Arkansas HVACR NewsMagazine September 2025

HVACR NewsMagazine September 2025

Business & Marketing Tips

A quick and easy way to decrease overhead cost is to ask your field and office personnel. If you ask, “How would you decrease overhead by $500 or $1000 a month, they won’t be able to think of anything. That number that is larger than they can imagine from a personal level. If you ask, “How can we shave $100 a month from overhead costs?” they will probably come up with some great ideas. Implement the simple things they suggest, whenever feasible, to decrease your overhead cost per hour. And, the greater the number of billable hours, the lower the overhead cost per hour. As you add more field labor, assuming they stay billable at least 85% of the time, then your overhead cost per hour will decrease. Most contractors still determine what their costs are and then divide by 1 minus the gross margin. This does NOT take overhead into consideration. Start at net profit. What net profit do you want to earn for the job? Do you want a higher net profit for jobs with higher equipment cost? Do you want a lower net profit for jobs with a higher labor cost? These are questions you need to ask before you establish your pricing. One of my clients continually complained about duct jobs. He moaned that he could never make money on them because of the labor involved. #7 – Price from the bottom up.

25 Ways to Increase Profitability (part 4)

Now that you have the basics and why you want to increase your company’s profitability, let’s continue ways to increase profitability. #6 – Know Your Overhead Cost per Hour. Overhead cost per hour is simply total overhead cost divided by billable (revenue producing) hours. If your overhead cost per hour is $50 per hour and your competitor’s overhead cost per hour is $30 per hour, then for an 8 hour job your overhead cost is $400 and your competitor’s overhead cost is $240. Your competitor can charge the same price and earn $160 more than you do. Or, your competitor can charge $160 less and win the job.