How to set HVAC service call rates (without scaring off customers)

I talk to a lot of HVAC contractors who charge $75 for a service call. When I ask how they landed on that number, the answer is almost always some version of "that's what the guy down the road charges."

That's not a pricing strategy. That's copying someone else's homework without knowing if they got the answers right.

Your service call rate is the foundation of your residential business. Get it wrong and you're losing money every time the phone rings. Get it right and every call, even the ones that don't turn into bigger jobs, covers your costs and keeps the lights on.

What a service call rate actually needs to cover

A service call isn't just the 20 minutes you spend diagnosing a problem. By the time you answer the phone, check the schedule, drive to the house, knock on the door, figure out what's wrong, write up the options, drive back, and log the call, you've spent somewhere between 60 and 90 minutes on that one customer.

Your rate needs to cover all of that. Here's the real cost breakdown:

• Drive time: Average 20-30 minutes each way in most metro areas. That's nearly an hour of labor plus fuel.
• Diagnostic time: 15-45 minutes depending on the issue.
• Truck cost: Insurance, payment, maintenance. Your truck costs money whether it's moving or parked.
• Overhead allocation: A portion of your monthly fixed costs (office, insurance, marketing) needs to be covered by each call.
• Unbillable admin: Scheduling the call, following up, entering it into your system.

When you add it all up, most HVAC businesses in mid-size markets need to charge somewhere between $89 and $149 for a diagnostic service call just to break even. If you're at $75, you're probably subsidizing every service call with profit from your install jobs.

The math behind your number

Here's a straightforward way to calculate it. You'll need three numbers:

1. Your fully loaded hourly cost. Take your monthly overhead (everything: rent, insurance, truck payments, phone, marketing, your salary) and divide by your billable hours per month. For most small HVAC shops, this lands between $85 and $140/hour.
2. Average time per service call. Be honest. Count from departure to return, not just wrench time. For most residential calls, it's 1 to 1.5 hours total.
3. Your target margin. You need profit on top of costs. 15-25% is reasonable for service work.

So if your loaded hourly cost is $110, an average call takes 1.25 hours, and you want a 20% margin:

$110 x 1.25 = $137.50 cost
$137.50 x 1.20 = $165 service call rate

That number might make you uncomfortable. Sit with it for a minute. Compare it to what you're actually charging. The gap between those two numbers is money you've been leaving behind.

But what about the competition?

Here's what I've noticed: the HVAC contractors who obsess over matching competitor pricing are usually the ones working the most hours for the least money. The ones doing well financially pick a rate based on their own numbers and then sell the value.

Your competitor charging $69 for a service call might:

• Have lower insurance (or not enough insurance)
• Not be paying themselves a real salary
• Use the low rate as a loss leader to sell equipment
• Be slowly going out of business and not realize it yet

You don't know their situation. You only know yours. Price from your numbers, not theirs.

How to explain your rate to price-sensitive customers

Some customers will ask why your service call costs more than another company. That's fair. Here's how to handle it without getting defensive:

"Our service call includes a full system diagnostic, not just a quick look at the part that's acting up. We check your whole system so we can catch small problems before they turn into expensive repairs. And the diagnostic fee gets applied to the repair if you go ahead with the work."

That last part is important. Applying the diagnostic fee to the repair price removes the objection for most people. They're not paying extra; they're paying a deposit on the work.

A few other things that justify a higher rate:

• Same-day or next-day availability
• Licensed, insured, background-checked technicians
• Written diagnostic report (even a simple one)
• Warranty on repairs
• No surprise charges

You don't need all of these. Pick two or three that you actually deliver on and mention them when the price question comes up.

Flat diagnostic fee vs. hourly billing

For residential service calls, flat fee wins every time. Customers want to know the cost before you show up. "It'll be $129 for me to come out, diagnose the problem, and give you options" is a much easier conversation than "I charge $110 an hour and I'm not sure how long it'll take."

Flat fees also protect you. If your tech is fast and diagnoses the issue in 10 minutes, you still get the full rate. Speed and experience should be rewarded, not penalized.

For commercial work or complex troubleshooting, hourly billing with a minimum charge makes more sense. Commercial customers are used to it and the scope is harder to predict.

When to charge more

Your base rate is for standard business hours, standard conditions. These situations deserve a premium:

• After-hours and weekends: 1.5x your standard rate is common. Some companies go to 2x. The customer called because they're desperate, and you're giving up personal time.
• Emergency/same-day: Even during business hours, a same-day call that bumps your schedule should carry a premium. $20-50 over your standard rate is reasonable.
• Long drive: If the customer is outside your normal service area, add a trip charge. Be upfront about it when they call.

Tracking what your service calls actually cost you

The formula above gives you a starting point, but real data beats estimates. For one month, track every service call:

Date	Customer	Total time (door to door)	Fuel cost	Parts used	Amount charged	Converted to repair?
3/1	Williams	1.5 hrs	$12	$0	$129	Yes, $485 repair
3/1	Patel	1 hr	$8	$0	$129	No
3/2	Garcia	2 hrs	$18	$14	$129	Yes, $1,200 repair

After a month, you'll know your real average time per call, your conversion rate from diagnostic to repair, and whether your rate is actually covering your costs. That's the kind of data that turns guessing into decisions.

If you want a simple way to track this stuff alongside your expenses and job pricing, the free ProTradeOps toolkit has templates built for exactly this. No sign-up headaches, just download and start using it.

Raising your rates without losing customers

If you've been charging too little, you'll need to raise your rate. A few tips from contractors who've done it:

1. Raise it for new customers first. Existing customers keep the old rate for 60-90 days.
2. Send a simple notice. "Effective April 1, our diagnostic service call rate will be $129 (currently $89). This reflects our increased cost of insurance, fuel, and continued investment in training."
3. Don't apologize. You're running a business. Costs go up. Rates go up. Everyone understands this.
4. Expect to lose a few customers. The ones who leave over a $40 increase were never profitable anyway.

Most contractors who raise their rates report losing less than 5% of their customer base. The increased revenue per call more than makes up for it.

Get your number right this week

Spend 20 minutes today calculating your actual loaded hourly cost. Multiply by your average call time. Add your margin. Write that number down.

If it's higher than what you're charging, you know what to do. If it's lower, congrats, you're one of the few who got it right the first time.

Either way, you're making the decision from real numbers instead of a guess. That's how you build a business that pays you what you're worth.

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