Gross hourly wage × 0.0145
05
FUTA (blended hourly, approx.)
For a full-year employee, FUTA on first $7,000 ÷ 2,080 hours ≈ $0.04/hour. Adjust if employee is part-year.
06
Arizona SUI rate (%)
Pull from your DES employer account. New employers start around 2.0%.
07
Arizona SUI cost per hour ($)Calc
= Gross hourly wage × (AZ SUI rate ÷ 100)
08
Workers' comp rate per $100 of wages (%)
NCCI Class Code 5537. Pull from your policy declarations page. National average ~$3.14 per $100; your AZ rate may differ.
09
Workers' comp cost per hour ($)Calc
= Gross hourly wage × (WC rate ÷ 100)
10
Vehicle allocation per hour ($)
Total monthly truck cost ÷ number of techs on that truck ÷ monthly billable hours.
11
Tool depreciation per hour ($)
Annual tool budget ÷ 2,000 hours. Example: $3,000/year ÷ 2,000 = $1.50/hour.
12
PTO load (%)
PTO days × 8 hours ÷ (2,080 − PTO hours). Example: 10 days = 80 hours ÷ 2,000 = 4.0%.
13
PTO cost per hour ($)Calc
= Gross hourly wage × (PTO load ÷ 100)
14
Health insurance per hour ($)
Monthly premium employer share ÷ 173 hours. Enter $0 if not offered.
15
Total loaded cost per paid hour ($)Calc
= Wage + SS + Medicare + FUTA + SUI + WC + Vehicle + Tools + PTO + Health
16
Billable-hour ratio (%)
Billable hours ÷ total paid hours. Start with 80% if no data; refine from time entries.
17
Burdened rate per BILLABLE hour ($)Calc
= Total loaded cost per paid hour ÷ (Billable-hour ratio ÷ 100)

Burdened Labor Rate Calculator

Copy 4 of 4

01
Employee name / role
One worksheet per employee.
02
Gross hourly wage ($)
Pull from payroll register. Use the actual rate, not a rounded number.
03
Social Security tax (6.2%)Calc
= Gross hourly wage × 0.062
04
Medicare tax (1.45%)Calc
= Gross hourly wage × 0.0145
05
FUTA (blended hourly, approx.)
For a full-year employee, FUTA on first $7,000 ÷ 2,080 hours ≈ $0.04/hour. Adjust if employee is part-year.
06
Arizona SUI rate (%)
Pull from your DES employer account. New employers start around 2.0%.
07
Arizona SUI cost per hour ($)Calc
= Gross hourly wage × (AZ SUI rate ÷ 100)
08
Workers' comp rate per $100 of wages (%)
NCCI Class Code 5537. Pull from your policy declarations page. National average ~$3.14 per $100; your AZ rate may differ.
09
Workers' comp cost per hour ($)Calc
= Gross hourly wage × (WC rate ÷ 100)
10
Vehicle allocation per hour ($)
Total monthly truck cost ÷ number of techs on that truck ÷ monthly billable hours.
11
Tool depreciation per hour ($)
Annual tool budget ÷ 2,000 hours. Example: $3,000/year ÷ 2,000 = $1.50/hour.
12
PTO load (%)
PTO days × 8 hours ÷ (2,080 − PTO hours). Example: 10 days = 80 hours ÷ 2,000 = 4.0%.
13
PTO cost per hour ($)Calc
= Gross hourly wage × (PTO load ÷ 100)
14
Health insurance per hour ($)
Monthly premium employer share ÷ 173 hours. Enter $0 if not offered.
15
Total loaded cost per paid hour ($)Calc
= Wage + SS + Medicare + FUTA + SUI + WC + Vehicle + Tools + PTO + Health
16
Billable-hour ratio (%)
Billable hours ÷ total paid hours. Start with 80% if no data; refine from time entries.
17
Burdened rate per BILLABLE hour ($)Calc
= Total loaded cost per paid hour ÷ (Billable-hour ratio ÷ 100)

Per-Job Cost and Quote Builder

4 copies when printed

Builds a complete job cost estimate from direct costs through overhead allocation to the final quote range. Use this for every install or large repair quote before presenting a price to the customer.

