The 7 Deadly HVAC Pricing Mistakes

HVAC pricing mistakes may be holding you back from growing a successful, profitable business. But it doesn’t have to be that way!

There are a number of HVAC pricing mistakes that you need to be aware of so you can avoid them as you build your business. In this article, we will cover seven common mistakes and how you can get past them:

Pricing to undercut the competition
Pricing too low or too high
Complicated pricing presentations
Not adapting and updating your pricing
Being inconsistent with pricing
Failing to differentiate your services
Not investing in service software

1. Setting Your Pricing to Undercut Competition

Your price is a very powerful commodity – it signals the perceived value of your products and services. Touting your services as “cheaper than the next guy” takes away from your value and standards your business holds over the competition and reduces it to saving a buck.

Sure, you need to look at what your local competitors are charging and adjust your prices to stay competitive. Make sure you understand market value. For example, an HVAC pro in NYC will make more than an HVAC pro in Iowa. Know the going rate in your city for your HVAC services.

A big HVAC pricing mistake is being just cheaper than your competition. Focus instead on what sets you apart from other HVAC companies, whether that’s quality of work, guarantees, or number of satisfied customers.

2. Pricing Too Low or Too High

Both of these extreme HVAC pricing mistakes should be avoided when pricing your services. Let’s consider what each of these strategies signals to potential customers:

Too Low (or lowest!): When you price at a bargain basement level, you are probably leaving money on the table. Potential customers may perceive your business as providing low quality work, to match your low price. McKinsey found that pricing low is much more detrimental to success than vice versa. 80-90% of all poorly chosen prices are too low.
Too high (or highest!): This may price you out of the market for many potential customers, resulting in less jobs and unfair expectations. Having the highest price in the market may also heighten expectations. If the customer is paying top dollar, they are going to want everything done 100% perfectly (and may demand that things are done their way!).

So how do you arrive at that “sweet spot” in HVAC pricing? Add up your cost of materials, labor and overhead. Determine your markup to make a fair profit. Then look at where your competitors are and set your price.

It will take some research and testing to see what is working and where you get push back. In general, you want to be closer to the highest price in town rather than the lowest.

3. Complicated Pricing Presentation

When presenting your pricing to a customer, you want to be as simple and straightforward as possible.

Don’t overcomplicate the process by telling the customer information they don’t need or won’t understand. If a customer doesn’t know what they are paying for, they won’t want to pay for it!

A popular and easy way to present a service and a pricing to a customer is to give them good-better-best pricing options. This allows them to choose what type of service or equipment they want to purchase. The ball is now in the customer’s court and can take the stress out of the situation

Many top level service software solutions (like FieldEdge!) include a price presentation tool. From a phone or tablet, an HVAC tech can present the price in a consistent and easy-to-understand format.

Many customers also prefer to have an upfront price before the work is started. That’s why a flat rate pricing model can work so well.

4. Not Adapting and Updating Your Pricing

The market is constantly changing. The past few years have brought high inflation and rising prices from the pump to the grocery store. One of the most dangerous HVAC pricing mistakes is not keeping up with market changes.

It’s good business to review your pricing on a yearly or even twice-yearly basis. Parts may be in short supply, hence equipment prices are rising to offset the shortage. Quality staff are hard to find and you have to pay up to keep your high performing employees and attract new ones.

Creating a business plan helps you stay on track with your pricing. This yearly review is critical for growing businesses to stay organized and establish clear, achievable goals. It may include the following:

Market costs
Year-over-year revenue (i.e. YoY)
Equipment trends

Make sure to run everything by a professional accountant for strategies to offset increases.

Customers expect price increases, but you have to tread carefully. Make sure to give your customers plenty of notice if they are repeat customers or have service agreements.

5. Being Inconsistent with Pricing

Integrity is important in business, so make sure you aren’t charging different customers different prices for the same service. Word usually gets out, and there’s no recovery from bad brand reputation.

The exception is when you are doing a short-term test when increasing prices. If this is the case, choose your least profitable customers to adjust pricing on before rolling out to all customers.

Regular discounts and lowering prices on the job are also areas to avoid. If you give a discount every time a customer complains, you start to lose respect and may be perceived as desperate. Stick to your pricing and do an exceptional job: this will weed out the difficult customers you don’t want anyway.

6. Failing to Differentiate Your Services from the Competition

Why would customers do business with you rather than the guy down the street? What makes you better? Do you have better customer service? Or maybe more skilled senior HVAC techs?

Your business can charge a premium if you have the reputation of going above and beyond.

So, how do you get there? Here are a few strategies:

Make sure you have solid reviews online, because that’s the first place potential customers are going to look.
Spend time on your website. It should be easy to navigate and showcase the type of work you do. Customer testimonials and an easy CTA (Call to Action) to get in touch with someone that will help you look professional.
Treat your customers like gold. Be courteous, professional and helpful. From the first phone call until a tech leaves a job, every interaction matters!
Always look professional and polished, whether it’s your work uniform or your trucks.

7. Not Investing in Top-Shelf Service Software

Just say no to calculating HVAC pricing using pen and paper or thumbing through a book of equipment to give a customer options while on the job.

Software like FieldEdge can help tremendously with your pricing efforts. Easily maintain profitability with time and job tracking
Create quick, professional estimates on-the-go
Streamlines payments and invoicing
Tracks chemicals and assets
Manage jobs from anywhere
Instantly optimize routes

Price presentation screens also show additional items or upsells for the technician to suggest. When the job is done, the invoice goes right into QuickBooks. You can even take payments from the job!

With more time saved and more upsells on the job, good HVAC software pays for itself.

See how FieldEdge can help with your pricing. Book your FREE personalized demo today!

No More HVAC Pricing Mistakes!

Now you are aware of 7 HVAC pricing mistakes to avoid while growing your business. Use the tips provided to make sure you are profitable and sensible with your pricing structure. In this article you learned the 7 deadly pricing mistakes (and how to avoid them!):

Expert pricing strategies for beating the competition
How the best HVAC software can transform your pricing
How differentiating your business can win more clients
The importance of updating your pricing periodically