Why a small increase can beat losing jobs
A price increase doesn't change what the job costs you. The parts and the labor are the same, so every extra dollar of price is an extra dollar of gross profit. That's why a 10% price increase can raise gross profit by a lot more than 10%.
It also means you can lose some jobs and still come out even. How many depends on your margin: the thinner your margin, the more a price increase is worth, and the more jobs you could lose before it stops paying.
How it works
- Cost per job = average ticket × (1 − gross margin). This stays the same after the increase.
- New ticket = average ticket × (1 + increase).
- New gross profit per job = new ticket − cost per job = average ticket × (margin + increase).
- Break-even volume loss = increase ÷ (margin + increase). Lose fewer jobs than this and you make more gross profit than today. Lose more and you make less.
- Outcome table = jobs kept × new gross profit per job, compared with today's gross profit.
Worked example
With the example numbers above: a $400 average ticket at a 50% gross margin means each job costs $200 and makes $200. At 200 jobs a month that's $40,000 of gross profit.
Raise prices 10% and the ticket is $440. The job still costs $200, so it now makes $240. At the same 200 jobs that's $48,000 a month — $8,000 more, a 20% jump in gross profit from a 10% price increase.
Break-even: 10% ÷ (50% + 10%) = 16.7%. You could lose about 33 of your 200 jobs a month and still make the same $40,000. Lose 10% of your jobs (180 left) and you still make $43,200 — $3,200 more than today.
Things this leaves out
- Net profit. This works on gross profit. Losing jobs can also free up tech hours and truck time, and keeping jobs can mean overtime — neither is counted.
- Commission. If techs or salespeople are paid a percent of the ticket, part of the increase goes to them. Lower your gross margin to include it.
- Which jobs you lose. The math assumes lost jobs look like your average job. Losing mostly small calls hurts less than losing replacements.
- Maintenance members and repeat customers. A lost customer can take future repairs and a replacement with them. The HVAC customer lifetime value calculator shows what one customer is worth over time.
We don't quote how many customers leave after a price increase, or typical HVAC margins, because we haven't found a solid public source for them. That's what the anonymous Owner Numbers survey collects, so owners can compare against real peers.
Related tools
Not sure what your margin is? The HVAC markup vs margin calculator turns a job cost and price into both percentages. Ready to set new prices? The HVAC flat-rate price calculator builds a price from parts, labor hours, and your target margin. Want to know the least you can charge per hour? The HVAC break-even hourly rate calculator adds your overhead to labor.