How to use

Fill in one worksheet per job. Pull material costs from your distributor quote or most recent invoice for comparable materials.
Use the burdened rate from the Burdened Labor Rate Calculator worksheet for the labor cost calculation.
Pull your overhead allocation rate from the Overhead Allocation worksheet (monthly overhead ÷ monthly billable hours = overhead cost per hour).
The quote range is calculated at your low and high gross margin targets. Present the customer a single price, not a range, use the range internally to know your floor and ceiling.

Per-Job Cost and Quote Builder

Copy 1 of 4

01
Job name / address
02
Service line
Residential Install / Light Commercial Install / Service & Repair / Mini-Split / Heat Pump / Maintenance Plan
03
Equipment cost ($)
Pull from distributor invoice or quote for the specific model. Do not use MSRP.
04
Equipment markup (%)
Your standard equipment markup percentage. Residential: 25–40% on cost. Commercial: 20–30% on cost.
05
Equipment price to customer ($)Calc
= Equipment cost × (1 + markup ÷ 100)
06
Materials cost ($)
Refrigerant, line set, electrical materials, consumables. Pull from last invoice for comparable job.
07
Materials markup (%)
Your standard parts/materials markup. Typically 50–100% on cost for small parts and refrigerant.
08
Materials price to customer ($)Calc
= Materials cost × (1 + markup ÷ 100)
09
Estimated labor hours
Use time entries from your last 3 comparable jobs as the baseline.
10
Burdened labor rate ($/hour)
From the Burdened Labor Rate Calculator worksheet.
11
Labor cost ($)Calc
= Estimated labor hours × Burdened labor rate
12
Subcontractor cost ($)
Electrician sub, crane rental, or other direct subs. Get quotes before pricing.
13
Permit cost ($)
Pull from the jurisdiction's current fee schedule. Call the permit desk if unsure.
14
Disposal and miscellaneous ($)
Old equipment disposal, refrigerant recovery, incidentals.
15
Total direct cost ($)Calc
= Equipment cost + Materials cost + Labor cost + Sub cost + Permit + Disposal
16
Overhead allocation per hour ($/hour)
Monthly overhead ÷ monthly billable hours. From your overhead allocation calculation.
17
Overhead allocation for this job ($)Calc
= Overhead allocation per hour × Estimated labor hours
18
Total cost including overhead ($)Calc
= Total direct cost + Overhead allocation
19
Target gross margin, low (%)
Your low-end gross margin target for this service line. From Section 6 of the playbook.
20
Quote price at low margin ($)Calc
= (Equipment price + Materials price + Labor cost + Sub cost + Permit + Disposal + Overhead) ÷ (1 − low margin ÷ 100)
21
Target gross margin, high (%)
Your high-end gross margin target for this service line.
22
Quote price at high margin ($)Calc
= Same formula as above using high margin %
23
Final quoted price ($)
Your chosen price within the range. Document the reason if pricing below the midpoint.

Per-Job Cost and Quote Builder

Copy 2 of 4

01
Job name / address
02
Service line
Residential Install / Light Commercial Install / Service & Repair / Mini-Split / Heat Pump / Maintenance Plan
03
Equipment cost ($)
Pull from distributor invoice or quote for the specific model. Do not use MSRP.
04
Equipment markup (%)
Your standard equipment markup percentage. Residential: 25–40% on cost. Commercial: 20–30% on cost.
05
Equipment price to customer ($)Calc
= Equipment cost × (1 + markup ÷ 100)
06
Materials cost ($)
Refrigerant, line set, electrical materials, consumables. Pull from last invoice for comparable job.
07
Materials markup (%)
Your standard parts/materials markup. Typically 50–100% on cost for small parts and refrigerant.
08
Materials price to customer ($)Calc
= Materials cost × (1 + markup ÷ 100)
09
Estimated labor hours
Use time entries from your last 3 comparable jobs as the baseline.
10
Burdened labor rate ($/hour)
From the Burdened Labor Rate Calculator worksheet.
11
Labor cost ($)Calc
= Estimated labor hours × Burdened labor rate
12
Subcontractor cost ($)
Electrician sub, crane rental, or other direct subs. Get quotes before pricing.
13
Permit cost ($)
Pull from the jurisdiction's current fee schedule. Call the permit desk if unsure.
14
Disposal and miscellaneous ($)
Old equipment disposal, refrigerant recovery, incidentals.
15
Total direct cost ($)Calc
= Equipment cost + Materials cost + Labor cost + Sub cost + Permit + Disposal
16
Overhead allocation per hour ($/hour)
Monthly overhead ÷ monthly billable hours. From your overhead allocation calculation.
17
Overhead allocation for this job ($)Calc
= Overhead allocation per hour × Estimated labor hours
18
Total cost including overhead ($)Calc
= Total direct cost + Overhead allocation
19
Target gross margin, low (%)
Your low-end gross margin target for this service line. From Section 6 of the playbook.
20
Quote price at low margin ($)Calc
= (Equipment price + Materials price + Labor cost + Sub cost + Permit + Disposal + Overhead) ÷ (1 − low margin ÷ 100)
21
Target gross margin, high (%)
Your high-end gross margin target for this service line.
22
Quote price at high margin ($)Calc
= Same formula as above using high margin %
23
Final quoted price ($)
Your chosen price within the range. Document the reason if pricing below the midpoint.

