Pricing guide
Margin vs. markup: the confusion that underprices HVAC jobs
A shop that wants 40% margin and applies 40% markup is losing roughly a tenth of every sale without noticing. The two numbers describe different things, and the gap between them widens exactly when it hurts most: on the bigger jobs.
The two formulas
Markup is measured against cost: price equals cost times one plus markup. Margin is measured against price: margin equals price minus cost, divided by price. A $6,000-cost job with 40% markup sells for $8,400, but that sale carries only about a 28.6% margin. To earn a true 40% margin on the same job, the price must be $10,000: cost divided by one minus the margin.
The conversion worth memorizing
- 25% markup = 20% margin
- 43% markup = 30% margin
- 50% markup = 33% margin
- 67% markup = 40% margin
- 100% markup = 50% margin
Why the mistake survives
Markup feels natural because it starts from the number you know (cost), and the error is invisible on any single job; the money is simply not there at year end. It compounds when overhead is estimated loosely: margin has to cover overhead and profit, so a shop with 30% overhead pricing at '30% margin' is working for free before the first callback.
Putting it into practice
- Price from margin, not markup: cost divided by (1 minus target margin)
- Know your overhead percentage before picking a target margin
- Set different targets where the market allows: equipment, labor, accessories
- Bake the math into your pricing system so reps never do it at the kitchen table
- Review realized margin per job monthly, not just revenue
The fix is not smarter reps; it is removing the arithmetic from the sales moment entirely. When company-wide margin settings live in the proposal system, every option a rep presents already carries the right price, and the kitchen table stays a selling conversation instead of a math quiz.
Set margins once. Every proposal protects them.
AirMatch applies company-wide margin settings across equipment, labor, and accessories, so reps sell from prices that already protect the business.