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  • Why Do HVAC Contractors Charge So Much?

    Energy Air

    You have a college degree, a respectable white collar job and you work hard — but you don’t make $100 an hour. That would be $200,000 per year! So where do HVAC contractors come off charging $100 per hour for labor when they are only paying their technician $35 per hour (including taxes and benefits)? Read on for an in-depth breakdown to see where your money is really going when you hire a contractor.

    Where Does Your Money Go?

    There are more moving parts to a reliable HVAC company than meets the eye. Let’s take a look at where your money is really going when you hire a technician.

    Miscellaneous Costs

    A painstakingly-efficient HVAC service company on average bills their service technicians out for less than 50 perfect of the time they are on the clock. The rest goes towards other often-forgotten costs, including:

      • Windshield time
      • Warehouse time
      • Paperwork time
      • On-going training
      • Running for parts
      • Return visits that are not billed
      • …and much more

    The technicians are getting paid for all of that time, but bill customers for less than half of it. So you can knock that $100 per hour the company is making down to around $50 per hour. That leaves a spread of $15 per hour ($50 billed – $35 in direct labor cost).

    Company Vehicles

    Now let’s look at the truck the service tech is driving. It costs at least $30,000 without inventory and its life is only around five years. That equates to 5,000 billing hours (20 hrs/week x 50 weeks x 5 years). It’s worth $5,000 when the company sells it. The truck costs $25,000/5,000 hours or $5.00 per billing hour (This doesn’t factor in finance charges, fuel, oil changes, tires or repairs).

    Remaining Overhead

    Now, factor the wages for the person who took your call and dispatched the technician, the bookkeeper who billed you and filed your warranty paperwork, the office, warehouse, inventory, taxes, insurance, computers, internet, phones, cell phones, etc. This is why many companies charging $100 per hour or basing their flat rate pricing on $100 per hour find there is no money left to pay the owner who is taking all the risk and fronting all the money.

    Consumers are not the only ones who don’t understand this. Many employees don’t understand either. Without the knowledge of the true costs to run the business, they assume the company is making $70 per hour profit. Many employees who steal from their employers use this as justification in their minds. Even many small business owners who do not already break down their expenses this way are surprised to learn how much they are losing every time their truck rolls out of the office.

    The competitive market works at keeping prices in line. Beware of a company charging below the going rate because there are one or two things you can be sure of. One is that the company is cutting corners on products, materials, skilled labor, insurance, permits, etc. The other is that the company won’t be in business for long and if you have a problem, you will have nowhere to go. It’s smart to shop around and keep companies honest but be sure you are comparing apples to apples. Many times the cheapest price is the worst value.

    According to Edward Marchiselli, President of consumer advocacy company AsktheSeal.com, “Once consumers understand the dynamics of why legitimate service companies charge what they do, the fear of being ripped off diminishes and they can select the best company for the job, receive quality work and enjoy the end product without wondering if they paid too much.”

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