Per-Job Cost and Quote Builder

Copy 3 of 4

01
Job name / address
02
Service line
Residential Install / Light Commercial Install / Service & Repair / Mini-Split / Heat Pump / Maintenance Plan
03
Equipment cost ($)
Pull from distributor invoice or quote for the specific model. Do not use MSRP.
04
Equipment markup (%)
Your standard equipment markup percentage. Residential: 25–40% on cost. Commercial: 20–30% on cost.
05
Equipment price to customer ($)Calc
= Equipment cost × (1 + markup ÷ 100)
06
Materials cost ($)
Refrigerant, line set, electrical materials, consumables. Pull from last invoice for comparable job.
07
Materials markup (%)
Your standard parts/materials markup. Typically 50–100% on cost for small parts and refrigerant.
08
Materials price to customer ($)Calc
= Materials cost × (1 + markup ÷ 100)
09
Estimated labor hours
Use time entries from your last 3 comparable jobs as the baseline.
10
Burdened labor rate ($/hour)
From the Burdened Labor Rate Calculator worksheet.
11
Labor cost ($)Calc
= Estimated labor hours × Burdened labor rate
12
Subcontractor cost ($)
Electrician sub, crane rental, or other direct subs. Get quotes before pricing.
13
Permit cost ($)
Pull from the jurisdiction's current fee schedule. Call the permit desk if unsure.
14
Disposal and miscellaneous ($)
Old equipment disposal, refrigerant recovery, incidentals.
15
Total direct cost ($)Calc
= Equipment cost + Materials cost + Labor cost + Sub cost + Permit + Disposal
16
Overhead allocation per hour ($/hour)
Monthly overhead ÷ monthly billable hours. From your overhead allocation calculation.
17
Overhead allocation for this job ($)Calc
= Overhead allocation per hour × Estimated labor hours
18
Total cost including overhead ($)Calc
= Total direct cost + Overhead allocation
19
Target gross margin, low (%)
Your low-end gross margin target for this service line. From Section 6 of the playbook.
20
Quote price at low margin ($)Calc
= (Equipment price + Materials price + Labor cost + Sub cost + Permit + Disposal + Overhead) ÷ (1 − low margin ÷ 100)
21
Target gross margin, high (%)
Your high-end gross margin target for this service line.
22
Quote price at high margin ($)Calc
= Same formula as above using high margin %
23
Final quoted price ($)
Your chosen price within the range. Document the reason if pricing below the midpoint.

Per-Job Cost and Quote Builder

Copy 4 of 4

01
Job name / address
02
Service line
Residential Install / Light Commercial Install / Service & Repair / Mini-Split / Heat Pump / Maintenance Plan
03
Equipment cost ($)
Pull from distributor invoice or quote for the specific model. Do not use MSRP.
04
Equipment markup (%)
Your standard equipment markup percentage. Residential: 25–40% on cost. Commercial: 20–30% on cost.
05
Equipment price to customer ($)Calc
= Equipment cost × (1 + markup ÷ 100)
06
Materials cost ($)
Refrigerant, line set, electrical materials, consumables. Pull from last invoice for comparable job.
07
Materials markup (%)
Your standard parts/materials markup. Typically 50–100% on cost for small parts and refrigerant.
08
Materials price to customer ($)Calc
= Materials cost × (1 + markup ÷ 100)
09
Estimated labor hours
Use time entries from your last 3 comparable jobs as the baseline.
10
Burdened labor rate ($/hour)
From the Burdened Labor Rate Calculator worksheet.
11
Labor cost ($)Calc
= Estimated labor hours × Burdened labor rate
12
Subcontractor cost ($)
Electrician sub, crane rental, or other direct subs. Get quotes before pricing.
13
Permit cost ($)
Pull from the jurisdiction's current fee schedule. Call the permit desk if unsure.
14
Disposal and miscellaneous ($)
Old equipment disposal, refrigerant recovery, incidentals.
15
Total direct cost ($)Calc
= Equipment cost + Materials cost + Labor cost + Sub cost + Permit + Disposal
16
Overhead allocation per hour ($/hour)
Monthly overhead ÷ monthly billable hours. From your overhead allocation calculation.
17
Overhead allocation for this job ($)Calc
= Overhead allocation per hour × Estimated labor hours
18
Total cost including overhead ($)Calc
= Total direct cost + Overhead allocation
19
Target gross margin, low (%)
Your low-end gross margin target for this service line. From Section 6 of the playbook.
20
Quote price at low margin ($)Calc
= (Equipment price + Materials price + Labor cost + Sub cost + Permit + Disposal + Overhead) ÷ (1 − low margin ÷ 100)
21
Target gross margin, high (%)
Your high-end gross margin target for this service line.
22
Quote price at high margin ($)Calc
= Same formula as above using high margin %
23
Final quoted price ($)
Your chosen price within the range. Document the reason if pricing below the midpoint.

Service-Line Gross Margin Tracker

2 copies when printed

Records actual gross margin on each closed job by service line, so the operator can find the median gross margin across real jobs and compare it to the targets in the playbook. Run this every month on all closed jobs.

How to use

Fill in one row per closed job. Pull revenue from the invoice and direct costs from the job cost report in QuickBooks.
Use the burdened labor rate from the Burdened Labor Rate Calculator, not the wage, for the labor cost column.
After filling in 10 rows for a service line, calculate the median gross margin % and compare it to your target. If the median is below target, the pricing needs to move up or the cost needs to come down.
Print two copies: one for the current quarter, one for the prior quarter for comparison.

Service-Line Gross Margin Tracker

Copy 1 of 2

01
Job # / Customer name
02
Service line
Residential Install / Light Commercial / Service & Repair / Maintenance Plan / Mini-Split / Heat Pump
03
Close date
04
Invoiced revenue ($)
05
Equipment cost ($)
From supplier invoice tied to this job.
06
Materials cost ($)
Refrigerant, parts, consumables from supplier invoice.
07
Labor cost ($)
Hours from time entries × burdened rate. Not wage, burdened rate.
08
Subcontractor cost ($)
09
Permit cost ($)
10
Other direct costs ($)
11
Total direct cost ($)Calc
= Equipment + Materials + Labor + Subs + Permit + Other
12
Gross profit ($)Calc
= Invoiced revenue − Total direct cost
13
Gross margin (%)Calc
= Gross profit ÷ Invoiced revenue × 100
14
Notes
Any unusual cost drivers: difficult access, callback, scope addition, emergency call.

Service-Line Gross Margin Tracker

Copy 2 of 2

01
Job # / Customer name
02
Service line
Residential Install / Light Commercial / Service & Repair / Maintenance Plan / Mini-Split / Heat Pump
03
Close date
04
Invoiced revenue ($)
05
Equipment cost ($)
From supplier invoice tied to this job.
06
Materials cost ($)
Refrigerant, parts, consumables from supplier invoice.
07
Labor cost ($)
Hours from time entries × burdened rate. Not wage, burdened rate.
08
Subcontractor cost ($)
09
Permit cost ($)
10
Other direct costs ($)
11
Total direct cost ($)Calc
= Equipment + Materials + Labor + Subs + Permit + Other
12
Gross profit ($)Calc
= Invoiced revenue − Total direct cost
13
Gross margin (%)Calc
= Gross profit ÷ Invoiced revenue × 100
14
Notes
Any unusual cost drivers: difficult access, callback, scope addition, emergency call.

Commission Designer

3 copies when printed

Models the cost and OTE (on-target earnings) for each commissioned role before making an offer, so the operator knows the cost-of-sale percentage and can budget the role against the revenue it is expected to generate.

How to use

Fill in one worksheet per role. Use the compensation model from Section 9 of the playbook as the starting structure.
The assumed close rate and average job size should come from your actual closed-job data, not from what you hope the new hire will achieve.
Calculate the cost-of-sale percentage (total annual comp ÷ total annual revenue generated) and compare it to the gross margin on the jobs the role is expected to close. The role must cost less than the gross margin it generates.
Print three copies: one per candidate role (Comfort Advisor, Lead Tech bonus structure, Service Tech spiff structure).

Commission Designer

Copy 1 of 3

01
Role name
02
Compensation model
Commission on revenue / Commission on gross margin / Base + bonus / Hourly + spiff
03
Base salary or hourly wage ($/year or $/hour)
04
Commission or bonus rate (%)
Percentage of revenue, gross margin, or flat per-job amount depending on model.
05
Assumed average job size ($)
Use your actual median closed-job revenue for this service line, not a target.
06
Assumed close rate or jobs per month
For salespeople: close rate on qualified leads. For techs: jobs per day × working days.
07
Assumed monthly revenue generated ($)Calc
= Average job size × jobs per month (or close rate × leads per month)
08
Monthly commission or bonus ($)Calc
= Monthly revenue × commission rate ÷ 100 (or flat bonus × jobs per month)
09
Monthly base or hourly comp ($)Calc
= Base salary ÷ 12 (or hourly rate × 173 hours)
10
Total monthly comp (OTE) ($)Calc
= Monthly base + Monthly commission/bonus
11
Annual OTE ($)Calc
= Total monthly comp × 12
12
Annual revenue generated ($)Calc
= Monthly revenue × 12
13
Cost-of-sale % (comp ÷ revenue)Calc
= Annual OTE ÷ Annual revenue × 100
14
Target gross margin % for this service line
From Section 6 of the playbook. The cost-of-sale % must be less than this number.
15
Net margin after comp (%)Calc
= Target gross margin % − Cost-of-sale %
16
Notes
Document any assumptions about lead volume, close rate, or job mix that could change the math.

Commission Designer

Copy 2 of 3

01
Role name
02
Compensation model
Commission on revenue / Commission on gross margin / Base + bonus / Hourly + spiff
03
Base salary or hourly wage ($/year or $/hour)
04
Commission or bonus rate (%)
Percentage of revenue, gross margin, or flat per-job amount depending on model.
05
Assumed average job size ($)
Use your actual median closed-job revenue for this service line, not a target.
06
Assumed close rate or jobs per month
For salespeople: close rate on qualified leads. For techs: jobs per day × working days.
07
Assumed monthly revenue generated ($)Calc
= Average job size × jobs per month (or close rate × leads per month)
08
Monthly commission or bonus ($)Calc
= Monthly revenue × commission rate ÷ 100 (or flat bonus × jobs per month)
09
Monthly base or hourly comp ($)Calc
= Base salary ÷ 12 (or hourly rate × 173 hours)
10
Total monthly comp (OTE) ($)Calc
= Monthly base + Monthly commission/bonus
11
Annual OTE ($)Calc
= Total monthly comp × 12
12
Annual revenue generated ($)Calc
= Monthly revenue × 12
13
Cost-of-sale % (comp ÷ revenue)Calc
= Annual OTE ÷ Annual revenue × 100
14
Target gross margin % for this service line
From Section 6 of the playbook. The cost-of-sale % must be less than this number.
15
Net margin after comp (%)Calc
= Target gross margin % − Cost-of-sale %
16
Notes
Document any assumptions about lead volume, close rate, or job mix that could change the math.

Commission Designer

Copy 3 of 3

01
Role name
02
Compensation model
Commission on revenue / Commission on gross margin / Base + bonus / Hourly + spiff
03
Base salary or hourly wage ($/year or $/hour)
04
Commission or bonus rate (%)
Percentage of revenue, gross margin, or flat per-job amount depending on model.
05
Assumed average job size ($)
Use your actual median closed-job revenue for this service line, not a target.
06
Assumed close rate or jobs per month
For salespeople: close rate on qualified leads. For techs: jobs per day × working days.
07
Assumed monthly revenue generated ($)Calc
= Average job size × jobs per month (or close rate × leads per month)
08
Monthly commission or bonus ($)Calc
= Monthly revenue × commission rate ÷ 100 (or flat bonus × jobs per month)
09
Monthly base or hourly comp ($)Calc
= Base salary ÷ 12 (or hourly rate × 173 hours)
10
Total monthly comp (OTE) ($)Calc
= Monthly base + Monthly commission/bonus
11
Annual OTE ($)Calc
= Total monthly comp × 12
12
Annual revenue generated ($)Calc
= Monthly revenue × 12
13
Cost-of-sale % (comp ÷ revenue)Calc
= Annual OTE ÷ Annual revenue × 100
14
Target gross margin % for this service line
From Section 6 of the playbook. The cost-of-sale % must be less than this number.
15
Net margin after comp (%)Calc
= Target gross margin % − Cost-of-sale %
16
Notes
Document any assumptions about lead volume, close rate, or job mix that could change the math.

Overhead Allocation Calculator

2 copies when printed

Lists every fixed and semi-fixed monthly overhead cost, totals them, and calculates the overhead cost per billable hour and per job. Update this whenever a new overhead cost is added (new truck, new software, new hire) or when a cost changes at renewal.

How to use

List every overhead cost that is not directly tied to a specific job. If a cost goes on a job invoice (permit, refrigerant, sub), it is a direct cost, not overhead.
Use your last 3 months of bank statements and credit card statements to find costs you may have forgotten.
The overhead cost per billable hour is the number that goes into the Per-Job Cost and Quote Builder worksheet.
Revisit this worksheet whenever you add a truck, hire an employee, or sign a new lease or subscription.

Overhead Allocation Calculator

Copy 1 of 2

01
Vehicle 1, payment + insurance + fuel + maintenance ($/month)
02
Vehicle 2, payment + insurance + fuel + maintenance ($/month)
03
General liability insurance ($/month)
04
Commercial auto insurance (already in vehicle line above?)
Check that you are not double-counting. Commercial auto is often bundled with GL or listed separately.
05
Tools and equipment depreciation ($/month)
Annual tool budget ÷ 12. Refrigerant recovery machines, manifold gauges, vacuum pumps, etc.
06
Software subscriptions ($/month)
Job management software, accounting software, GPS fleet tracking, LSA platform fees.
07
Marketing and LSA spend ($/month)
Google LSA budget, referral partner fees, any paid advertising.
08
Owner draw or salary ($/month)
Marcus Rivera's compensation if not billed directly to jobs as a technician.
09
Accounting / bookkeeping ($/month)
10
Phone and communications ($/month)
11
Office supplies and miscellaneous ($/month)
12
Other overhead cost 1 ($/month)
13
Other overhead cost 2 ($/month)
14
Total monthly overhead ($)Calc
= Sum of all overhead line items above
15
Estimated monthly billable hours
Number of technicians × billable hours per tech per month. Start with 160 hours per tech per month and refine from time entries.
16
Overhead cost per billable hour ($)Calc
= Total monthly overhead ÷ Estimated monthly billable hours
17
Overhead as % of revenue targetCalc
= (Total monthly overhead × 12) ÷ Annual revenue target × 100

Overhead Allocation Calculator

Copy 2 of 2

01
Vehicle 1, payment + insurance + fuel + maintenance ($/month)
02
Vehicle 2, payment + insurance + fuel + maintenance ($/month)
03
General liability insurance ($/month)
04
Commercial auto insurance (already in vehicle line above?)
Check that you are not double-counting. Commercial auto is often bundled with GL or listed separately.
05
Tools and equipment depreciation ($/month)
Annual tool budget ÷ 12. Refrigerant recovery machines, manifold gauges, vacuum pumps, etc.
06
Software subscriptions ($/month)
Job management software, accounting software, GPS fleet tracking, LSA platform fees.
07
Marketing and LSA spend ($/month)
Google LSA budget, referral partner fees, any paid advertising.
08
Owner draw or salary ($/month)
Marcus Rivera's compensation if not billed directly to jobs as a technician.
09
Accounting / bookkeeping ($/month)
10
Phone and communications ($/month)
11
Office supplies and miscellaneous ($/month)
12
Other overhead cost 1 ($/month)
13
Other overhead cost 2 ($/month)
14
Total monthly overhead ($)Calc
= Sum of all overhead line items above
15
Estimated monthly billable hours
Number of technicians × billable hours per tech per month. Start with 160 hours per tech per month and refine from time entries.
16
Overhead cost per billable hour ($)Calc
= Total monthly overhead ÷ Estimated monthly billable hours
17
Overhead as % of revenue targetCalc
= (Total monthly overhead × 12) ÷ Annual revenue target × 100

Margin Literacy Reference Card

1 copy when printed

A one-page reference showing the markup-to-margin conversion table and the key margin formulas. Print one copy and keep it at the estimating desk or in the quote folder.

How to use

This is a reference card, not a fill-in worksheet. No fields to complete.
Use the conversion table when building quotes to confirm that your markup percentage produces the gross margin percentage you intend.
Use the formulas at the bottom to check any margin or markup calculation by hand.

Margin Literacy Reference Card

Copy 1 of 1

01
Markup 20% → Gross Margin 16.7%
Price = Cost × 1.20. Margin = 0.20 ÷ 1.20.
02
Markup 25% → Gross Margin 20.0%
Price = Cost × 1.25. Margin = 0.25 ÷ 1.25.
03
Markup 33% → Gross Margin 24.8%
Price = Cost × 1.33. Margin = 0.33 ÷ 1.33.
04
Markup 43% → Gross Margin 30.0%
Price = Cost × 1.43. Margin = 0.43 ÷ 1.43.
05
Markup 50% → Gross Margin 33.3%
Price = Cost × 1.50. Margin = 0.50 ÷ 1.50.
06
Markup 67% → Gross Margin 40.0%
Price = Cost × 1.67. Margin = 0.67 ÷ 1.67.
07
Markup 100% → Gross Margin 50.0%
Price = Cost × 2.00. Margin = 1.00 ÷ 2.00.
08
Formula: Markup % = Margin % ÷ (1 − Margin %)
Use this to find the required markup for any target margin.
09
Formula: Margin % = Markup % ÷ (1 + Markup %)
Use this to find the actual margin produced by any markup.
10
Formula: Quote price from cost + target margin = Cost ÷ (1 − Margin %)
Example: $4,000 cost at 40% margin target = $4,000 ÷ 0.60 = $6,667 quote price.
11
Formula: Gross margin % = (Revenue − Direct cost) ÷ Revenue × 100
Direct cost = materials + burdened labor + subs + permits. Does NOT include overhead.
12
Formula: Net margin % = (Revenue − All costs) ÷ Revenue × 100
All costs = direct cost + overhead. Net margin is what's left for the owner.

When to come back and re-do the math

**Workers' comp renews and the rate changes by more than $0.50 per $100 of payroll.** At $32/hour wages, a $0.50 change in the WC rate moves your burdened labor rate by $0.16/hour, small per hour, but meaningful across 1,700 billable hours per tech per year. Update the Burdened Labor Rate Calculator worksheet and recalculate your quote floor.
**A technician's wage changes.** Any raise, whether merit or market-driven, changes the burdened labor rate for that technician. Recalculate the worksheet the day the new rate takes effect and update your flat-rate menu and quote templates.
**Distributor equipment pricing moves by 5% or more.** Refrigerant regulation changes (the R-410A phasedown and R-454B transition) and supply chain events can move equipment prices quickly. If your distributor raises prices on the equipment you install most often, your quote floor moves with it. Pull a new distributor quote before pricing the next job in that equipment category.
**Three quotes in a row lose on price to a known competitor.** This is a market signal, not a cost signal. Before cutting price, find out what the competitor is quoting: same equipment tier? Same scope? Same warranty? If the scope is comparable and you are consistently losing, your price may be above market, or your close rate may be a sales process issue, not a pricing issue.
**Monthly overhead changes by more than $500.** Adding a truck, signing a new software subscription, or hiring an admin changes the overhead cost per billable hour. Update the Overhead Allocation Calculator and recalculate the overhead allocation line in your Per-Job Cost and Quote Builder.
**Your median gross margin on any service line drops below your target for two consecutive months.** Pull the Service-Line Gross Margin Tracker for the last 60 days. If the median is below target, find the cause before adjusting price: is it a cost increase (materials, labor), a scope creep issue (jobs running longer than quoted), or a pricing issue (quotes set too low)? The fix depends on the cause.